exv10w81








 




    Exhibit
    10.81



 


 




    NEW ISSUE
    BOND PROGRAM AGREEMENT



 




    (For
    January Settlement)



 




    by and
    among



 




    UNITED
    STATES DEPARTMENT OF THE TREASURY,



 




    FEDERAL
    NATIONAL MORTGAGE ASSOCIATION



 




    and



 




    FEDERAL
    HOME LOAN MORTGAGE CORPORATION



 




    Dated as
    of December 18, 2009



 













 








    TABLE OF
    CONTENTS



 


	 	 	 	 	 	 	 
	
 
	
 
	
 
	
 
	
    Page
	
 

	 

	

    ARTICLE 1


	
 
	
    DEFINITIONS
	
 
	
 
	
    2
	
 

	

    ARTICLE 2


	
 
	
    ROLE OF THE GSES
	
 
	
 
	
    5
	
 

	

    ARTICLE 3


	
 
	
    THE NEW ISSUE BOND PROGRAM
	
 
	
 
	
    6
	
 

	

    ARTICLE 4


	
 
	
    SETTLEMENT
	
 
	
 
	
    8
	
 

	

    ARTICLE 5


	
 
	
    LOSS SHARING
	
 
	
 
	
    9
	
 

	

    ARTICLE 6


	
 
	
    REPORTING
	
 
	
 
	
    10
	
 

	

    ARTICLE 7


	
 
	
    ROLE OF TREASURY’S AGENTS
	
 
	
 
	
    10
	
 

	

    ARTICLE 8


	
 
	
    DECISION CONTROL
	
 
	
 
	
    11
	
 

	

    ARTICLE 9


	
 
	
    GSE SECURITIES NOT TO TRADE
	
 
	
 
	
    11
	
 

	

    ARTICLE 10


	
 
	
    DISSOLUTION OF GSE SECURITIES
	
 
	
 
	
    11
	
 

	

    ARTICLE 11


	
 
	
    CERTAIN MATTERS
	
 
	
 
	
    12
	
 

	

    ARTICLE 12


	
 
	
    INTERPRETATION
	
 
	
 
	
    13
	
 

	

    ARTICLE 13


	
 
	
    GOVERNING LAW
	
 
	
 
	
    13
	
 

	

    ARTICLE 14


	
 
	
    NOTICES
	
 
	
 
	
    13
	
 

	

    ARTICLE 15


	
 
	
    SEVERABILITY
	
 
	
 
	
    15
	
 

	

    ARTICLE 16


	
 
	
    EXPENSES
	
 
	
 
	
    16
	
 

	

    ARTICLE 17


	
 
	
    OPERATION OF THIS AGREEMENT
	
 
	
 
	
    16
	
 

	

    ARTICLE 18


	
 
	
    THIRD PARTY RIGHTS
	
 
	
 
	
    16
	
 

	

    ARTICLE 19


	
 
	
    ENTIRE AGREEMENT
	
 
	
 
	
    16
	
 

	

    ARTICLE 20


	
 
	
    SUCCESSORS AND ASSIGNS
	
 
	
 
	
    16
	
 

	

    ARTICLE 21


	
 
	
    NO JOINT VENTURE
	
 
	
 
	
    17
	
 

	

    ARTICLE 22


	
 
	
    COUNTERPARTS
	
 
	
 
	
    17
	
 

	

    ARTICLE 23


	
 
	
    AMENDMENT
	
 
	
 
	
    17
	
 

	

    ARTICLE 24


	
 
	
    FURTHER ASSURANCES; NO CIRCUMVENTION OF AGREEMENT
	
 
	
 
	
    17
	
 

	

    Schedules:


	
 
	
 
	
 
	
 
	
 
	
 

	

    Schedule A


	
 
	
    GSE Fees
	
 
	
 
	
 
	
 

	

    Schedule B


	
 
	
    Form of Certification from GSE Special Closing Counsel
	
 
	
 
	
 
	
 

	

    Schedule C


	
 
	
    Uniform Loss Sharing Attachment
	
 
	
 
	
 
	
 

	

    Schedule D


	
 
	
    Description of Program Bonds
	
 
	
 
	
 
	
 











    

    i








 







    This NEW ISSUE BOND PROGRAM AGREEMENT (this
    “Agreement”), dated December 18, 2009, is
    among the United States Department of the Treasury
    (“Treasury”), the Federal National Mortgage
    Association, a United States Government-sponsored enterprise
    (“Fannie Mae”), and the Federal Home Loan
    Mortgage Corporation, a United States Government-sponsored
    enterprise (“Freddie Mac”) (Fannie Mae and
    Freddie Mac are herein referred to as the
    “GSEs” and, each a “GSE”).



 




    W I T N E
    S S E T
    H:
    



 



    WHEREAS, the disruptions in housing markets, housing finance and
    capital markets over the past several years have constricted the
    general availability of credit to many different credit markets,
    particularly those related to housing;



 



    WHEREAS, the United States Congress, in enacting the Housing and
    Economic Recovery Act of 2008, the Emergency and Economic
    Stabilization Act of 2008, the American Recovery and
    Reinvestment Act of 2009 and other legislation provided Treasury
    and other agencies of government with the authority, funding,
    and direction to undertake credit support programs, with many of
    these programs directed specifically at supporting housing
    markets and housing finance;



 



    WHEREAS, state and local housing finance agencies
    (“HFAs”) have a core mission of providing
    (i) affordable mortgage financing for low and moderate
    income households, especially first-time homebuyers, and
    (ii) financing for affordable multifamily rental properties;



 



    WHEREAS, the National Council of State Housing Finance Agencies
    and the National Association of Local Housing Finance Agencies
    requested assistance from Treasury to meet their funding needs
    to continue support of their affordable housing mission during
    this period of disruption in housing finance and that request
    has been supported by market developments;



 



    WHEREAS, Treasury, the Federal Housing Finance Agency, Fannie
    Mae and Freddie Mac entered into a Memorandum of Understanding,
    dated October 19, 2009 (the “MOU”), that
    sets forth the mutual understandings and intentions of such
    parties with respect to the establishment of a program pursuant
    to which (i) the HFAs will issue single-family and
    multifamily Program Bonds (as defined in this Agreement),
    (ii) the GSEs will securitize such Program Bonds and issue
    GSE Securities (as defined in this Agreement) evidencing
    beneficial ownership of such Program Bonds and
    (iii) Treasury will purchase the GSE Securities (the
    “New Issue Bond Program”); and



 



    WHEREAS, Treasury and the GSEs are entering into this Agreement
    in order to implement the New Issue Bond Program.



 



    NOW, THEREFORE, in consideration of the mutual agreements set
    forth in this Agreement, and other good and valuable
    consideration, the receipt and adequacy of which are hereby
    acknowledged, the parties to this Agreement, intending to be
    legally bound, hereby agree as follows:














 








    ARTICLE 1
    



 




    DEFINITIONS.
    



 



    Terms used in this Agreement, including the schedules to this
    Agreement, are used as defined below.



 



    “Acquisition Period” means the period
    commencing on October 19, 2009 through and including
    December 31, 2009.



 



    “Administration Agreement” means the
    Administration Agreement dated as of December 1, 2009 among
    the GSEs and the Administrator.



 



    “Administrator” means U.S. Bank National
    Association, in its capacity as custodian, collection agent,
    paying agent and administrator under the Administration
    Agreement.



 



    “Agreement” has the meaning given to such term
    in the introductory section of this Agreement.



 



    “Business Day” means any day that is not
    (a) a Saturday, a Sunday, or any other day on which Fannie
    Mae, Freddie Mac or the Administrator is not open for business,
    (b) a day on which banking institutions in New York are
    permitted or required by law or executive order to be closed or
    (c) a day on which Treasury or the Federal Reserve Bank of
    New York is closed.



 



    “Closing Agent” means U.S. Bank National
    Association, in its capacity as escrow and closing agent under
    the Settlement Agreement.



 



    “Crossover Date” means the first date on which
    Program Losses equal or exceed 25/35ths of the First Loss Limit
    (as such amount may be adjusted in writing by the GSEs and
    Treasury with notice to the Administrator).



 



    “Custodial Receipt” means any of the custodial
    receipts relating to Program Bonds executed and delivered by the
    Administrator to the GSEs pursuant to the Administration
    Agreement.



 



    “Decision Control” means, with respect to a
    Program Bond represented by a Custodial Receipt relating to a
    GSE Security, any right available to a holder of that Program
    Bond to (i) instruct the related HFA trustee to take or
    refrain from taking an action or decision including, without
    limitation, any proposed amendment, restatement, waiver,
    forbearance of, or supplement to, the bond indenture or
    resolution under which the Program Bond was issued or
    (ii) decide upon a course of action in response to an Event
    of Default.



 



    “DTC” means The Depository Trust Company
    or its successor in interest.





    

    2








 







    “Event of Default” means an “event of
    default” as such term is defined in the bond indenture for
    the related Program Bonds.



 



    “Fannie Mae” has the meaning given to such term
    in the introductory section of this Agreement.



 



    “First Loss Limit” has the meaning given to
    such term in Section 1 of Schedule C of this Agreement.



 



    “Freddie Mac” has the meaning given to such
    term in the introductory section of this Agreement.



 



    “GSE” and “GSEs” have the meanings
    given to such terms in the introductory section of this
    Agreement.



 



    “GSE Fees” mean, with respect to each GSE, the
    sum of (a) the Initial Securitization Fee owed to such GSE
    and (b) the other fees and expenses due to such GSE on the
    related Settlement Date (which includes any legal fees and
    expenses of outside counsel to the GSEs) with respect to all of
    the GSE Securities being issued to the related HFA on the
    related Settlement Date pursuant to the related Placement
    Agreement and Settlement Agreement.



 



    “GSE PPM” means as to each GSE Security, the
    document prepared by each GSE and provided to Treasury
    describing certain information about the GSE Securities and the
    related Program Bonds and including a schedule of information
    concerning the Program Bonds substantially in the form of
    Schedule B to the related Placement Agreement; provided
    that each GSE may deliver a single GSE PPM for each Settlement
    Date with a related GSE PPM Schedule.



 



    “GSE PPM Schedule” means for each GSE and each
    Settlement Date, a schedule or schedules that consolidates the
    information from Schedule B of each Placement Agreement
    concerning the Program Bonds together with information about the
    related GSE Securities.



 



    “GSE Securities” means the securities issued by
    each GSE, each of which evidences an undivided 50% beneficial
    ownership interest in the related Program Bonds.



 



    “GSE Special Closing Counsel” means the counsel
    set forth on Schedule A to the related Placement Agreement.



 



    “GSE Trust” means a trust established by a GSE
    which holds such GSE’s Custodial Receipts.



 



    “HFA” has the meaning given to such term in the
    recitals of this Agreement.



 



    “HFA Initiative” has the meaning given to such
    term in the Settlement Agreement.





    

    3








 







    “HFA Trustee” means the bond indenture trustee
    of the related Program Bonds as set forth on
    Schedule B-1
    or B-2, as applicable, of the related Placement Agreement.



 



    “Initial Securitization Fee” means the Initial
    Securitization Fee payable by each HFA to each GSE, which amount
    is set forth on Schedule A to the related Placement
    Agreement.



 



    “Market Bonds” has the meaning given to such
    term in the related Placement Agreement.



 



    “MOU” has the meaning given to such term in the
    recitals of this Agreement.



 



    “Multifamily Credit Enhanced Bonds” means
    project-based multifamily bonds eligible for purchase pursuant
    to the Multifamily Credit Enhancement Program.



 



    “Multifamily Credit Enhancement Program” means
    any purchases by Treasury of new tax-exempt and certain taxable
    project-based multifamily bonds issued by HFAs that are credit
    enhanced by the GSEs pursuant to Multifamily Credit Enhanced
    Bonds purchase agreements entered into by such parties prior to
    the end of the Acquisition Period.



 



    “New Issue Bond Program” has the meaning given
    to such term in the recitals of this Agreement.



 



    “Official Statement” has the meaning given to
    such term in the related Placement Agreement.



 



    “Partial Guarantee” has the meaning given to
    such term in Section 3.4 of this Agreement.



 



    “Participation Agreement” means each
    Participation Agreement entered into prior to the end of the
    Acquisition Period by and between Treasury and the GSEs whereby
    the rights, duties and obligations of Treasury and the GSEs with
    respect to the Temporary Credit and Liquidity Facility Program
    (including the terms of the Partial Guarantee) are set forth.



 



    “Placement Agreement” means each Placement
    Agreement entered into as of the date hereof between the GSEs
    and a participating HFA.



 



    “Program Bond Guarantee Fee” means the amount
    payable to each GSE out of interest payments on the Program
    Bonds, which shall be equal to the amount set forth on
    Schedule A of this Agreement.



 



    “Program Bonds” means those certain
    single-family or multifamily mortgage revenue bonds issued by
    the HFAs and identified in Schedule B to the Placement
    Agreements.





    

    4








 







    “Program Losses” has the meaning given to such
    term in Section 1 of Schedule C of this
    Agreement.



 



    “Settlement” means the consummation of the
    issuance and exchange of the related Program Bonds for the
    related GSE Securities, the purchase of the GSE Securities by
    Treasury, the payment of the net purchase proceeds to the bond
    indenture trustee of the Program Bonds, the payment of the
    related GSE Fees to the GSEs and the other transactions
    contemplated by the related Placement Agreements and Settlement
    Agreements.



 



    “Settlement Agreement” means each Settlement
    Agreement entered into as of the date hereof among each
    participating HFA, the GSEs, Treasury and the Closing Agent with
    respect to the related Settlement.



 



    “Settlement Date” means January 12, 2010.



 



    “Supplemental Indenture” has the meaning given
    to such term in the related Placement Agreement.



 



    “Temporary Credit and Liquidity Facility” or
    “TCLF” means any Temporary Credit and Liquidity
    Facility by the GSEs for the benefit of a participating HFA
    entered into prior to the end of the Acquisition Period under
    the Temporary Credit and Liquidity Facility Program.



 



    “Temporary Credit and Liquidity Facility
    Program” means the program under which Treasury may
    purchase participation interests in TCLFs issued by the GSEs in
    support of existing VRDOs originally issued to finance single
    family
    and/or
    certain multifamily mortgage loans.



 



    “Transaction Loss” has the meaning given to
    such term in Section 1 of Schedule C of this
    Agreement.



 



    “Treasury” has the meaning given to such term
    in the introductory section of this Agreement.



 



    “Treasury’s Agent” has the meaning given
    to such term in Section 7.7 of this Agreement.



 



    “VRDO” means a variable rate demand obligation
    bond issued by an HFA.



 




    ARTICLE 2
    



 




    ROLE OF
    THE GSES.



 



    2.1.  The GSEs and Treasury acknowledge and agree that:



 



    (a) The GSEs have not acted as an intermediary between the
    HFAs and Treasury, have not made any introductions between those
    parties and are not





    

    5








 







    expected to (and will not) perform the traditional functions of
    a securities dealer with respect to the New Issue Bond Program.



 



    (b) The New Issue Bond Program and any transactions
    executed pursuant to such program are not related to the
    GSEs’ ordinary activities in tax-exempt or taxable
    securities.



 



    (c) The GSEs are not registered as dealers in tax-exempt or
    taxable securities. The parties further acknowledge that the
    GSEs will not provide price quotes to Treasury or otherwise act
    in a manner with respect to Treasury that would constitute a
    dealer-customer relationship.



 



    (d) Any amounts paid to the GSEs under the New Issue Bond
    Program are intended to compensate them for (i) certain
    credit risks that they will bear and (ii) certain
    administrative services that they will provide.



 




    ARTICLE 3
    



 




    THE NEW
    ISSUE BOND PROGRAM.



 



    3.1.  The New Issue Bond Program. The GSEs and
    Treasury shall initiate, administer and carry out the New Issue
    Bond Program in accordance with this Agreement.



 



    3.2.  Program Bonds and Custodial Receipts.
    Each participating HFA shall deliver Program Bonds to the GSEs
    in exchange for the GSE Securities in accordance with the
    related Placement Agreement. In accordance with the
    Administration Agreement and the related Settlement Agreement,
    (a) Program Bonds will be transferred to a trust account
    established by the Administrator and (b) upon receipt of
    the Program Bonds, the Administrator shall deliver to each GSE a
    Custodial Receipt evidencing an undivided 50% beneficial
    ownership interest in the related Program Bonds.



 



    3.3.  GSE Securities. In accordance with the
    related Placement Agreement, Settlement Agreement and the
    Administration Agreement, upon receipt of the Custodial Receipts
    each GSE shall issue the related GSE Securities in accordance
    with Section 3.3(a) below and deliver (or cause to
    be delivered), on behalf of the participating HFA, the related
    GSE Securities to Treasury by crediting Treasury’s
    Agent’s account at DTC; provided, that each GSE may issue
    and deliver (i) one GSE Security to Treasury with respect
    to all of the single-family Program Bonds and (ii) one GSE
    Security to Treasury with respect to all of the multifamily
    Program Bonds. Each GSE will issue its GSE Securities on the
    Settlement Date. Treasury shall purchase all of the GSE
    Securities issued by the GSEs pursuant to each Placement
    Agreement and Settlement Agreement. Purchases by Treasury of GSE
    Securities must occur on or before December 31, 2009.



 



    (a)  GSE Trusts.  Each GSE will
    arrange for the deposit of Custodial Receipts into its GSE Trust
    and for the securitization of such Custodial Receipts under
    appropriate policies and procedures established by that GSE for
    purposes of the New Issue Bond Program. The structure and terms
    of any GSE Trust may vary from those





    

    6








 







    adopted by the other GSE in order to conform to its
    transactional and operational policies, procedures and
    practices. Such structure and terms also may vary from time to
    time with respect to GSE Trusts established by the same GSE to
    the extent that such GSE may deem circumstances so warrant.



 



    (b) Ownership Vests with Treasury. Treasury (or
    Treasury’s Agent) will acquire legal and beneficial
    ownership of GSE Securities upon delivery thereof in accordance
    with the related Placement Agreement and Settlement Agreement.



 



    (c) Allocation of Principal and Interest; Available
    Funds Only. All principal and interest received on Program
    Bonds represented by Custodial Receipts related to a GSE
    Security, less administrative and other fees and expenses
    to which the related GSE and the Administrator are entitled,
    will be allocated to that GSE Security without preference or
    priority. All GSE Securities will be structured, and all
    distributions will be made, solely on an available-funds basis.



 



    (d) Distribution Dates. The GSE Trusts will
    distribute funds available from payments received from the
    underlying Program Bonds (less administrative fees and
    other fees and expenses to which the GSEs and the Administrator
    are entitled) on the 25th calendar day of each month or, if
    not a Business Day, the next succeeding Business Day. Subject to
    the Program Bond payment dates represented in a GSE Security,
    distributions may not necessarily be payable every calendar
    month.



 



    3.4.  Partial Guarantee; No Other Guarantee.



 



    (a) Each GSE will provide a partial guarantee (the
    “Partial Guarantee”) to its GSE Trusts as a
    means of documenting its loss sharing obligations to the GSE
    Trusts regarding the related GSE Securities as provided in
    Article 5 and Schedule C of this
    Agreement.



 



    (b) The GSE Securities, together with interest thereon,
    will not be guaranteed by the United States and will not
    constitute a debt or obligation of the United States or any
    agency or instrumentality thereof other than the related GSE
    Trust and other than with respect to the Partial Guarantee which
    shall be an obligation of the related GSE.



 



    3.5.  GSE Fees.



 



    (a) Each GSE will be entitled to a Program Bond Guarantee
    Fee to compensate the GSE for (i) its Loss Sharing
    obligations pursuant to Article 5,
    (ii) management of the New Issue Bond Program and
    (iii) certain third-party expenses incurred in connection
    with the New Issue Bond Program. The Program Bond Guarantee Fee
    and the other fees chargeable by the GSEs under the New Issue
    Bond Program are set forth in Schedule A of this
    Agreement.



 



    (b) In the event the interest payments received on a series
    of Program Bonds at any time is less than the Program Bond
    Guarantee Fee with respect to such series of Program Bonds, the
    GSE shall be entitled to charge such shortfall against





    

    7








 







    interest payments received on any other Program Bonds and to
    recoveries of any interest payments on any such Program Bonds.



 



    (c) Each GSE shall be entitled to an Initial Securitization
    Fee on the Settlement of each GSE Security as set forth in
    Schedule A of this Agreement.



 




    ARTICLE 4
    



 




    SETTLEMENT.



 



    4.1.  Settlement. The parties hereby
    acknowledge that Settlement with respect to each issue of GSE
    Securities will occur in accordance with and subject to the
    terms of the related Settlement Agreement.



 



    4.2.  Delivery of GSE Security Information. On
    or prior to January 7, 2010, each GSE shall deliver to
    Treasury the GSE PPM, and the related GSE PPM Schedule, with
    respect to the GSE Securities.



 



    4.3.  Delivery of Permanent Rate Information.



 



    (a) On December 18, 2009, Treasury shall deliver (or
    cause to be delivered), to the related HFA, the related HFA
    Trustee, the GSEs and the related GSE Special Closing Counsel,
    the final interest rate confirmation (as approved by Treasury)
    of State Street Global Advisors with respect to any Permanent
    Rate Program Bonds, which confirmation shall set forth the
    Permanent Rate on such Permanent Rate Program Bonds and the
    principal balance at issue date of such Permanent Rate Program
    Bonds and the Conversion Program Bonds. For purposes of this
    Section 4.3, “Permanent Rate”,
    “Permanent Rate Program Bonds” and
    “Conversion Program Bonds” have the respective
    meanings given to such terms in the related Supplemental
    Indenture.



 



    (b) With respect to any portion of the Conversion Program
    Bonds converting to a Permanent Rate during 2010, Treasury shall
    cause Treasury’s Agent to deliver on the Permanent Rate
    Calculation Date to the related HFA, the related HFA Trustee,
    the GSEs and the related GSE Special Closing Counsel, the final
    interest rate confirmation (as approved by Treasury) of State
    Street Global Advisors with respect to such Conversion Program
    Bonds, which confirmation shall set forth the Permanent Rate on
    the Conversion Program Bonds and the principal balance of such
    Conversion Program Bonds at such Permanent Rate Calculation
    Date. For purposes of this Section 4.3,
    “Permanent Rate Calculation Date” has the
    meaning given to such term in the related Supplemental Indenture



 



    4.4.  Program Bond Eligibility Requirements and
    Closing Counsel Certification. The eligibility requirements
    for Program Bonds under the New Issue Bond Program are set forth
    on Schedule D to this Agreement. As contemplated by
    each Settlement Agreement, a Closing Counsel Certification with
    respect to the satisfaction of the applicable eligibility
    requirements for the related Program Bonds, the form of which is
    attached as Schedule B to this Agreement, will be
    delivered to each GSE. The parties to this Agreement hereby
    acknowledge and agree that the Closing Counsel Certification





    

    8








 







    shall be conclusive evidence as to the eligibility of the
    related Program Bonds under the New Issue Bond Program.
    Notwithstanding the foregoing, the parties to this Agreement
    hereby acknowledge that each such party shall have the right to
    enforce the representations and warranties of each HFA with
    respect to the eligibility of the related Program Bonds pursuant
    to the related Placement Agreement.



 



    4.5.  Certain Closings. The parties to this
    Agreement acknowledge and agree that Settlement with respect to
    any issue of GSE Securities will be deemed to have occurred on,
    and have a Settlement Date of, December 31, 2009 if each of
    the following requirements is satisfied:



 



    (a) On or before December 31, 2009, the following
    fully executed documents are delivered to the parties to this
    Agreement: (i) the related Placement Agreement, with a
    completed Schedule B and the completed, if applicable,
    relevant Schedule D, (ii) the Administration Agreement
    and (iii) the related Settlement Agreement;



 



    (b) The Administration Agreement and each such Placement
    Agreement and Settlement Agreement is an irrevocable,
    unconditional, mutually binding contract which requires such
    Settlement to occur on or before January 29, 2010; and



 



    (c) Such Settlement occurs in full and in accordance with
    the Administration Agreement and each such Placement Agreement
    and Settlement Agreement and this Agreement on or before
    January 29, 2010.



 



    4.6.  Obligations of the Parties. The
    respective obligations under this Agreement and under each
    Settlement Agreement of each GSE to Treasury with respect to
    each related issue of GSE Securities are expressly conditioned
    upon (i) the timely performance by Treasury of its
    obligations under this Agreement and under such Settlement
    Agreement with respect to such issue in accordance with this
    Agreement and the Settlement Agreement, respectively, and
    (ii) the timely performance by the related HFA of its
    obligations under the related Placement Agreement and Settlement
    Agreement in accordance with such Placement Agreement and
    Settlement Agreement, respectively. Treasury’s obligations
    to each GSE under this Agreement and under each Settlement
    Agreement with respect to each related issue of GSE Securities
    are expressly conditioned upon (a) the timely performance
    by such GSE of its obligations under this Agreement and such
    Settlement Agreement with respect to such issue in accordance
    with this Agreement and the Settlement Agreement, respectively,
    and (b) the timely performance by the HFA of its
    obligations under such Placement Agreement and Settlement
    Agreement in accordance with such Placement Agreement and
    Settlement Agreement, respectively.



 




    ARTICLE 5
    



 




    LOSS
    SHARING.
    



 



    Treasury and the GSEs shall share Program Losses, if any,
    realized on the principal of the Program Bonds represented by
    the Custodial Receipts related to the GSE





    

    9








 







    Securities issued under the New Issue Bond Program in accordance
    with and only to the extent set forth in Schedule C
    of this Agreement. Any losses incurred with respect to accrued
    but unpaid interest on any such Program Bonds are not subject to
    sharing with the GSEs and will be borne entirely by Treasury.



 




    ARTICLE 6
    



 




    REPORTING.
    



 



    The parties hereby acknowledge that Treasury is entitled to
    certain reporting and information rights pursuant to, and as set
    forth in, the Administration Agreement and the Placement
    Agreements.



 




    ARTICLE 7
    



 




    ROLE OF
    TREASURY’S
    AGENTS.
    



 



    7.1.  The parties hereby acknowledge and agree that JP
    Morgan Chase Bank, N.A. is acting as Treasury’s agent
    (“Treasury’s Agent”) in connection with
    the HFA Initiative, including without limitation, reviewing and
    confirming documents and information, receiving and remitting
    funds, and performing such functions as may be described in the
    Administration Agreement, the Placement Agreements and the
    Settlement Agreements. Treasury hereby acknowledges and agrees
    that (a) Treasury’s Agent is authorized to so act for
    and on behalf of Treasury and to provide notices, direction,
    certificates and other communications in respect thereof,
    (b) the GSEs, the Administrator and their respective agents
    and representatives shall be entitled to rely in good faith on
    any such notice, direction, certificate or other communication
    provided by Treasury’s Agent in respect thereof, and
    (c) the GSEs, the Administrator and their respective agents
    and representatives shall not be bound to make any investigation
    into the facts or matters stated in any such notice, direction,
    certificate or other communication.



 



    7.2.  The parties hereby acknowledge and agree that,
    with respect to the HFA Initiative, State Street Global Advisors
    will be providing certain interest rate confirmations as
    contemplated by Section 4.3 of this Agreement and
    specifying the applicable Permanent Rate Calculation Date under
    the related Supplemental Indentures for and on behalf of
    Treasury. Treasury hereby acknowledges and agrees that
    (a) State Street Global Advisors is authorized to so act
    for and on behalf of Treasury and to provide notices, direction,
    certificates and other communications in respect thereof,
    (b) the GSEs, the Administrator and their respective agents
    and representatives shall be entitled to rely in good faith on
    any such notice, direction, certificate or other communication,
    and (c) the GSEs, the Administrator and their respective
    agents and representatives shall not be bound to make any
    investigation into the facts or matters stated in any such
    notice, direction, certificate or other communication.





    

    10








 








    ARTICLE 8
    



 




    DECISION
    CONTROL.
    



 



    With respect to any Program Bond represented by a Custodial
    Receipt related to a GSE Security, Treasury shall be entitled to
    exercise Decision Control so long as the Crossover Date has not
    occurred, and the GSEs shall be entitled to exercise such
    Decision Control on and after the Crossover Date. The identity
    of the party having Decision Control shall not affect the
    obligations of Treasury under this Agreement. Treasury agrees to
    consult with the relevant GSE, and each GSE agrees to make
    recommendations to Treasury, with respect to the issues for
    which Decision Control by Treasury is to be exercised.
    Conversely, each GSE agrees to consult with Treasury, and
    Treasury agrees to make recommendations to such GSE, with
    respect to the issues for which Decision Control by such GSE is
    to be exercised. Notwithstanding the foregoing, the party having
    Decision Control shall have the unilateral right to exercise
    Decision Control.



 




    ARTICLE 9
    



 




    GSE
    SECURITIES NOT TO
    TRADE.
    



 



    Treasury agrees that it will not trade, sell, exchange,
    securitize, donate or give to any third party or pledge,
    hypothecate or otherwise transfer any interests in or to any of
    the GSE Securities acquired by it from time to time pursuant to
    or as contemplated by this Agreement. Excluded from this
    limitation is the use by Treasury of custodians or nominees
    (including Treasury’s Agent) to hold any GSE Security on
    behalf of Treasury.



 




    ARTICLE 10
    



 




    DISSOLUTION
    OF GSE
    SECURITIES.
    



 



    At the written request of Treasury, each GSE shall promptly
    (i) cause its GSE Trust to dissolve any series of GSE
    Securities or withdraw a Program Bond or Program Bonds from the
    related securitization and GSE Trust, and (ii) cause the
    Administrator to cancel and destroy, or appropriately annotate
    or replace the schedule of, the related Custodial Receipt(s) and
    deliver the underlying series of Program Bonds to
    Treasury’s designee in connection with the sale of such
    underlying Program Bonds; provided that with respect to any
    series of GSE Securities, Treasury shall make such request of
    both GSEs at the same time and provided further that any
    additional details related to the process for any such
    dissolution or withdrawal and any related fees to be paid to the
    GSEs shall be agreed to by the parties at the time of
    Treasury’s written request.





    

    11








 








    ARTICLE 11
    



 




    CERTAIN
    MATTERS.
    



 



    11.1.  With respect to each Settlement and as of such
    Settlement Date, Treasury shall be deemed to have acknowledged
    and agreed to the following provisions:



 



    (a) Subject to receipt thereof in accordance with this
    Agreement or the related Settlement Agreement, Treasury hereby
    acknowledges and agrees that it or Treasury’s Agent has
    been furnished with each related GSE PPM and Official Statement,
    and such other documents with respect to the related GSE
    Securities, the corresponding Program Bonds and the underlying
    loans provided to it or Treasury’s Agent under such related
    Settlement Agreement, and has been given the opportunity to
    (a) ask questions of, and receive answers from, the related
    GSE concerning the terms and conditions of the purchase of the
    related GSE Securities, and (b) obtain any additional
    information necessary to evaluate the merits and risks of
    purchasing the GSE Securities.



 



    (b) In considering the purchase of the related GSE
    Securities, Treasury has evaluated for itself the risks and
    merits of such purchase including the risks set forth under the
    caption “Risk Factors” (or similar caption), if any,
    in the related GSE PPM and Official Statement, and has not
    relied upon any representations made by, or other information
    (whether oral or written) furnished by or on behalf of, the
    related GSE, or any director, officer, employee or agent of such
    GSE, other than as expressly set forth in the related GSE PPM
    and the Closing Counsel Certification.



 



    (c) Neither GSE has made, nor was required to make, on
    behalf of Treasury or any other party, any inquiry or
    investigation into the facts or matters stated in any
    resolution, certificate, official statement, private placement
    memorandum, prospectus, supplement, instrument, opinion, report,
    notice, request, direction, consent, order, bond, note or other
    paper or document with respect to any Program Bond, and, other
    than with respect to the Closing Counsel Certification, any
    inquiry or investigation into any facts or matters it may have
    conducted shall be exclusively for the benefit of such GSE.



 



    11.2.  Each of the parties to this Agreement agrees
    that it will in good faith cooperate and consult with the other
    parties to this Agreement in respect of, and share any findings
    that such party documents in a writing in accordance with its
    normal internal policies and procedures as to, an actual or
    potential Transaction Loss. However, in no event shall any party
    to this Agreement be obligated to make any inquiry or
    investigation into the facts or matters stated in any
    resolution, certificate, official statement, private placement
    memorandum, prospectus, supplement, instrument, opinion, report,
    notice, request, direction, consent, order, bond, note or other
    paper or document with respect to any Program Bond for the
    benefit of any of the other parties to this Agreement.





    

    12








 








    ARTICLE 12
    



 




    INTERPRETATION.
    



 



    Each of the parties acknowledges that it and its in-house
    and/or
    outside counsel have participated in the drafting and revision
    of this Agreement. Accordingly, the parties agree that any rule
    of construction which disfavors the drafting party shall not
    apply to the interpretation of this Agreement.



 




    ARTICLE 13
    



 




    GOVERNING
    LAW.
    



 



    This Agreement shall be governed by, and interpreted in
    accordance with, United States law, not the law of any state or
    locality. To the extent that a court looks to the laws of any
    state to determine or define the United States law, it is the
    intention of the parties to this Agreement that such court shall
    look only to the laws of the State of New York without regard to
    the rules of conflicts of laws.



 




    ARTICLE 14
    



 




    NOTICES.
    



 



    All notices, directions, certificates or other communications
    under this Agreement shall be sent by certified or registered
    mail, return receipt requested, or by overnight courier
    addressed to the appropriate notice address set forth below. Any
    such notice, direction, certificate or communication shall be
    deemed to have been given as of the date of actual delivery or
    the date of failure to deliver by reason of refusal to accept
    delivery or changed address of which no notice was given
    pursuant to this Article 14. Any of the parties to
    this Agreement may, by such notice described above, designate
    any further or different address to which subsequent notices,
    certificates or other communications shall be sent without any
    requirement of execution of any amendment to this Agreement. The
    notice addresses are as follows:





    

    13








 






	 	 	 	 	 
	

    To Treasury:


	
 
	
    Department of the Treasury

    1500 Pennsylvania Avenue, N.W.

    Washington, D.C. 20220

    


	
 
	
 
	
    Attention:
	
 
	

Fiscal Assistant Secretary
re:  Housing Finance Agencies Initiative

and





	
 
	
 
	
    Attention:
	
 
	

Assistant General Counsel
(Banking and Finance)
re: Housing Finance Agencies Initiative

with a copy to:





	
 
	
 
	
    JPMorgan Chase Bank, N.A.

    1 Chase Manhattan Plaza, Floor 19

    New York, NY 10005

	
 
	
 
	
    Attention:
	
 
	
    Lillian G. White

	
 
	
 
	
    E-mail:
	
 
	

Lillian.G.White@jpmorgan.com





	
 
	
 
	
    Notice delivered to Treasury at the address given above shall
    also constitute notice to Treasury’s Agent.

    


	

    To Fannie Mae:


	
 
	
    Fannie Mae

    3900 Wisconsin Avenue, N.W.

    Washington, D.C. 20016

	
 
	
 
	
    Attention:
	
 
	
    Richard Sorkin

    Vice President, Structured Transactions

	
 
	
 
	
    Email:
	
 
	

richard_sorkin@fanniemae.com

and





	
 
	
 
	
    Attention:
	
 
	
    Paul Van Hook

    Vice President and

    Deputy General Counsel

	
 
	
 
	
    Email:
	
 
	
    paul_vanhook@fanniemae.com











    

    14








 






	 	 	 	 	 
	

    To Freddie Mac:


	
 
	
    Freddie Mac

    1551 Park Run Drive

    Mail Stop D4F

    McLean, Virginia 22102

	
 
	
 
	
    Attention:
	
 
	
    Mark D. Hanson

    Vice President Mortgage Funding

	
 
	
 
	
    E-mail:
	
 
	

Mark_Hanson@freddiemac.com

and





	
 
	
 
	
    Attention:
	
 
	
    Melinda Reingold

    Managing Associate General Counsel —

    Mortgage Securities

    8200 Jones Branch Drive

    McLean, Virginia 22102

	
 
	
 
	
    E-mail:
	
 
	

Melinda_Reingold@freddiemac.com

with a copy to:





	
 
	
 
	
    Attention:
	
 
	
    Arnold Dean

    Associate General Counsel —

    Mortgage Securities

    8200 Jones Branch Drive

    McLean, Virginia 22102

	
 
	
 
	
    E-mail:
	
 
	

Arnold_Dean@freddiemac.com

and





	
 
	
 
	
    Attention:
	
 
	
    Edward Abrams

    Associate General Counsel —

    Mortgage Securities

    8200 Jones Branch Drive

    McLean, Virginia 22102

	
 
	
 
	
    E-mail:
	
 
	
    Edward_Abrams@freddiemac.com









 



    or to any other address any party provides to the other parties
    in writing.



 




    ARTICLE 15
    



 




    SEVERABILITY.
    



 



    Any provision of this Agreement that is determined to be
    prohibited or unenforceable in any jurisdiction shall, as to
    such jurisdiction, be ineffective to the extent of such
    prohibition or unenforceability without invalidating the
    remaining provisions of this Agreement, and no such prohibition
    or unenforceability in any jurisdiction shall invalidate such
    provision in any other jurisdiction.





    

    15








 








    ARTICLE 16
    



 




    EXPENSES.
    



 



    Except as otherwise provided in this Agreement, each party to
    this Agreement shall bear its own expenses in connection with
    the preparation, negotiation and execution of this Agreement and
    all costs associated with the sharing of information under this
    Agreement, and no party shall be liable to any other party for
    such expenses.



 




    ARTICLE 17
    



 




    OPERATION
    OF THIS
    AGREEMENT.
    



 



    17.1.  This Agreement is not a Federal procurement
    contract and is therefore not subject to the provisions of the
    Federal Property and Administrative Services Act (41 U.S.C.
    §§ 251-60),
    the Federal Acquisition Regulations (48 CFR
    Chapter 1), or any other Federal procurement law.



 



    17.2.  Each GSE shall be responsible only for the
    performance by it of its obligations under this Agreement and
    under any transaction, GSE Security or other undertaking made
    pursuant to this Agreement. Nothing in this Agreement shall make
    or be deemed to make a GSE responsible for the obligations of
    the other GSE under this Agreement or under any transaction, GSE
    Security or other specific undertaking made pursuant to this
    Agreement.



 




    ARTICLE 18
    



 




    THIRD
    PARTY
    RIGHTS.
    



 



    This Agreement does not confer any rights, benefits, remedies or
    claims, either at law or in equity, on any person not a party to
    this Agreement including, but not limited to, any HFA.



 




    ARTICLE 19
    



 




    ENTIRE
    AGREEMENT.
    



 



    This Agreement constitutes the entire agreement among the
    parties pertaining to the subject matter of this Agreement and
    supersedes all prior agreements and understandings pertaining to
    the subject matter of this Agreement, including, but not limited
    to, the MOU.



 




    ARTICLE 20
    



 




    SUCCESSORS
    AND
    ASSIGNS.
    



 



    The identity of each of the parties being of material importance
    to each other party, this Agreement is made on the condition
    that, except as otherwise expressly





    

    16








 







    provided in this Agreement, no party’s rights or
    obligations under this Agreement shall be assignable without the
    prior written consent of the other parties. The rights of the
    GSEs under this Agreement shall inure to the benefit of their
    respective successors and assigns.



 




    ARTICLE 21
    



 




    NO JOINT
    VENTURE.
    



 



    The execution of this Agreement is not intended to be, nor shall
    it be construed to be, the formation of a joint venture or
    partnership between the parties; nor shall it be deemed to
    create any relationship between the parties other than as
    expressly stated in this Agreement.



 




    ARTICLE 22
    



 




    COUNTERPARTS.
    



 



    This Agreement may be executed in counterparts by the parties;
    each counterpart shall be considered an original; and all
    counterparts shall constitute one and the same instrument.



 




    ARTICLE 23
    



 




    AMENDMENT.
    



 



    The parties to this Agreement may from time to time amend this
    Agreement in writing, and such amendments, when executed by all
    parties, shall then become a part of this Agreement.



 




    ARTICLE 24
    



 




    FURTHER
    ASSURANCES; NO CIRCUMVENTION OF
    AGREEMENT.
    



 



    Each of the parties to this Agreement agrees to use commercially
    reasonable efforts to take, or cause to be taken, all actions
    and to do, or cause to be done, and to assist and cooperate with
    the other parties in doing, all things necessary, proper or
    advisable to give effect to the transactions contemplated by
    this Agreement, and not to take, or cause to be taken, any
    actions to circumvent its obligations under this Agreement.



 




    *  
    *   *
    





    

    17








 







    IN WITNESS WHEREOF, the parties to this Agreement have executed
    this Agreement as of the date first written above.



 


	 	 	 
	
 
	
 
	

UNITED STATES DEPARTMENT OF
     THE TREASURY





	
 
	
 
	

    By:  /s/  Richard
    L. Gregg


    Richard L. Gregg

    Acting Fiscal Assistant Secretary











 



    [Treasury New Issue Bond Program Agreement Signature Page]





    

    S-1








 







    IN WITNESS WHEREOF, the parties to this Agreement have executed
    this Agreement as of the date first written above.



 


	 	 	 
	
 
	
 
	

FEDERAL NATIONAL MORTGAGE
     ASSOCIATION





	
 
	
 
	

    By:  /s/  Carl
    W. Riedy, Jr.


    Name: Carl W. Riedy, Jr.

    Title: Vice President











 



    [Fannie Mae New Issue Bond Program Agreement Signature
    Page]





    

    S-2








 







    IN WITNESS WHEREOF, the parties to this Agreement have executed
    this Agreement as of the date first written above.



 


	 	 	 
	
 
	
 
	

FEDERAL HOME LOAN MORTGAGE
     CORPORATION





	
 
	
 
	

    By:  /s/  Mark
    D. Hanson


    Name: Mark D. Hanson

    Title: Vice President, Mortgage Funding











 



    [Freddie Mac Signature Page to New Issue Bond Program
    Agreement]





    

    S-2








 








    SCHEDULE A
    



 




    GSE
    FEES



 


	 	 	 
	
 
	
 
	
 

	

    Initial Securitization Fee:


	
 
	
    An amount calculated in each instance in (a), (b) and (c), as
    applicable, based on the aggregate original principal amount of
    all Program Bonds issued by the HFA under the New Issue Bond
    Program as follows: (a) where the aggregate original
    principal amount of all the Program Bonds is less than or equal
    to $25,000,000, a fee equal to $25,000 per GSE; (b) where
    the aggregate original principal amount of all the Program Bonds
    is greater than $25,000,000 and less than or equal to
    $50,000,000, a fee for each GSE equal to the product of 0.1%
    (10 basis points) and the aggregate original principal
    amount of all the Program Bonds; and (c) where the
    aggregate original principal amount of all the Program Bonds is
    greater than $50,000,000, a fee for each GSE equal to the
    greater of (i) $50,000 or (ii) the product of 0.05%
    (or 5 basis points) and the aggregate original principal
    amount of all the Program Bonds.

	
 
	
 
	
 

	

    Program Bond Guarantee Fee:


	
 
	
    With respect to each GSE and Program Bond series, one-twelfth of
    the product of 0.25% and the unpaid principal amount of the
    Program Bonds being held under the Administration Agreement
    (paid monthly to the GSEs); provided, however, for purposes of
    this calculation, Program Bonds that are subject to Conversion,
    and for which the Release Date (as such terms are defined in the
    related Supplemental Indenture) has not occurred, are excluded.

	
 
	
 
	
 











    

    A-1








 








    SCHEDULE B
    



 




    FORM OF
    CERTIFICATION FROM GSE SPECIAL CLOSING COUNSEL



 




    [            
      ,
         ]



 




    Federal
    National Mortgage Association

    3900 Wisconsin Avenue, N.W.

    Washington, D.C. 20016
    



 




    Federal Home
    Loan Mortgage Corporation

    1551 Park Run Drive

    Mail Stop D4F

    McLean, Virginia 22102
    



 



    Re:  Issuer
    Name:          (the
    “HFA”)

    Program Bond Amount:

    Program Bond Name:



 




    Ladies and
    Gentlemen:
    



 



    The GSEs (as defined below) have engaged us to assist them as
    GSE Special Closing Counsel in connection with the Settlements
    described in that certain New Issue Bond Program Agreement,
    dated as of December 18, 2009 (the “Program
    Agreement”), among the Federal National Mortgage
    Association, the Federal Home Loan Mortgage Corporation
    (collectively the “GSEs”) and the United States
    Department of the Treasury, and each of the related Placement
    Agreement and Settlement Agreement dated as of December 18,
    2009 (respectively the “Placement Agreement”
    and the “Settlement Agreement”) among the GSEs,
    the above named HFA and the other parties thereto.



 



    Any capitalized terms used in this Certification that are not
    defined in this Certification shall have the meaning ascribed to
    such terms in the Program Agreement; and if not defined therein,
    shall have the meaning ascribed to such term in the Placement
    Agreement.



 



    As GSE Special Closing Counsel, we hereby certify to each of you
    pursuant to the provisions of Section 4.4 of the Program
    Agreement that, except as may be specified in any list of
    exceptions attached to this Certification, (a) we have
    received and hold in our possession in escrow pending the
    Settlement: all of the original, facsimile or electronic copies
    of (i) the required documents set forth and described on
    Exhibit C to the Placement Agreement (the
    “Settlement Deliverables”), (ii) the
    Placement Agreement, (iii) the Official Statement and
    (iv) the Settlement Agreement (all such documents described
    in this paragraph (a)(i), (ii), (iii) and
    (iv) referred to collectively as the “Closing
    Documents”); (b) we have reviewed and confirmed the
    due execution of each Closing





    

    B-1








 







    Document (if such Closing Document requires execution) either
    (i) by confirming whether each document requiring execution
    by the HFA or the HFA Trustee is executed by authorized officers
    of such parties based solely on and by reference to the
    incumbency certificates of the HFA and the HFA Trustee delivered
    in connection therewith or (ii) by reviewing one or more
    opinions of counsel with respect to execution of the Closing
    Documents; (c) we have reviewed the information on
    Schedule B to the Placement Agreement and confirmed that
    such information is consistent with the information in the
    Official Statement and the other Closing Documents; (d) we
    have confirmed that the Closing Documents comply in all material
    respects with the requirements of Schedule C to the
    Placement Agreement; and (e) the Program Bonds and the
    other Settlement Deliverables conform in all material respects
    to the requirements of Schedule D to the Placement
    Agreement.



 



    As the GSEs have instructed, our scope of work, as related to
    the above-captioned transaction, was limited to confirming the
    foregoing.



 



    This Certification is furnished by us to the GSEs as GSE Special
    Closing Counsel and is solely for your benefit. Except in
    connection with the New Issue Bond Program Agreement, this
    Certification is not to be used, circulated, quoted or otherwise
    referred to or relied upon, in whole or in part, for any other
    purpose or by any other party except (i) upon the prior
    written consent of GSE Special Closing Counsel and (ii) by
    the United States Department of the Treasury in connection with
    the New Issue Bond Program.



 



    Very truly yours,





    

    B-2








 








    Exceptions

    

    N/A
    





    

    B-3








 








    SCHEDULE C
    



 



    The following is the Uniform Loss Sharing Attachment for the New
    Issue Bond Program and the Temporary Credit and Liquidity
    Facility Program. This attachment contains the provisions
    applicable to (i) Partial Guarantees relating to GSE
    Securities issued from time to time under the New Issue Bond
    Program and (ii) Participation Agreements entered into from
    time to time and Partial Guarantees relating to GSE Securities
    issued from time to time under the Temporary Credit and
    Liquidity Facility Program.



 



    This Uniform Loss Sharing Attachment is attached to each Partial
    Guarantee and each Participation Agreement.



 



    Section
    1     Definitions.  In
    this Attachment and in any agreement or other document to which
    this Attachment is attached, all capitalized terms have the
    meanings given to those terms in this Section 1 unless the
    context or use clearly indicates a different meaning. Any
    capitalized term used in this Attachment but not defined in this
    Exhibit shall be used as defined in the agreement or other
    document to which this Exhibit is attached. The following terms
    have the following meanings:



 



    “Amount Available” has the meaning given to
    that term in each Temporary Credit and Liquidity Facility.



 



    “Bank Bonds” means any VRDOs that were tendered
    for purchase by a bondholder and were put to the GSEs under a
    TCLF and have not yet been remarketed to a new bondholder,
    whether or not the GSEs have issued GSE Securities backed by
    such Bank Bonds.



 



    “Bonds” means, as the case may be, VRDOs, Bank
    Bonds and New Issue Bonds.



 



    “Credit Advance” means an advance under a TCLF
    to pay debt service due on VRDOs for which there are
    insufficient funds available under the related indenture.



 



    “Event of Default” means an “event of
    default” as such term is defined in the related bond
    indenture for the underlying bonds.



 



    “Fannie Mae” means the Federal National
    Mortgage Association, a federally-chartered and
    stockholder-owned corporation organized and existing under the
    Federal National Mortgage Association Charter Act,
    12 U.S.C. § 1716 et seq.



 



    “First Loss Limit” has the meaning given to
    that term in Section 5.



 



    “First Position Loss” means the amount of
    Program Loss to be borne by Treasury under the Program. The
    First Position Loss is that portion of the Program Loss that
    does not exceed the First Loss Limit.





    

    C-1








 







    “Freddie Mac” means the Federal Home Loan
    Mortgage Corporation, a shareholder-owned government-sponsored
    enterprise organized and existing under the laws of the United
    States.



 



    “Government-sponsored enterprise” or
    “GSE” means either or both Fannie Mae and Freddie Mac.



 



    “GSE Obligations” or “GSE
    Securities” are obligations and securities issued or
    guaranteed, in whole or in part, by Fannie Mae or Freddie Mac
    including, without limitation, Bank Bonds and New Issue Bonds
    and, with respect to the Temporary Credit and Liquidity Facility
    Program, Participation Agreements.



 



    “HFA” means a housing finance agency created by
    any of the States of the United States or any possession,
    territory or commonwealth of the United States, or any political
    subdivision thereof.



 



    “Liquidity Advance” means an advance under a
    TCLF to pay for bond purchase tenders relating to VRDOs.



 



    “Loss Calculation Date” means the date as of
    which a Loss is calculated as provided in Paragraph 6.



 



    “MOU” means the Memorandum of Understanding
    among Treasury, Federal Housing Finance Agency, Fannie Mae and
    Freddie Mac.



 



    “Multifamily Credit Enhancement Program” means
    the Treasury program, distinct and separate from the Programs,
    to purchase HFA bonds which are guaranteed by the Credit
    Enhancement Agreement by either of the GSEs.



 



    “New Issue Bond Program” means the program
    described in the New Issue Bond Program Agreement.



 



    “New Issue Bond Program Agreement” means one or
    more New Issue Bond Program Agreements by and among Treasury and
    the GSEs, concerning the program for the acquisition of GSE
    Securities backed by New Issue Bonds.



 



    “New Issue Bonds” means, collectively, the
    single family bonds and multifamily bonds which back GSE
    Securities purchased under the New Issue Bond Program Agreement.



 



    “Partial Guarantee” means a partial guarantee
    provided by a GSE (a) pursuant to a GSE Security issued
    with respect to the Temporary Credit and Liquidity Facility
    Program or (b) pursuant to a GSE Security issued with
    respect to the New Issue Bond Program.



 



    “Participation Agreement” means each
    Participation Agreement by and between Treasury and the GSEs
    whereby the rights, duties and obligations of the Treasury and
    the GSEs with respect to the Temporary Credit and Liquidity
    Facility Program (including the terms of the Partial Guarantee)
    are set forth, as such agreements are amended and supplemented.





    

    C-2








 







    “Program” means either of the New Issue Bond
    Program or the Temporary Credit and Liquidity Facility Program.



 



    “Program Bonds” means New Issue Bonds and Bank
    Bonds.



 



    “Program Losses” mean the aggregate of all
    Transaction Losses incurred under the Temporary Credit and
    Liquidity Facility Program and the New Issue Bond Program.



 



    “Recovery” means any payment or other amount
    received or recovered with respect to a Transaction Loss. A
    Recovery excludes any amounts paid by a GSE to Treasury with
    respect to a Second Position Loss or any amounts payable by
    Treasury to the GSEs under any purchase agreement or
    participation agreement.



 



    “Reimbursement Agreement” means each
    Reimbursement Agreement entered into among an HFA, a bond
    trustee and the GSEs relative to a TCLF, as such Reimbursement
    Agreements are amended and supplemented.



 



    “Risk Rating” means the risk rating of an
    indenture under a Program.



 



    “Second Position Loss” means that portion of
    Program Losses, if any, that is not allocated to the First Loss
    Position. Any Second Position Loss will be allocated to the
    Participation Agreements and Partial Guarantees in accordance
    with the Uniform Loss Sharing Attachment.



 



    “Secured Multifamily Loans” means loans that
    are secured by multifamily properties.



 



    “Temporary Credit and Liquidity Facility” or
    “TCLF” has the meaning given to that term in
    the Participation Agreement.



 



    “Temporary Credit and Liquidity Facility
    Program” means the Program described in the
    Participation Agreement.



 



    “Transaction Documents” means, collectively,
    the TCLF, the Reimbursement Agreement and related Bond documents
    with respect to any series included in the Temporary Credit and
    Liquidity Facility Program, as such documents are amended from
    time to time in accordance with their terms.



 



    “Transaction Loss” means an amount calculated
    pursuant to Section 7 as the loss realized on a Program
    Bond or a Temporary Credit and Liquidity Facility.



 



    “Trust” means a trust established by a GSE as a
    pass-through entity which holds one or more issues of Bonds and,
    where appropriate, a Partial Guarantee.



 



    “VRDO” means a variable rate demand obligation
    bond issued by an HFA



 



    Section 2     General
    Statement.  Treasury and the GSEs will share
    Program Losses, if any, realized on:





    

    C-3








 







    (a) the principal of the New Issue Bonds backing GSE
    Securities issued from time to time under the New Issue Bond
    Program; and



 



    (b) the principal portion of all Credit Advances and
    Liquidity Advances made from time to time under the Temporary
    Credit and Liquidity Facilities issued under the Temporary
    Credit and Liquidity Facility Program.



 



    Any losses incurred with respect to accrued but unpaid interest
    on any of the New Issue Bonds backing the GSE Securities issued
    from time to time under the New Issue Bond Program and on any
    Credit Advance or Liquidity Advance made from time to time under
    the Temporary Credit and Liquidity Facilities issued under the
    Temporary Credit and Liquidity Facility Program are not subject
    to sharing with the GSEs and will be entirely borne by Treasury.
    No loss sharing shall occur with respect to the Multifamily
    Credit Enhancement Program as a GSE will have provided credit
    enhancement for such Bonds separately.



 



    Section 3     GSE Only Shares
    in Losses for its Activities in Programs.  The
    sharing of Program Losses will be structured between Treasury
    and each GSE separately. A GSE will only share in Program Losses
    realized on the New Issue Bonds backing the GSE Securities
    issued by that GSE and on losses realized on that GSE’s
    portion of the Temporary Credit and Liquidity Facilities.
    Neither GSE will share in Program Losses allocable to the other
    GSE.



 



    Section 4     Allocation of
    Losses between Treasury and GSE.  Treasury will
    bear all Program Losses realized on the New Issue Bond Program
    and the Temporary Credit and Liquidity Facility Program up to
    the First Loss Limit (“First Position Losses”). Each
    GSE will bear Program Losses, if any, realized on the New Issue
    Bond Program and the Temporary Credit and Liquidity Facility
    Program once the Program Losses, if any, realized by Treasury
    equal the First Loss Limit (“Second Position Losses”).



 



    Section 5     First Loss
    Limit.  With respect to a GSE, the First Loss
    Limit will be 35% of the sum of:



 



    (a) the aggregate original principal amount of all New
    Issue Bonds backing the GSE Securities issued from time to time
    under the New Issue Bond Program by that GSE; and



 



    (b) the aggregate original principal portion of the Amount
    Available obligated to be paid by each GSE in each Temporary
    Credit and Liquidity Facility issued under the Temporary Credit
    and Liquidity Facility Program.



 



    Such First Loss Limit may be adjusted by the GSEs and Treasury
    if the aggregate amount under either (a) or (b) above
    is less than $10 billion, or upon the obtaining or
    processing of information impacting the applicable Risk Ratings,
    or such other material new information that affects risk,
    commercial reasonableness, or safety and soundness under either
    the New Issue Bond Program or the Temporary Credit and Liquidity
    Facility Program. Any such adjustment shall be made in good
    faith by the GSEs and Treasury





    

    C-4








 







    based upon objective thresholds factoring into, among other
    things, the applicable Risk Ratings and the aggregate amounts
    set forth in (a) and (b) above.



 



    Section 6     When Transaction
    Loss is Calculated.



 



    (a) New Issue Bond Program. Under the New Issue Bond
    Program, Transaction Loss will be calculated separately with
    respect to each Program Bond upon twelve (12) months after
    the first to occur of:



 



    (1) the stated maturity date of the New Issue Bond;



 



    (2) the date the New Issue Bond is fully redeemed;



 



    (3) the date of acceleration of the New Issue Bond; or



 



    (4) the date of mandatory tender in lieu of redemption of
    the New Issue Bond.



 



    (b) Temporary Credit and Liquidity Facility Program.
    Under the Temporary Credit and Liquidity Facility Program,
    Transaction Loss will be calculated for each Temporary Credit
    and Liquidity Facility upon the last to occur of:



 



    (1) the date the GSE has no further obligation under the
    Temporary Credit and Liquidity Facility;



 



    (2) the date all Bank Bonds, if any, are paid in full,
    remarketed or redeemed; or



 



    (3) twelve (12) months after the first to occur of:



 



    (A) a Credit Advance remains unreimbursed;



 



    (B) a Bank Bond is not paid or redeemed when due; or



 



    (C) the GSE causes the acceleration, redemption or
    mandatory tender of the Bonds upon the occurrence of an Event of
    Default under any of the Transaction Documents.



 



    Section 7     How Losses are
    Determined.



 



    Transaction Losses will be calculated for a New Issue Bond or a
    Temporary Credit and Liquidity Facility as follows:



 



    (a) New Issue Bond Program. Under the New Issue Bond
    Program, a Transaction Loss under a New Issue Bond is the amount
    of principal of such New Issue Bond then due and unpaid as of
    the date that Transaction Loss is calculated. Any accrued and
    unpaid interest and any interest on interest or interest on
    other unpaid sums will not be included in Transaction Losses and
    will be borne solely by Treasury.





    

    C-5








 







    (b) Temporary Credit and Liquidity Facility Program.
    Under the Temporary Credit and Liquidity Facility Program, a
    Transaction Loss under a Temporary Credit and Liquidity Facility
    is:



 



    (1) all amounts owing and unpaid by the HFA under the
    related Reimbursement Agreement (relating to the principal
    portion of unreimbursed Credit Advances and unreimbursed
    Liquidity Advances); less



 



    (2) the sum of all amounts reimbursed, received or
    recovered on account of the amounts owing under paragraph
    (1) above prior to the Loss Calculation Date.



 



    The amount of any Transaction Loss will be allocated between
    unreimbursed Credit Advances and unreimbursed Liquidity Advances
    (and the related Bank Bonds) on the basis of the ratio of
    aggregate unreimbursed principal of the Credit Advances to the
    aggregate unreimbursed principal of the Liquidity Advances.



 



    Transaction Losses will be adjusted pursuant to the provisions
    of Sections 11 and 12.



 



    (c) Calculation Rules. For purposes of determining
    Transaction Loss under the New Issue Bond Program:



 



    (1) Transaction Loss will be calculated only with respect
    to the Bonds actually held by the related Trust. Any Bonds that
    were not acquired by the Trust shall be excluded from the
    calculation of Transaction Loss.



 



    (2) For purposes of calculating Transaction Loss, all
    payments made by the trustee for the Bonds shall be applied as
    principal or interest as characterized by the trustee for the
    Bonds in making such payment. Should the trustee for the Bonds
    not characterize a payment as either principal or interest, then
    that payment shall be characterized as required by the indenture
    or bond resolution for the Bonds. If the trustee for the Bonds
    does not characterize the payment as principal or interest and
    the related indenture or resolution contains no relevant terms,
    then the payment shall be applied first to outstanding and
    unpaid principal of the Bonds in the order of their stated
    maturity dates and then to accrued and unpaid interest on the
    Bonds in the order of their stated maturity dates.



 



    Section 8     Procedure for
    Reporting a Transaction Loss.  Pursuant to the
    timeframes set forth in Paragraph 6 above, the GSE will
    calculate, or cause to be calculated, the amount of Transaction
    Loss, if any, realized on a New Issue Bond or Temporary Credit
    and Liquidity Facility as provided in Paragraph 7 above.



 



    Section 9     Reporting if No
    Transaction Loss Calculated.  If the calculation
    prepared in accordance with Paragraph 7 above shows that no
    Transaction Loss was realized, the GSE will provide or cause to
    be provided a statement to that effect to Treasury within
    90 days of the Loss Calculation Date.





    

    C-6








 







    Section 10     Reporting if
    Transaction Loss Calculated; Payment of Second Position Loss.



 



    (a) Reconciliation. If the calculation shows that a
    Transaction Loss was realized, the GSE will send a written
    reconciliation calculation to Treasury within 90 days of
    the Loss Calculation Date which specifies:



 



    (1) Transaction Identification: The New Issue Bond
    or Temporary Credit and Liquidity Facility for which the
    reconciliation is made.



 



    (2) Transaction Loss: The Transaction Loss realized
    on the New Issue Bond or Temporary Credit and Liquidity Facility
    as of the Loss Calculation Date.



 



    (3) Program Losses:



 



    (A) Aggregate Program Losses (excluding only the
    Transaction Loss then just calculated for the New Issue Bond or
    Temporary Credit and Liquidity Facility for which the
    reconciliation is made); and



 



    (B) Aggregate Program Losses realized as of the Loss
    Calculation Date (including the Transaction Loss then just
    calculated for the New Issue Bond or Temporary Credit and
    Liquidity Facility for which the reconciliation is made).



 



    (4) The First Loss Limit.



 



    (5) The amount of the First Loss Limit still to be borne by
    Treasury.



 



    (b) First Position Losses. If the amount calculated
    in (a)(3)(B) is not more than the First Loss Limit, then the
    Transaction Loss for the New Issue Bond or Temporary Credit and
    Liquidity Facility for such reconciliation calculation is fully
    First Position Losses.



 



    (c) Partial First Position Losses; Partial Second
    Position Losses. If the amount appearing in (a)(3)(A) is
    less than the First Loss Limit but the amount calculated in
    (a)(3)(B) exceeds the First Loss Limit, then:



 



    (1) the portion of the Transaction Loss equal to the
    difference between the amount appearing in (a)(3)(A) and the
    First Loss Limit constitutes First Position Losses; and



 



    (2) the remaining portion of the Transaction Loss not
    allocated to the First Position Losses constitutes Second
    Position Losses.



 



    (d) Second Position Losses. If the amount appearing
    in (a)(3)(A) is more than the First Loss Limit, then the entire
    Transaction Loss constitutes Second Position Losses.





    

    C-7








 







    (e) Loss Sharing Payment. The GSE will pay the
    amount of any Second Position Losses (less all amounts
    previously paid by the GSE to Treasury as Second Position
    Losses) to Treasury or its order not later than 90 days
    after the Loss Calculation Date. Loss sharing payments made with
    respect to GSE Securities will be made as a distribution under
    the GSE Security and all other loss sharing payments will be
    paid to Treasury to such account as Treasury may require.



 



    Section 11     Recoveries;
    Losses are Incurred But Not In Excess of the First Loss
    Limit.  This Section applies if a GSE has
    calculated that a Transaction Loss has been realized with
    respect to one or more New Issue Bonds or Temporary Credit and
    Liquidity Facilities but the amount of the aggregate Program
    Losses has not exceeded the First Loss Limit. If one or more
    payments are received or other amounts are received or recovered
    with respect to any New Issue Bond or Temporary Credit and
    Liquidity Facility in respect of a Transaction Loss, then all
    such amounts will be paid to Treasury and the related
    Transaction Loss and, consequently, the aggregate Program Losses
    will be reduced by the amount of such Recovery.



 



    Section 12     Recoveries;
    Losses are Incurred Which Exceed the First Loss
    Limit.  This Section applies if a GSE has
    calculated that a Transaction Loss has been realized with
    respect to one or more New Issue Bonds or Temporary Credit and
    Liquidity Facilities, aggregate Program Losses exceed the First
    Loss Limit and the GSE has paid any Second Position Losses to
    Treasury. If one or more payments are received or other amounts
    are received or recovered with respect to any New Issue Bond or
    Temporary Credit and Liquidity Facility in respect of a
    Transaction Loss, then:



 



    (a) the related Transaction Losses and, consequently, the
    aggregate Program Losses will be reduced by the amount of such
    Recovery;



 



    (b) the GSE shall be entitled to such payments and other
    amounts, but not in excess of the amount of the Second Position
    Losses previously paid to Treasury; and



 



    (c) any excess available after the payment made in
    subparagraph (b) above shall be paid to Treasury.



 



    Section 13     Partial
    Guarantees of GSE Securities.  In order to
    evidence a GSE’s loss sharing obligations with respect to
    the GSE Securities it issues, the GSE will issue a partial
    guarantee to the related Trust (“Partial Guarantee”)
    for Program Losses allocable to such GSE Securities. The GSE
    will make a payment under a Partial Guarantee only under the
    circumstances set out in this Exhibit.



 



    Section 14     Termination of
    Loss Sharing Upon Unwinding of GSE Security.  A
    GSE’s loss sharing obligations and any related Partial
    Guarantee will automatically terminate with respect to any New
    Issue Bonds or Bank Bonds and the related GSE Security if
    Treasury causes a GSE Security to be unwound in exchange for the
    underlying New Issue Bonds or Bank Bonds.





    

    C-8








 








    SCHEDULE D-1



 




    DESCRIPTION
    OF PROGRAM BONDS

    (SINGLE-FAMILY-ESCROW)



 



    Terms capitalized in this
    Schedule D-1
    and not defined in Article 1 of this Agreement will have
    the meaning assigned to such terms in the Complete Indenture.



 



    In order to qualify as Eligible Bonds under the New Issue Bond
    Program, the Program Bonds, the related Complete Indenture and
    the HFA must satisfy the following requirements:



 



    1. Taxability:  At issuance, the Program
    Bonds will be tax-exempt qualified mortgage bonds within the
    meaning of Section 143 of the Internal Revenue Code of
    1986. If the Program Bonds do not satisfy the requirements of
    the foregoing sentence, then the HFA hereby certifies that it
    reasonably expects to have volume cap or alternative means of
    issuing tax-exempt bonds on a timely basis and in a manner which
    will permit the release of all Escrowed Proceeds (as defined
    below) by December 31, 2010, and will use its reasonable
    best efforts to obtain volume cap if necessary.



 



    2. Term:  The Program Bonds are stated to
    mature on a maturity date that is:



 



    (a) not less than ten (10) years after the
    Pre-Settlement Date of the Program Bonds; and



 



    (b) not more than thirty-two (32) years from the
    Pre-Settlement Date of the Program Bonds.



 



    3. Sinking Fund: The Program Bonds are subject to
    mandatory sinking fund redemptions or are structured to pass
    through principal payments and principal prepayments on the
    underlying mortgage loans. The sinking fund redemption schedule
    or alternative redemption/prepayment requirements will be
    established and added to the Complete Indenture no later than
    the final Release Date. This schedule (or these redemption
    provisions) is required by the terms of the Complete Indenture
    to take into account anticipated underlying mortgage loan
    amortization and standard and customary practices of the HFA in
    connection with combined serial bond and term bond issuances.



 



    4. Market Bond Ratio Requirement:



 



    At issuance, the HFA must reasonably expect to issue and sell to
    persons other than Treasury, in conjunction with the issuance
    and subsequent conversion to a permanent rate of the Program
    Bonds, bonds that are not Program Bonds but which are issued out
    of the same indenture and the proceeds of which are intended to
    be used in the HFA’s single-family loan program
    (“Market Bonds”). The HFA intends to issue
    Market Bonds after the Settlement Date and before
    January 1, 2011 so that after such issuances, the principal
    amount of the Market Bonds will be not less than two-thirds
    (2/3) of the principal amount of the Program Bonds
    (“Market Bond Ratio Requirement”).





    

    D-1-1








 







    5. Certain Terms Applicable to Market
    Bonds:  The Complete Indenture provides that
    Market Bonds may not be issued with “super sinker”,
    planned amortization classes or other priority allocation class
    rights unless such provisions retain for application to the
    redemption of the Program Bonds at least a pro rata portion of
    any prepayments or other recoveries of principal relative to
    mortgage loans funded or mortgage-backed securities purchased
    with proceeds of the Program Bonds.



 



    6. Escrow Requirement:  The Complete
    Indenture provides that:



 



    (a) Certain of the net proceeds of the Program Bonds must
    be held in Escrow (as defined below) until, with respect to all
    or the relevant portion of the Program Bonds, (i) the
    Market Bond Requirement is satisfied and (ii) the Program
    Bonds are tax-exempt. “Market Bond Ratio
    Requirement” means the requirement that the HFA issue
    and deliver Market Bonds in conjunction with and as a condition
    to each Release Date, the principal amount of such Market Bonds
    being not less than two-thirds (2/3) of the principal amount of
    Program Bonds the proceeds of which are proposed to be released
    on such Release Date.



 



    (b) The amount of net proceeds that must be escrowed at any
    given time (“Escrowed Proceeds”) is all
    proceeds of the Program Bonds with respect to which the
    requirements for the release of Escrowed Proceeds have not been
    met.



 



    (c) The Escrowed Proceeds will be held in escrow under the
    Complete Indenture (“Escrow”) pending the
    satisfaction of the requirements set forth in Section 6(e)
    below.



 



    (d) Escrowed Proceeds must be invested in such investments
    as permitted by Treasury and set forth in the Supplemental
    Indenture (“Permitted Escrow Investments”).
    Permitted Escrow Investments are pledged exclusively to the
    repayment of the Program Bonds unless and until there is a
    default under the Complete Indenture, in which case such funds
    will be applied as required by the Complete Indenture.



 



    (e) Escrowed Proceeds may be released from Escrow, subject
    to, among other things, the conditions that:



 



    (i) The HFA delivers a bond counsel opinion to the HFA
    Trustee to the effect that interest on the Program Bonds related
    to the Escrowed Proceeds to be released is exempt from federal
    income taxation under Section 103 of the Code;



 



    (ii) The HFA delivers to the HFA Trustee, who is required
    to provide copies to the Administrator, the GSEs and
    Treasury’s Financial Agent a certificate of Market Bond
    issuance and calculation of the release amount pursuant to the
    Market Bond Ratio Requirement; and



 



    (iii) The HFA delivers or causes to be delivered to the HFA
    Trustee net proceeds of the Market Bonds, which proceeds
    (together with any amounts deducted from proceeds for
    underwriting fees and expenses) shall be in an amount not less
    than two-thirds (2/3) of the applicable portion of the principal
    amount of the Program Bonds being Converted.





    

    D-1-2








 







    (f) Any Program Bonds with respect to which a Release Date
    has not occurred prior to January 1, 2011 are subject to
    mandatory redemption on February 1, 2011 (or an earlier
    date selected by the HFA), at a redemption price equal to 100%
    of the principal amount thereof plus accrued interest to the
    redemption date.



 



    7. Minimum Rating:  The Program Bonds have
    a long-term rating of not less than
    ‘Baa3’/‘BBB-’. The Complete Indenture
    provides that to the extent that the minimum rating threshold
    for the Program Bonds is not maintained while the proceeds
    thereof are Escrowed Proceeds, all proceeds that are still held
    in Escrow must be used to redeem a corresponding amount of
    Program Bonds.



 



    8. Interest Rate:  The Complete Indenture
    provides that each Pre-Conversion Bond shall bear interest at
    the Short-Term Rate from the Settlement Date to the related
    Conversion Date. The interest rate on some or all of the
    Pre-Conversion Bonds may be Converted on a Conversion Date to a
    Permanent Rate in accordance with the provisions thereof.
    Interest shall be payable on each Interest Payment Date. The
    capitalized terms used herein and not otherwise defined shall
    have the following definitions:



 



    ”Conversion Date” means, with respect to all or
    a portion of Pre-Conversion Bonds that are converting to a
    Permanent Rate, the date two (2) months after the related
    Release Date; provided that there shall be no more than three
    (3) Conversion Dates.



 



    ”Four Week T-Bill Rate” means the interest rate
    for Four Week Treasury Bills (secondary market) as reported by
    the Federal Reserve on its website at the following internet
    address
    -http://www.federalreserve.gov/releases/h15/update/h15upd.htm.



 



    ”Permanent Rate” means an interest rate per
    annum certified to the HFA Trustee by the Special Permanent Rate
    Advisor on or prior to the Release Date, which shall be equal to
    the sum of the 10 year Constant Maturity Treasury Rate, as
    reported by Treasury as of the close of business on the Business
    Day immediately before the applicable Permanent Rate Calculation
    Date for Program Bonds, established by reference to the Daily
    Treasury Yield Curve Rates published by Treasury, currently
    available on its website
    at:http://www/ustreas.gov/offices/domestic-finance/debt-management/interest-rate
    /yield.shtml, plus (ii) the Spread.



 



    ”Permanent Rate Calculation Date” means the
    date on which the Permanent Rate is calculated with respect to
    all or a portion of the Program Bonds, which shall be, with
    respect to each applicable portion of the Pre-Conversion Bonds,
    either (i) a date selected by the HFA and acceptable to the
    GSEs prior to the Settlement Date or (ii) a date selected
    by the HFA and acceptable to the GSEs on or prior to
    December 31, 2010 on which Market Bonds are priced;
    provided that, with respect to dates described in
    clause (ii) above, a bond purchase agreement must be
    executed with respect to the Market Bonds on such date for such
    Permanent Rate to be effective.



 



    ”Pre-Conversion Bonds” means Program Bonds for
    which the interest rate has not been the subject of a conversion.





    

    D-1-3








 







    ”Release Date” means such date or dates (not to
    exceed three (3) dates) on or prior to December 31,
    2010 and which dates are acceptable to the GSEs, on which dates
    the proceeds of the related Market Bonds are delivered to the
    HFA Trustee and the other requirements under the Complete
    Indenture are met.



 



    ”Short-Term Rate” means (i) for the period
    from the Settlement Date to the applicable Release Date, the
    interest rate which produces an interest payment on such Release
    Date relative to the Program Bonds with respect to which
    Escrowed Proceeds are subject to release on such Release Date
    equal to Investment Earnings, and (ii) from the Release
    Date to the Conversion Date, an interest rate equal to the sum
    of the Spread plus the lesser of (A) the Four Week
    T-Bill Rate as of the Business Day prior to the Release Date or
    (B) the Permanent Rate less the Spread. For purposes of
    this provision, “Investment Earnings” means
    total investment earnings on the portion of the Escrow Fund
    related to Program Bonds with respect to which a Release Date is
    occurring. [Alternatively, the HFA may elect a Short-Term Rate
    equal to a variable Four Week T-Bill Rate plus, after the
    Release Date, the Spread]



 



    ”Spread” means additional per annum interest on
    the Program Bonds based upon the lowest Bond Rating effective as
    of the Permanent Rate Calculation Date to the Program Bonds
    under the Complete Indenture by the rating agencies rating the
    Program Bonds, as follows:



 


	 	 	 
	

    Rating


	
 
	
    Additional Spread

	

    ‘Aaa’/‘AAA’


	
 
	
    60 bps

	

    ‘Aa’/‘AA’


	
 
	
    75 bps

	

    ‘A’


	
 
	
    110 bps

	

    ‘Baa’/‘BBB’


	
 
	
    225 bps











 



    9. Use of Proceeds:



 



    (a) The Complete Indenture provides that the proceeds of
    the Program Bonds must, except as provided in Section 9(b)
    below, be used only (i) to acquire and finance the holding
    of single-family loans or single-family mortgage-backed
    securities which are either newly originated or refinanced, so
    long as all such loans are eligible to be financed on a
    tax-exempt basis under applicable federal income tax law
    (“eligible loans”) or (ii) to fund
    reasonably required reserves and pay costs of issuance of the
    Program Bonds in accordance with the requirements and
    limitations of applicable federal tax law.



 



    (b) Proceeds of the Program Bonds may be used to refund, as
    fixed rate bonds, any of the HFA’s variable rate debt
    (including auction rate securities) issued and outstanding prior
    to October 19, 2009 or to refund an issue that did so, so
    long as such debt was, in turn, issued to acquire and finance
    the holding of eligible loans. The aggregate of such use of
    proceeds is not greater than thirty percent (30%) of the net
    proceeds of the Program Bonds. The restrictions on refundings in
    this Section 9(b) do not apply to either (i) the use
    of proceeds to repay “warehouse credit lines” used to
    acquire mortgage loans and mortgage-backed securities or
    (ii) “replacement refundings” where proceeds of
    Program Bonds are exchanged dollar-for-dollar for unexpended





    

    D-1-4








 







    tax exempt bond proceeds
    and/or
    mortgage loan prepayments so long as all proceeds of related
    Market Bonds are exchanged first for such purpose.



 



    10. Issuance Limitation:  The HFA hereby
    certifies that the sum of:



 



    (i) the face amount of the Program Bonds;



 



    (ii) the face amount of the Market Bonds issued at the time
    of issuance of the Program Bonds; and



 



    (iii) the face amount of all other Market Bonds which must
    be issued prior to January 1, 2011 in order for the Market
    Bond Ratio Requirement to be satisfied by no later than that
    date;



 



    does not exceed the reasonable expectations requirement
    applicable to tax-exempt mortgage revenue bonds. The principal
    amount of the Program Bonds does not exceed the amount allocated
    to the HFA under the Single-Family New Issue Bond Program.



 



    11. Redemption:  The Complete Indenture
    provides that:



 



    (a) The Program Bonds are redeemable in whole or in part
    (in minimum denominations of $10,000 and integral multiples of
    $10,000 in excess thereof). Redemptions of Program Bonds may be
    made without premium or penalty.



 



    (b) Except as limited by tax law requirements, all proceeds
    of the Program Bonds, to the extent not used to acquire mortgage
    loans or mortgage backed securities, refund prior bonds as
    permitted above, pay Program Bond issuance expenses or fund
    related reserve accounts, must be applied exclusively to the
    redemption of Program Bonds.



 



    (c) Except as limited by tax law requirements, so long as
    any Market Bonds remain outstanding, at least 60% or, if no
    Market Bonds are Outstanding, 100% of all principal prepayments
    and other recoveries of principal received with respect to the
    mortgage loans or mortgage backed securities financed with the
    proceeds of the Program Bonds must be applied to the redemption
    of the Program Bonds, to the extent not used to pay scheduled
    principal, interest, or sinking fund redemptions on Program
    Bonds, Market Bonds or other bonds issued in conjunction with
    and secured by the Trust Estate on a parity with the
    Program Bonds.



 



    12. No Recycling:  The Complete Indenture
    provides that all principal payments, principal prepayments and
    other recoveries of principal received with respect to the
    mortgage loans financed with the proceeds of the Program Bonds
    may not be recycled into new mortgage loans or mortgage backed
    securities.



 



    13. Selected Covenants:  The Complete
    Indenture includes, without limitation, the following covenants:



 



    (a) The HFA shall take all steps necessary to assure that
    all assets and revenues of any description pledged to the
    payment of the Program Bonds and all other bonds issued under





    

    D-1-5








 







    the Complete Indenture shall be applied strictly in accordance
    with, and solely for the purposes and in the amounts specified
    and permitted by, the terms of the Complete Indenture.



 



    (b) The HFA shall not issue new bonds under the Complete
    Indenture in a variable rate demand, adjustable rate or auction
    rate mode other than Program Bonds during the period such
    Program Bonds bear interest at the Short-Term Rate.



 



    (c) With respect to the purchase, origination, enforcement
    and servicing of mortgage loans and mortgage backed securities
    (“MBS”), the HFA shall:



 



    (i) originate or cause to be originated and, if applicable,
    purchased, mortgage loans, and purchase, or cause to be
    purchased, mortgage backed securities in a manner consistent
    with applicable state law, the Complete Indenture and any
    supplements thereto and such other related documents by which
    the HFA is bound;



 



    (ii) cause all mortgage loans to be serviced pursuant to
    the servicing requirements of the HFA, GNMA, FHA, Fannie Mae and
    Freddie Mac, as applicable;



 



    (iii) except as otherwise permitted by Treasury or the
    GSEs, diligently take all steps necessary or desirable to
    enforce all terms of the mortgage loans, MBS, loan program
    documents and all such other documents evidencing obligations to
    the HFA; and



 



    (iv) diligently take all actions consistent with sound
    mortgage loan origination, purchase and servicing practices and
    principles as may be necessary to receive and collect sufficient
    revenues to pay debt service when due on the Program Bonds.



 



    (d) The HFA shall not issue bonds senior in priority to the
    Program Bonds and the HFA hereby represents and warrants that
    the Program Bonds are at least equal in priority with respect to
    payment and security to the most senior Outstanding Bonds under
    the Complete Indenture.





    

    D-1-6








 








    SCHEDULE D-2



 




    DESCRIPTION
    OF PROGRAM BONDS

    (SINGLE-FAMILY-IMMEDIATE FUNDING)



 



    Terms capitalized in this
    Schedule D-2
    and not defined in Article 1 of this Agreement will have
    the meaning assigned to such terms in the Complete Indenture.



 



    In order to qualify as Eligible Bonds under the New Issue Bond
    Program, the Program Bonds, the related Complete Indenture and
    the HFA must satisfy the following requirements:



 



    1. Tax-exempt Status:  The HFA hereby
    covenants that, at issuance, the Program Bonds will be
    tax-exempt qualified mortgage bonds within the meaning of
    Section 143 of the Internal Revenue Code of 1986.



 



    2. [Premium Bonds.  The amount to be paid
    by Treasury for the GSE Securities backed by the Program Bonds
    and which is allocable to the Program Bonds (before the netting
    out of any fees or expenses) is equal to the stated principal of
    the Program Bonds; that is, no portion of the Program Bonds were
    issued at a premium.. If the Program Bonds do not satisfy the
    requirements of the following sentence (i.e., a portion of the
    Program Bonds are Premium Bonds), then the Premium Bonds must
    satisfy the following criteria:



 



    (a) The aggregate original stated principal amount of the
    Premium Bonds is
    $          
    (“Premium Bond Amount”). The aggregate original
    stated principal amount of all Program Bonds subject to
    immediate funding is
    $          
    (“Total Amount”). The Premium Bond Amount does
    not exceed twenty percent (20%) of the Total Amount.



 



    (b) The premium is no greater than 103%.



 



    (c) The premium and the related interest rate were
    certified to the HFA by Treasury’s Agent, State Street
    Global Advisors.



 



    (d) The Complete Indenture provides that use of the
    proceeds of the premium are restricted to making supplemental
    loans to borrowers for down payment assistance.]



 



    3. Term:  The Program Bonds are stated to
    mature on a maturity date that is:



 



    (a) not less than ten (10) years after the
    Pre-Settlement Date of the Program Bonds; and



 



    (b) not more than thirty-two (32) years from the
    Pre-Settlement Date of the Program Bonds.



 



    4. Sinking Fund:  The Program Bonds are
    subject to mandatory sinking fund redemptions or are structured
    to pass through principal payments or principal prepayments on
    the underlying mortgage loans. The sinking fund redemption
    schedule (or alternative





    

    D-2-1








 







    redemption/prepayment requirements) is contained in the Complete
    Indenture. The HFA hereby certifies that such schedule (or these
    redemption provisions) takes into account anticipated underlying
    mortgage loan amortization, and standard and customary practices
    of the HFA in connection with combined serial bond and term bond
    issuances.



 



    5. Market Bond Ratio Requirement:  At
    issuance, the HFA hereby represents and warrants that it has,
    prior to the Settlement Date, issued and sold to persons other
    than Treasury, in conjunction with the issuance of the Program
    Bonds, bonds that are not Program Bonds but which are issued out
    of the same indenture and the proceeds of which are intended to
    be used in the HFA’s single-family loan program
    (“Market Bonds”). The principal amount of such
    Market Bonds is not less than two-thirds (2/3) of the principal
    amount of the Program Bonds (“Market Bond Ratio
    Requirement”).



 



    6. Certain Terms Applicable to Market
    Bonds:  The HFA hereby certifies that the Market
    Bonds were not sold with “super sinker”, planned
    amortization classes or other priority allocation class rights
    unless such provisions retained for application to the
    redemption of the Program Bonds at least a pro rata portion of
    any prepayments or other recoveries of principal relative to
    mortgage loans funded or mortgage-backed securities purchased
    with proceeds of the Program Bonds.



 



    7. Minimum Rating:  The Program Bonds have
    a long-term rating of not less than
    ‘Baa3’/‘BBB-’.



 



    8. Interest Rate:  The Complete Indenture
    provides that the Program Bonds will bear interest at
          percent
    (  %) per annum. The rate is made up of the sum
    of (i)       percent
    (  %) per annum, the index rate certified to
    the HFA by Treasury’s agent, State Street Global Advisors,
    and (ii) a Spread of
          bps based on the
    long-term rating described in Section 7 above. Interest
    shall be payable on each Interest Payment Date.



 



    9. Use of Proceeds:



 



    (a) The Complete Indenture provides that, except as set
    forth in (b) and (c) below, the proceeds of the
    Program Bonds must be used only (i) to acquire and finance
    the holding of single-family loans or single-family
    mortgage-backed securities which are either newly originated or
    refinanced, so long as all such loans are eligible to be
    financed on a tax-exempt basis under applicable federal income
    tax law (“eligible loans”) or (ii) to fund
    reasonably required reserves and pay costs of issuance of the
    Program Bonds in accordance with the requirements and
    limitations of applicable federal tax law.



 



    (b) Proceeds of the Program Bonds may be used to refund, as
    fixed rate bonds, certain of the HFA’s variable rate debt
    (including auction rate securities) issued and outstanding prior
    to October 19, 2009 or refund an issue that did so, so long
    as such debt was, in turn, issued to acquire and finance the
    holding of eligible loans. The use of Program Bond proceeds for
    such a purpose is limited to thirty percent (30%) of the net
    proceeds of the Program Bonds, provided, however, that the
    restrictions on refundings in this subparagraph (b) shall
    not apply to either (i) the repayment of “warehouse
    credit lines” used to acquire mortgage loans and mortgage
    backed securities or (ii) “replacement
    refundings” where proceeds of Program Bonds are exchanged





    

    D-2-2








 







    dollar-for-dollar for unexpended tax exempt bond proceeds
    and/or
    mortgage loan prepayments so long as all proceeds of related
    Market Bonds are exchanged first for such purpose.



 



    (c) Proceeds of the Program Bonds representing original
    issuance premium, if any (“Premium Bonds”), may
    be used to make supplemental loans to underlying borrowers for
    down payment assistance.



 



    10. Issuance Limitation:  The HFA hereby
    certifies that the sum of:



 



    (i) the face amount of the Program Bonds; and



 



    (ii) the face amount of the Market Bonds issued at the time
    of issuance of the Program Bonds;



 



    does not exceed the reasonable expectations requirement
    applicable to tax-exempt mortgage revenue bonds. The principal
    amount of the Program Bonds does not exceed the amount allocated
    to the HFA under the Single-Family New Issue Bond Program.



 



    11. Redemption:  The Complete Indenture
    provides that:



 



    (a) The Program Bonds are redeemable in whole or in part
    (in minimum denominations of $10,000 and integral multiples of
    $10,000 in excess thereof). Redemptions of Program Bonds may be
    made without premium or penalty; provided,
    however, that with respect to the Premium Bonds:



 



    (i) the redemption price for the Premium Bonds has been
    adjusted for any unamortized premium as set forth in a fixed
    redemption price schedule affixed to the Complete
    Indenture; and



 



    (ii) special redemptions related to prepayments and
    recoveries of principal on underlying mortgage loans may be made
    at par.



 



    (b) Except as limited by tax law requirements, all proceeds
    of the Program Bonds, to the extent not used to acquire mortgage
    loans or mortgage backed securities, refund outstanding bond
    issues as permitted by the Complete Indenture, pay Program Bond
    issuance expenses, fund downpayment assistance loans (from and
    to the extent of the premium) or fund related reserve accounts,
    must be applied exclusively to the redemption of Program Bonds.



 



    (c) Except as limited by tax law requirements, either
    (i) with respect to HFAs having marketed Market Bonds prior
    to the date hereof only, a pro rata portion of all prepayments
    and other recoveries of principal received with respect to the
    mortgage loans or mortgage backed securities financed with the
    proceeds of the Program Bonds must be applied to the redemption
    of the Program Bonds, to the extent not used to pay scheduled
    principal, interest, or sinking fund redemptions on Program
    Bonds, Market Bonds or other bonds issued and secured by the
    Trust Estate on a parity with the Program Bonds or
    (ii) with respect to other transactions, so long as any
    Market Bonds remain outstanding, at least 60% or, if no Market
    Bonds are Outstanding, 100%, of all principal prepayments and
    other recoveries of principal received with respect to the





    

    D-2-3








 







    mortgage loans or mortgage backed securities financed with the
    proceeds of the Program Bonds must be applied to the redemption
    of the Program Bonds, to the extent not used to pay scheduled
    principal, interest, or sinking fund redemptions on Program
    Bonds, Market Bonds or other bonds issued in conjunction with
    and secured by the Trust Estate on a parity with the
    Program Bonds.



 



    12. No Recycling:  The Complete Indenture
    provides that all principal payments, principal prepayments and
    other recoveries of principal received with respect to the
    mortgage loans financed with the proceeds of the Program Bonds
    may not be recycled into new mortgage loans or MBS.



 



    13. Selected Covenants:  The Complete
    Indenture includes, without limitation, the following covenants:



 



    (a) The HFA shall take all steps necessary to assure that
    all assets and revenues of any description pledged to the
    payment of the Program Bonds and all other bonds issued under
    the Complete Indenture shall be applied strictly in accordance
    with, and solely for the purposes and in the amounts specified
    and permitted by, the terms of the Complete Indenture.



 



    (b) The HFA shall not issue new bonds under the Complete
    Indenture in a variable rate demand, adjustable rate or auction
    rate mode, other than Program Bonds with Escrowed Proceeds at
    the Variable Rate and Construction Program Bonds.



 



    (c) With respect to the purchase, origination, enforcement
    and servicing of mortgage loans and mortgage backed securities
    (“MBS”), the HFA shall:



 



    (i) originate or cause to be originated, and, if
    applicable, purchased, mortgage loans and purchase, or cause to
    be purchased, MBS in a manner consistent with applicable state
    law, the Complete Indenture and any supplements thereto, and
    such other related documents by which the HFA is bound;



 



    (ii) cause all mortgage loans to be serviced pursuant to
    the servicing requirements of the HFA, GNMA, FHA, Fannie Mae and
    Freddie Mac, as applicable;



 



    (iii) except as otherwise permitted by Treasury or the
    GSEs, diligently take all steps necessary or desirable to
    enforce all terms of the mortgage loans, MBS, loan program
    documents and all such other documents evidencing obligations to
    the HFA; and



 



    (iv) diligently take all actions consistent with sound
    mortgage loan origination, purchase and servicing practices and
    principles as may be necessary to receive and collect sufficient
    revenues to pay debt service when due on the Program Bonds.



 



    (d) The HFA shall not issue any bonds senior in priority to
    the Program Bonds and the HFA hereby represents and warrants
    that the Program Bonds are at least equal in priority with
    respect to payment and security to the most senior Outstanding
    Bonds under the Complete Indenture.





    

    D-2-4








 








    SCHEDULE D-3



 




    DESCRIPTION
    OF PROGRAM BONDS



 




    (MULTIFAMILY-ESCROW)



 



    Terms capitalized in this
    Schedule D-3
    and not defined in Article 1 of this Agreement will have
    the meaning assigned to such terms in the Complete Indenture.



 



    In order to qualify as Eligible Bonds under the New Issue Bond
    Program, the Program Bonds, the related Complete Indenture and
    the HFA must satisfy the following requirements:



 



    1. Taxability:  At issuance, the Program
    Bonds will be tax-exempt (exempt facility) bonds issued to
    finance qualified residential rental projects within the meaning
    of Section 142 of the Internal Revenue Code of 1986. If the
    Program Bonds do not satisfy the requirements of the foregoing
    sentence, then the HFA hereby certifies that it reasonably
    expects to have volume cap or alternative means of issuing
    tax-exempt bonds on a timely basis and in a manner which will
    permit the release of all Escrowed Proceeds (as defined below)
    by December 31, 2010, and will use its reasonable best
    efforts to obtain volume cap if necessary.



 



    2. Term:  The Program Bonds are stated to
    mature on a maturity date that is:



 



    (a) not less than ten (10) years after the
    Pre-Settlement Date of the Program Bonds; and



 



    (b) not more than [thirty-two (32)] [thirty-four (34)]
    [forty-two (42)] years from the date of issuance of the
    Program Bonds.



 



    The HFA hereby certifies that all Program Bonds with a maturity
    in excess of thirty-two (32) years and less than
    thirty-four (34) years will fund loans pursuant to the
    Construction Program Bond program or will
    fund FHA-insured
    loans, and all Program Bonds with a maturity in excess of
    thirty-four (34) years will be used to
    fund FHA-insured
    loans.



 



    3. Sinking Fund:  The Program Bonds are
    subject to mandatory sinking fund redemptions or are structured
    to pass through principal payments or principal prepayments on
    the underlying mortgage loans. The sinking fund redemption
    schedule or alternative redemption/prepayments requirements will
    be established and added to the Complete Indenture no later than
    the final Release Date. This schedule (or these redemption
    provisions) is required by the terms of the Complete Indenture
    to take into account anticipated underlying mortgage loan
    amortization and standard and customary practices in the
    industry.



 



    4. Escrow Requirement:  The Complete
    Indenture provides that:



 



    (a) Certain of the net proceeds of the Program Bonds must
    be held in Escrow (as defined below) to the extent that, at
    issuance, the Program Bonds will not be tax-exempt.





    

    D-3-1








 







    (b) The net proceeds of all taxable Program Bonds must be
    escrowed (“Escrowed Proceeds”).



 



    (c) The Escrowed Proceeds will be held in escrow under the
    Complete Indenture (“Escrow”) pending the
    satisfaction of the requirements set forth in Section 4(e)
    below.



 



    (d) Escrowed Proceeds must be invested in such investments
    as permitted by Treasury and set forth in the Supplemental
    Indenture (“Permitted Escrow Investments”).
    Permitted Escrow Investments are pledged exclusively to the
    repayment of the Program Bonds unless and until there is a
    default under the Complete Indenture, in which case such funds
    will be applied as required by the Complete Indenture.



 



    (e) Escrowed Proceeds may be released from Escrow, subject
    to, among other things, the condition that the HFA delivers a
    bond counsel opinion to the HFA Trustee to the effect that
    interest on the Program Bonds related to the Escrowed Proceeds
    to be released is exempt from federal income taxation under
    Section 103 of the Code.



 



    (f) If any Escrowed Proceeds remain in Escrow on
    January 1, 2011, such Escrowed Proceeds must be used to
    redeem outstanding Program Bonds at par on February 1, 2011
    (or an earlier date selected by the HFA).



 



    5. Minimum Rating:  The Program Bonds have
    a long-term rating of not less than
    ‘A3’/‘A-’. The Complete Indenture provides
    that to the extent that the minimum rating threshold for the
    Program Bonds is not maintained while the proceeds thereof are
    Escrowed Proceeds, all proceeds that are still held in Escrow
    must be used to redeem a corresponding amount of Program Bonds.



 



    6. Interest Rate.  The Complete Indenture
    provides that the interest rate on the Program Bonds, which
    shall be payable on each Interest Payment Date, will be
    determined as follows:



 



    (a) Each Pre-Conversion Bond which is not a Variable Rate
    Construction Program Bond shall bear interest at the Short-Term
    Rate from the Settlement Date to the related Conversion Date.
    The interest rate on some or all of the Pre-Conversion Bonds
    which are not Variable Rate Construction Program Bonds may be
    Converted on a Conversion Date to a Permanent Rate in accordance
    with the provisions thereof.



 



    (b) Each Pre-Conversion Bond which is a Variable Rate
    Construction Program Bond shall bear interest at the Short-Term
    Rate from the Settlement Date to the Release Date. From and
    after the Release Date to the Variable Rate Construction Program
    Bond Conversion Date, the Variable Rate Construction Program
    Bonds shall bear interest at the Construction Program Bond
    Variable Rate. On and after the Construction Program Bond
    Conversion Date, the interest rate on the Variable Rate
    Construction Program Bonds shall be the Permanent Rate.



 



    For purposes of this Section 6, the following definitions
    are applicable:



 



    “Construction Program Bond Conversion Date”
    means the first day of the first month which is more than
    forty-eight (48) months after the Settlement Date.





    

    D-3-2








 







    “Construction Program Bond Variable Rate” means
    a variable rate equal to the sum of (i) the index of the
    weekly index rate resets of tax-exempt variable rate issues
    included in a database maintained by Municipal Market Data, a
    Thomson Financial Services Company, or its successors, which
    meet specific criteria established by The Securities Industry
    and Financial Markets Association, such index currently known as
    The Securities Industry and Financial Markets Association
    (SIFMA) Municipal Swap Index or any successor to such index
    plus (ii) 0.50% per annum.



 



    “Construction Program Bonds” means bonds
    designated by the HFA as Construction Program Bonds issued to
    finance a multifamily mortgage loan meeting the requirements of
    Section 7(a)(ii) below, which bonds mature less than
    thirty-four (34) years after the Settlement Date and which
    bear interest and having the terms set forth above. Construction
    Program Bonds may be either fixed rate Construction Program
    Bonds (which shall bear interest at the Permanent Rate on and
    after the Conversion Date) or Variable Rate Construction Program
    Bonds (which shall bear interest at the Construction Program
    Bond Variable Rate from and after the Release Date and at the
    Permanent Rate from and after the Construction Program Bond
    Conversion Date).



 



    “Conversion Date” means, with respect to all or
    a portion of Pre-Conversion Bonds that are converting to a
    Permanent Rate, the date two (2) months after the related
    Release Date; provided that there shall be no more than three
    (3) Conversion Dates.



 



    “Permanent Rate” means an interest rate per
    annum certified to the HFA Trustee by the Special Permanent Rate
    Advisor on or prior to the Release Date, which shall be equal to
    the sum of (i) the
    10-year
    Constant Maturity Treasury Rate, as reported by Treasury as of
    the close of business on the Business Day immediately before the
    applicable Permanent Rate Calculation Date for Program Bonds,
    established by reference to the Daily Treasury Yield Curve Rates
    published by Treasury, currently available on its website at:
    http://www/ustreas.gov/offices/domestic-finance/debt-management/interest-rate/yield.shtml,
    plus (ii) the Spread.



 



    “Permanent Rate Calculation Date” means the
    date on which the Permanent Rate is calculated with respect to
    all or a portion of the Program Bonds, which shall be, with
    respect to each applicable portion of the Pre-Conversion Bonds,
    a date acceptable to the GSEs selected by the HFA on or prior to
    December 31, 2010.



 



    “Release Date” means such date or dates (not to
    exceed three (3) dates) on or prior to December 31,
    2010 and which dates are acceptable to the GSEs, on which dates
    the requirements for release of the Escrowed Proceeds are
    satisfied.



 



    “Short-Term Rate” means (i) for the period
    from the Settlement Date to the applicable Release Date, the
    interest rate which produces an interest payment on such Release
    Date relative to the Program Bonds with respect to which
    Escrowed Proceeds are subject to release on such Release Date
    equal to Investment Earnings, and (ii) with respect to
    Program Bonds which are not Variable Rate Construction Program
    Bonds, from the Release Date to the Conversion Date, an interest
    rate equal to the sum of the Spread plus the lesser of
    (A) the Four Week
    T-Bill Rate
    as of the Business Day prior to the Release Date or (B) the
    Permanent Rate





    

    D-3-3








 







    less the Spread. For purposes of this provision,
    “Investment Earnings” means total investment
    earnings on the portion of the Escrow Fund related to Program
    Bonds with respect to which a Release Date is occurring.
    [Alternatively, the HFA may elect a Short-Term Rate equal to a
    variable Four Week T-Bill Rate plus, after the Release Date, the
    Spread]



 



    “Special Permanent Rate Advisor” means State
    Street Bank and Trust Company, and any successor or assign
    designated by Treasury.



 



    “Spread” means (i) with respect to Program
    Bonds which are not Variable Rate Construction Program Bonds,
    additional per annum interest on the Program Bonds based upon
    the lowest bond rating of the Program Bonds effective as of the
    Permanent Rate Calculation Date under the Complete Indenture by
    the rating agencies rating the Program Bonds, as follows:



 


	 	 	 
	

    Rating


	
 
	
    Additional Spread

	

    ‘Aaa’/‘AAA’


	
 
	
    60 bps

	

    ‘Aa’/‘AA’


	
 
	
    75 bps

	

    ‘A’


	
 
	
    110 bps











 



    and, (ii) with respect to Program Bonds which are Variable
    Rate Construction Program Bonds, additional per annum interest
    on the Variable Rate Construction Program Bonds based upon the
    lowest bond rating of the Program Bonds effective as of the
    Permanent Rate Calculation Date under the Complete Indenture by
    the rating agencies rating the Construction Program Bonds, as
    follows:



 


	 	 	 
	

    Rating


	
 
	
    Additional Spread

	

    ‘Aaa’/‘AAA’


	
 
	
    140 bps

	

    ‘Aa’/‘AA’


	
 
	
    155 bps

	

    ‘A’


	
 
	
    190 bps











 



    “Variable Rate Construction Program Bonds”
    means bonds designated by the HFA as Variable Rate Construction
    Program Bonds issued to finance a multifamily mortgage loan
    meeting the requirements of Section 7(a)(ii) below, which
    bonds mature no more than thirty-four (34) years after the
    Settlement Date and which bear interest and have the terms set
    forth above. Variable Rate Construction Program Bonds bear
    interest at the Construction Program Bond Variable Rate from and
    after the Release Date and at the Permanent Rate from and after
    the Construction Program Bond Conversion Date.



 



    7. Use of Proceeds:



 



    (a) The Complete Indenture provides that the proceeds of
    the Program Bonds must, except as provided in Section 7(b)
    or Section 7(c) below, be used only to:



 



    (i) acquire and finance the holding of Permitted Mortgage
    Loans; or





    

    D-3-4








 







    (ii) acquire and finance the holding of Permitted Mortgage
    Loans which are either (A) loans guaranteed by either GSE
    or (B) loans originated pursuant to underwriting criteria
    agreed to by the GSEs and which are financed with Program Bonds
    that the HFA elects to treat as Construction Program Bonds.



 



    (b) Proceeds of the Program Bonds may be spent to fund
    reasonably required reserves and pay costs of issuance of the
    Program Bonds in accordance with the requirements and
    limitations of applicable federal tax law.



 



    (c) Proceeds of the Program Bonds may be used to refund, as
    fixed rate bonds, any of the HFA’s outstanding variable
    rate debt (including auction rate securities) issued on or
    before October 19, 2009, so long as such debt, in turn, was
    issued to acquire and finance the holding of Permitted Mortgage
    Loans for projects that were initially financed on or after
    October 19, 2004 (proceeds used for the purpose described
    in this Section 7(c) may not exceed thirty (30%) of the
    principal amount of the Program Bonds; provided, however, that
    “replacement refundings” where proceeds of Program
    Bonds are exchanged dollar-for-dollar for unexpended tax exempt
    bond proceeds
    and/or
    mortgage loan prepayments shall not be considered a refunding
    for purposes hereof).



 



    For purposes of this Section 7, “Permitted Mortgage
    Loans” means (i) loans insured by FHA, including
    loans under the FHA risk-sharing program, (ii) loans
    guaranteed by GNMA, (iii) loans guaranteed by either GSE,
    and (iv) loans originated pursuant to underwriting criteria
    agreed to by the GSEs (which criteria are provided by the GSEs
    in writing for use in connection with the Program Bonds) which
    are either newly originated or refinanced as part of a refunding
    of variable rate debt of the HFA issued on or before
    October 19, 2009, which debt was issued to acquire and
    finance the holding of multifamily loans described in clauses
    (i)-(iv) above on or after October 19, 2004, so long as all
    such loans are eligible to be financed on a tax-exempt basis
    under applicable federal income tax law.



 



    8. Issuance Limitation:



 



    The HFA hereby certifies that the principal amount of the
    Program Bonds does not exceed the amount allocated to the HFA
    under the Multifamily New Issue Bond Program.



 



    9. Redemption:  The Complete Indenture
    provides that:



 



    (a) The Program Bonds are redeemable in whole or in part
    (in minimum denominations of $10,000 and integral multiples of
    $10,000 in excess thereof). Redemptions of Program Bonds may be
    made without premium or penalty.



 



    (b) Except as limited by tax law requirements, all proceeds
    of the Program Bonds, to the extent not used to
    fund Permitted Mortgage Loans, refund outstanding bond
    issues as provided in the Complete Indenture, pay Program Bond
    issuance expenses or fund related reserve accounts must be
    applied exclusively to the redemption of Program Bonds.



 



    (c) Except as limited by tax law requirements, a pro rata
    portion of all principal prepayments and other recoveries of
    principal received with respect to the mortgage loans or
    mortgage backed securities financed with the proceeds of the
    Program Bonds must be applied to





    

    D-3-5








 







    the redemption of the Program Bonds, to the extent not used to
    pay scheduled principal, interest, or sinking fund redemptions
    on Program Bonds or other bonds issued in conjunction with and
    secured by the Trust Estate on a parity with the Program
    Bonds.



 



    10. No Recycling:  The Complete Indenture
    provides that all principal payments, principal prepayments and
    other recoveries of principal received with respect to the
    mortgage loans financed with the proceeds of the Program Bonds
    may not be recycled into new Permitted Mortgage Loans.



 



    11. Selected Covenants:  The Complete
    Indenture includes, without limitation, the following covenants:



 



    (a) The HFA shall take all steps necessary to assure that
    all assets and revenues of any description pledged to the
    payment of the Program Bonds and all other bonds issued under
    the Complete Indenture shall be applied strictly in accordance
    with, and solely for the purposes and in the amounts specified
    and permitted by, the terms of the Complete Indenture.



 



    (b) The HFA shall not issue new bonds under the Complete
    Indenture in a variable rate demand, adjustable rate or auction
    rate mode, other than Program Bonds bearing a variable rate
    prior to conversion and Construction Program Bonds.



 



    (c) With respect to the purchase, origination, enforcement
    and servicing of Permitted Mortgage Loans, the HFA shall:



 



    (i) originate or cause to be originated, and, if
    applicable, purchased, mortgage loans and purchase, or cause to
    be purchased, MBS in a manner consistent with applicable state
    law, the Complete Indenture and any supplements thereto, and
    such other related documents by which the HFA is bound;



 



    (ii) cause all mortgage loans to be serviced pursuant to
    the servicing requirements of the HFA, GNMA, FHA, Fannie Mae and
    Freddie Mac, as applicable;



 



    (iii) except as otherwise permitted by Treasury or the
    GSEs, diligently take all steps necessary or desirable to
    enforce all terms of the mortgage loans, MBS, loan program
    documents and all such other documents evidencing obligations to
    the HFA; and



 



    (iv) diligently take all actions consistent with sound
    mortgage loan origination, purchase and servicing practices and
    principles as may be necessary to receive and collect sufficient
    revenues to pay debt service when due on the Program Bonds.



 



    12. Complete Indenture Trust Estate
    Limitations.  The Complete Indenture contains a
    representation and warranty of the HFA to the effect that the
    Program Bonds are not secured on a subordinate or parity basis
    with any other bonds of the HFA secured, in whole or in part,
    with multifamily loans which are not Permitted Mortgage Loans.
    The Complete Indenture contains a covenant of the HFA that it
    will not issue bonds or other indebtedness senior to or on





    

    D-3-6








 







    a parity with the Program Bonds which additional parity or
    senior bonds or indebtedness is secured, in whole or in part,
    with multifamily loans which are not Permitted Mortgage Loans.





    

    D-3-7








 








    SCHEDULE D-4



 




    DESCRIPTION
    OF PROGRAM BONDS

    (MULTIFAMILY-IMMEDIATE FUNDING)



 



    Terms capitalized in this
    Schedule D-4
    and not defined in Article 1 of this Agreement will have
    the meaning assigned to such terms in the Complete Indenture.



 



    In order to qualify as Eligible Bonds under the New Issue Bond
    Program, the Program Bonds, the related Complete Indenture and
    the HFA must satisfy the following requirements:



 



    1. Tax-exempt Status:  The HFA hereby
    covenants that, at issuance, the Program Bonds will be
    tax-exempt (exempt facility) bonds issued to finance qualified
    residential rental projects within the meaning of
    Section 142 of the Internal Revenue Code of 1986.



 



    2. Term:  The Program Bonds are stated to
    mature on a maturity date that is:



 



    (a) not less than ten (10) years after the
    Pre-Settlement Date of the Program Bonds; and



 



    (b) not more than [thirty-two (32)] [thirty-four (34)]
    [forty-two (42)] years from the date of issuance of the
    Program Bonds.



 



    The HFA hereby certifies that all Program Bonds with a maturity
    in excess of thirty-two (32) years and less than
    thirty-four (34) years will fund loans pursuant to the
    Construction Program Bond program or will
    fund FHA-insured
    loans, and all Program Bonds with a maturity in excess of
    thirty-four (34) years will be used to
    fund FHA-insured
    loans.



 



    3. Sinking Fund:  The Program Bonds are
    subject to mandatory sinking fund redemption or are structured
    to pass through principal payments or principal prepayments on
    the underlying mortgage loans. The sinking fund redemption
    schedule (or alternative redemption/prepayment requirements) is
    contained in the Complete Indenture. The HFA hereby certifies
    that such schedule (or these redemption provisions) takes into
    account anticipated underlying mortgage loan amortization and
    standard and customary practices of the HFA.



 



    4. Minimum Rating:  The Program Bonds have
    a long-term rating of not less than
    ‘A3’/‘A-’.



 



    5. Interest Rate:  The Complete Indenture
    provides that the Program Bonds (other than Construction Program
    Bonds) will bear interest at
              
    percent per annum. The rate is made up of the sum of (i)
              
    percent per annum, the index rate certified to the HFA by
    Treasury’s Agent, State Street Global Advisors, and
    (ii) a Spread of
          bps based on the
    long-term rating described in Section 4 above. Interest
    shall be payable on each Interest Payment Date.





    

    D-4-1








 







    6. Construction Program Bonds:  Each
    Program Bond which is a Variable Rate Construction Program Bond
    shall bear interest at the Construction Program Bond Variable
    Rate from the Settlement Date to the Construction Program Bond
    Conversion Date. Construction Program Bonds which are not
    Variable Rate Construction Program Bonds shall bear interest at
    the Permanent Rate on and after the Conversion Date. On and
    after the Construction Program Bond Conversion Date, the
    interest rate on the Variable Rate Construction Program Bonds
    shall be the Permanent Rate.



 



    For purposes of this Section 6, the following definitions
    are applicable:



 



    ”Construction Program Bond Conversion Date”
    means the first day of the first month which is more than
    forty-eight (48) months after the Settlement Date.



 



    ”Construction Program Bond Variable Rate” means
    a variable rate equal to the sum of (i) the index of the
    weekly index rate resets of tax-exempt variable rate issues
    included in a database maintained by Municipal Market Data, a
    Thomson Financial Services Company, or its successors, which
    meet specific criteria established by The Securities Industry
    and Financial Markets Association, such index currently known as
    The Securities Industry and Financial Markets Association
    (SIFMA) Municipal Swap Index or any successor to such index
    plus (ii) 0.50% per annum.



 



    ”Construction Program Bonds” means bonds
    designated by the HFA as Construction Program Bonds issued to
    finance a multifamily mortgage loan meeting the requirements of
    Section 7(a)(ii) below guaranteed as to timely payment of
    principal and interest by a GSE, which bonds mature less than
    thirty-four (34) years after the Settlement Date and
    bearing interest and having the terms set forth above.
    Construction Program Bonds may be either fixed rate Construction
    Program Bonds (which shall bear interest at the Permanent Rate
    on and after the Conversion Date) or Variable Rate Construction
    Program Bonds (which shall bear interest at the Construction
    Program Bond Variable Rate on and after the Release Date and at
    the Permanent Rate on and after the Construction Program Bond
    Conversion Date).



 



    ”Permanent Rate” means an interest rate per
    annum equal to
              percent
    per annum. The rate is made up of the sum of
    (i)            percent
    per annum, the index rate certified to the HFA by
    Treasury’s agent, State Street Global Advisors, and
    (ii) a Spread of
          bps based on the
    long-term rating described in Section 4 above.



 



    ”Variable Rate Construction Program Bonds”
    means bonds designated by the HFA as Variable Rate Construction
    Program Bonds issued to finance a multifamily mortgage loan
    meeting the requirements of Section 7(a)(ii) below, which
    bonds mature no more than thirty-four (34) years after the
    Settlement Date and which bear interest and have the terms set
    forth above. Variable Rate Construction Program Bonds bear
    interest at the Construction Program Bond Variable Rate from and
    after the Release Date and at the Permanent Rate from and after
    the Construction Program Bond Conversion.



 



    7. Use of Proceeds:



 



    (a) The Complete Indenture provides that the proceeds of
    the Program Bonds must, except as provided in Sections 7(b)
    or (c) below, be used only to:





    

    D-4-2








 







    (i) acquire and finance the holding of Permitted Mortgage
    Loans; or



 



    (ii) acquire and finance the holding of Permitted Mortgage
    Loans which are either (A) loans guaranteed by either GSE
    or (B) loans originated pursuant to underwriting criteria
    agreed to by the GSEs and which are financed with Program Bonds
    that the HFA elects to treat as Construction Program Bonds.



 



    (b) Proceeds of the Program Bonds may be spent to fund
    reasonably required reserves and pay costs of issuance of the
    Program Bonds in accordance with the requirements and
    limitations of applicable federal tax law.



 



    (c) Proceeds of the Program Bonds may be used to refund, as
    fixed rate bonds, any of the HFA’s outstanding variable
    rate debt (including auction rate securities) issued on or
    before October 19, 2009, so long as such debt, in turn, was
    issued to acquire and finance the holding of Permitted Mortgage
    Loans for projects that were initially financed on or after
    October 19, 2004 (proceeds used for the purpose described
    in this Section 7(c) may not exceed thirty (30%) of the
    principal amount of the Program Bonds; provided, however, that
    “replacement refundings” where proceeds of Program
    Bonds are exchanged dollar-for-dollar for unexpended tax exempt
    bond proceeds
    and/or
    mortgage loan prepayments shall not be considered a refunding
    for purposes hereof).



 



    For purposes of this Section 7, “Permitted Mortgage
    Loans” means (i) loans insured by FHA, including
    loans under the FHA risk-sharing program, (ii) loans
    guaranteed by GNMA, (iii) loans guaranteed by either GSE,
    and (iv) loans originated pursuant to underwriting criteria
    agreed to by the GSEs (which criteria are provided by the GSEs
    in writing for use in connection with the Program Bonds) which
    are either newly originated or refinanced as part of a refunding
    of variable rate debt of the HFA issued on or before
    October 19, 2009, which debt was issued to acquire and
    finance the holding of multifamily loans described in clauses
    (i)-(iv) above on or after October 19, 2004, so long as all
    such loans are eligible to be financed on a tax-exempt basis
    under applicable federal income tax law.



 



    8. Issuance Limitation:



 



    The HFA hereby certifies that the principal amount of the
    Program Bonds does not exceed the amount allocated to the HFA
    under the Multifamily New Issue Bond Program.



 



    9. Redemption:  The Complete Indenture
    provides that:



 



    (a) The Program Bonds are redeemable in whole or in part
    (in minimum denominations of $10,000 and integral multiples of
    $10,000 in excess thereof). Redemptions of Program Bonds may be
    made without premium or penalty.



 



    (b) Except as limited by tax law requirements, all proceeds
    of the Program Bonds, to the extent not used to
    fund Permitted Mortgage Loans, refund outstanding bond
    issues as provided in the Complete Indenture, pay Program Bond
    issuance expenses or fund related reserve accounts must be
    applied exclusively to the redemption of Program Bonds.





    

    D-4-3








 







    (c) Except as limited by tax law requirements, a pro rata
    portion of all principal prepayments and other recoveries of
    principal received with respect to the mortgage loans or
    mortgage backed securities financed with the proceeds of the
    Program Bonds must be applied to the redemption of the Program
    Bonds, to the extent not used to pay scheduled principal,
    interest, or sinking fund redemptions on Program Bonds or other
    bonds issued in conjunction with and secured by the
    Trust Estate on a parity with the Program Bonds.



 



    10. No Recycling:  The Complete Indenture
    provides that all principal payments, principal prepayments and
    other recoveries of principal received with respect to the
    mortgage loans financed with the proceeds of the Program Bonds
    may not be recycled into new Permitted Mortgage Loans.



 



    11. Selected Covenants:  The Complete
    Indenture includes, without limitation, the following covenants:



 



    (a) The HFA shall take all steps necessary to assure that
    all assets and revenues of any description pledged to the
    payment of the Program Bonds and all other bonds issued under
    the Complete Indenture shall be applied strictly in accordance
    with, and solely for the purposes and in the amounts specified
    and permitted by, the terms of the Complete Indenture.



 



    (b) The HFA shall not issue new bonds under the Complete
    Indenture in a variable rate demand, adjustable rate or auction
    rate mode, other than Program Bonds bearing a variable rate
    prior to conversion and Construction Program Bonds.



 



    (c) With respect to the purchase, origination, enforcement
    and servicing of Permitted Mortgage Loans, the HFA shall:



 



    (i) originate or cause to be originated, and, if
    applicable, purchased, mortgage loans and purchase, or cause to
    be purchased, MBS in a manner consistent with applicable state
    law, the Complete Indenture and any supplements thereto, and
    such other related documents by which the HFA is bound;



 



    (ii) cause all mortgage loans to be serviced pursuant to
    the servicing requirements of the HFA, GNMA, FHA, Fannie Mae and
    Freddie Mac, as applicable;



 



    (iii) except as otherwise permitted by Treasury or the
    GSEs, diligently take all steps necessary or desirable to
    enforce all terms of the mortgage loans, MBS, loan program
    documents and all such other documents evidencing obligations to
    the HFA; and



 



    (iv) diligently take all actions consistent with sound
    mortgage loan origination, purchase and servicing practices and
    principles as may be necessary to receive and collect sufficient
    revenues to pay debt service when due on the Program Bonds.



 



    12. Complete Indenture Trust Estate
    Limitations.  The Complete Indenture contains a
    representation and warranty of the HFA to the effect that the
    Program Bonds are not





    

    D-4-4








 







    secured on a subordinate or parity basis with any other bonds of
    the HFA secured, in whole or in part, with multifamily loans
    which are not Permitted Mortgage Loans. The Complete Indenture
    contains a covenant of the HFA that it will not issue bonds or
    other indebtedness senior to or on a parity with the Program
    Bonds which additional parity or senior bonds or indebtedness is
    secured, in whole or in part, with multifamily loans which are
    not Permitted Mortgage Loans.





    

    D-4-5








 








    SCHEDULE D-5



 




    DESCRIPTION
    OF PROGRAM BONDS

    (SMALL ISSUE)



 



    Terms capitalized in this
    Schedule D-5
    and not defined in Article 1 of this Agreement will have
    the meaning assigned to such terms in the Complete Indenture.



 



    In order to qualify as Eligible Bonds under the New Issue Bond
    Program, the Program Bonds, the related Complete Indenture and
    the HFA must satisfy the following requirements:



 



    1. Taxability:  At issuance, the Program
    Bonds will be tax-exempt qualified mortgage bonds within the
    meaning of Section 143 of the Internal Revenue Code of
    1986. If the Program Bonds do not satisfy the requirements of
    the foregoing sentence, then the HFA hereby certifies that the
    HFA reasonably expects to have volume cap or alternative means
    of issuing tax-exempt bonds on a timely basis and in a manner
    which will permit the release of all Escrowed Proceeds (as
    defined below) by December 31, 2010, and will use its
    reasonable best efforts to obtain volume cap if necessary.



 



    2. Small Issue Program Bonds:  The Program
    Bonds are Program Bonds which satisfy each of the following
    requirements: (i) the Complete Indenture is required to be
    a “Permitted Single-Family Indenture”, which
    term is defined to mean an indenture with respect to which 100%
    of the mortgage assets held under the indenture are
    single-family mortgage backed securities, (ii) at issuance,
    the Program Bonds will have a long-term credit rating of
    ‘Aaa’/‘AAA’ and (iii) the principal
    amount of the Program Bonds is not in excess of $25,000,000.



 



    3. Term:  The Program Bonds are stated to
    mature on a maturity date that is:



 



    (a) not less than ten (10) years after the
    Pre-Settlement Date of the Program Bonds; and



 



    (b) not more than thirty-two (32) years from the
    Pre-Settlement Date of the Program Bonds.



 



    4. Sinking Fund:  The Program Bonds are
    subject to mandatory sinking fund redemptions or are structured
    to pass through principal payments or principal prepayments on
    the underlying MBS. The sinking fund redemption schedule or
    alternative redemption/prepayment requirements will be
    established and added to the Complete Indenture no later than
    the final Release Date. This schedule (or these redemption
    provisions) is required by the terms of the Complete Indenture
    to take into account anticipated underlying mortgage loan
    amortization and standard and customary practices of the HFA.



 



    5. Escrow Requirement:  The Complete
    Indenture provides that:



 



    (a) Certain of the net proceeds of the Program Bonds must
    be held in Escrow (as defined below) to the extent that, at
    issuance, the Program Bonds will not be tax-exempt.





    

    D-5-1








 







    (b) The net proceeds of all taxable Program Bonds must be
    escrowed (“Escrowed Proceeds”).



 



    (c) The Escrowed Proceeds will be held in escrow under the
    Complete Indenture (“Escrow”) pending the
    satisfaction of the requirements set forth in Section 4(e)
    below.



 



    (d) Escrowed Proceeds must be invested in such investments
    as permitted by Treasury and set forth in the Supplemental
    Indenture (“Permitted Escrow Investments”).
    Permitted Escrow Investments are pledged exclusively to the
    repayment of the Program Bonds unless and until there is a
    default under the Complete Indenture, in which case such funds
    will be applied as required by the Complete Indenture.



 



    (e) Escrowed Proceeds may be released from Escrow, subject
    to, among other things, the condition that the HFA delivers a
    bond counsel opinion to the HFA Trustee to the effect that
    interest on the Program Bonds related to the Escrowed Proceeds
    to be released is exempt from federal income taxation under
    Section 103 of the Code.



 



    (f) If any Escrowed Proceeds remain in Escrow on
    January 1, 2011, such Escrowed Proceeds must be used to
    redeem outstanding Program Bonds at par on February 1, 2011
    (or an earlier date selected by the HFA).



 



    6. Minimum Rating:  The Program Bonds have
    a long-term rating of “AAA”/“Aaa”. The
    Complete Indenture provides that to the extent that such rating
    for the Program Bonds is not maintained while the proceeds
    thereof are Escrowed Proceeds, all proceeds that are still held
    in Escrow must be used immediately to redeem a corresponding
    amount of Program Bonds.



 



    7. Interest Rate:  The Complete Indenture
    provides that each Pre-Conversion Bond shall bear interest at
    the Short-Term Rate from the Settlement Date to the related
    Conversion Date. The interest rate on some or all of the
    Pre-Conversion Bonds may be Converted on a Conversion Date to a
    Permanent Rate in accordance with the provisions thereof.
    Interest shall be payable on each Interest Payment Date. The
    capitalized terms used herein and not otherwise defined shall
    have the following definitions:



 



    “Conversion Date” means, with respect to all or
    a portion of Pre-Conversion Bonds that are converting to a
    Permanent Rate, the date three (3) months after the related
    Release Date; provided that there shall be no more than three
    (3) Conversion Dates.



 



    “Four Week T-Bill Rate” means the interest rate
    for Four Week Treasury Bills (secondary market) as reported by
    the Federal Reserve on its website at the following internet
    address
    -http://www.federalreserve.gov/releases/h15/update/h15upd.htm.



 



    “Permanent Rate” means an interest rate per
    annum certified to the HFA Trustee by the Special Permanent Rate
    Advisor on or prior to the Release Date, which shall be equal to
    the sum of the
    10-year
    Constant Maturity Treasury rate, as reported by Treasury as of
    the close of business on the Business Day immediately before the
    applicable Permanent Rate Calculation Date for Program Bonds,
    established by reference to the Daily Treasury Yield Curve Rates
    published by Treasury, currently available on its website





    

    D-5-2








 







    at:http://www/ustreas.gov/offices/domestic-finance/debt-management/interest
    -rate/yield.shtml, plus (ii) the Spread.



 



    “Permanent Rate Calculation Date” means the
    date on which the Permanent Rate is calculated with respect to
    all or a portion of the Program Bonds, which shall be, with
    respect to each applicable portion of the Pre-Conversion Bonds,
    either (i) a date selected by the HFA and acceptable to the
    GSEs prior to the Settlement Date or (ii) dates selected by
    the HFA and acceptable to the GSEs on or prior to
    December 31, 2010 by delivery of a release certificate as
    described in the Complete Indenture.



 



    “Pre-Conversion Bonds” means Program Bonds for
    which the interest rate has not been the subject of a Conversion.



 



    “Release Date” means such date or dates (not to
    exceed three (3) dates) on or prior to December 31,
    2010 and which dates are acceptable to the GSEs, on which dates
    the requirements under the Complete Indenture are met.



 



    “Short-Term Rate” means, (i) for the
    period from the Settlement Date to the applicable Release Date,
    the interest rate which produces an interest payment on such
    Release Date relative to the Program Bonds with respect to which
    Escrowed Proceeds are subject to release on such Release Date
    equal to Investment Earnings, and (ii) from the Release
    Date to the Conversion Date, an interest rate equal to the sum
    of the Spread plus the lesser of (A) the Four Week
    T-Bill Rate as of the Business Day prior to the Release Date or
    (B) the Permanent Rate less the Spread. For purposes of
    this provision, “Investment Earnings” means
    total investment earnings on the portion of the Escrow Fund
    related to Program Bonds with respect to which a Release Date is
    occurring. [Alternatively, the HFA may elect a Short-Term Rate
    equal to a variable Four Week T-Bill Rate plus, after the
    Release Date, the Spread]



 



    “Spread” means additional per annum interest on
    the Program Bonds equal to sixty (60) bps.



 



    8. Use of Proceeds.



 



    (a) The Complete Indenture provides that, except as
    provided in Section 8(b) below, the proceeds of the Program
    Bonds must be used only (i) to acquire and finance the
    holding of single-family MBS, so long as all underlying loans
    are eligible to be financed on a tax-exempt basis under
    applicable federal income tax law (“eligible
    loans”) or (ii) to fund reasonably required
    reserves and pay costs of issuance of the Program Bonds in
    accordance with the requirements and limitations of applicable
    federal tax law.



 



    (b) Proceeds of the Program Bonds may be used to refund, as
    fixed rate bonds, any of the HFA’s variable rate debt
    (including auction rate securities) issued and outstanding prior
    to October 19, 2009 or to refund an issue that did so, so
    long as such debt was, in turn, issued to acquire and finance
    the holding of MBS with underlying eligible loans, the use of
    proceeds for such a refunding purpose shall be limited to thirty
    percent (30%) of the net proceeds of the Program Bonds; the
    restrictions on refundings herein shall not apply to either
    (A) the repayment of “warehouse credit lines”
    used to acquire MBS or (B) “replacement
    refundings” where





    

    D-5-3








 







    proceeds of Program Bonds are exchanged dollar-for-dollar for
    unexpended tax exempt bond proceeds
    and/or
    mortgage loan prepayments.



 



    9. Issuance Limitation:  The HFA hereby
    certifies that the principal amount of the Program Bonds does
    not exceed $25,000,000 and the amount allocated to the HFA under
    the Single-Family New Issue Bond Program.



 



    10. Redemption:  The Complete Indenture
    provides that:



 



    (a) The Program Bonds are redeemable in whole or in part
    (in minimum denominations of $10,000 and integral multiples of
    $10,000 in excess thereof). Redemptions of Program Bonds may be
    made without premium or penalty.



 



    (b) Except as limited by tax law requirements, all proceeds
    of the Program Bonds, to the extent not used to acquire MBS,
    refund outstanding bond issues as herein provided, pay Program
    Bond issuance expenses or fund related reserve accounts, must be
    applied exclusively to the redemption of Program Bonds.



 



    (c) Except as limited by tax law requirements, a pro rata
    portion of all principal prepayments and other recoveries of
    principal received with respect to the mortgage loans or
    mortgage backed securities financed with the proceeds of the
    Program Bonds must be applied to the redemption of the Program
    Bonds, to the extent not used to pay scheduled principal,
    interest, or sinking fund redemptions on Program Bonds or other
    bonds issued in conjunction with and secured by the
    Trust Estate on a parity with the Program Bonds.



 



    11. No Recycling:  The Complete Indenture
    provides that all principal payments, principal prepayments and
    other recoveries of principal received with respect to the
    mortgage loans financed with the proceeds of the Program Bonds
    may not be recycled into new mortgage loans or MBS.



 



    12. Selected Covenants:  The Complete
    Indenture includes, without limitation, the following covenants:



 



    (a) The HFA shall take all steps necessary to assure that
    all assets and revenues of any description pledged to the
    payment of the Program Bonds and all other bonds issued under
    the Complete Indenture shall be applied strictly in accordance
    with, and solely for the purposes and in the amounts specified
    and permitted by, the terms of the Complete Indenture.



 



    (b) The HFA shall not issue new bonds under the Complete
    Indenture in a variable rate demand, adjustable rate or auction
    rate mode, other than Program Bonds with Escrowed Proceeds at
    the Short-Term Rate.



 



    (c) With respect to the purchase, origination, enforcement
    and servicing of mortgage backed securities
    (“MBS”), the HFA shall:



 



    (i) purchase, or cause to be purchased, MBS in a manner
    consistent with applicable state law, the Complete Indenture and
    any supplements thereto, and such other related documents by
    which the HFA is bound; and





    

    D-5-4








 







    (ii) except as otherwise permitted by Treasury or the GSEs,
    diligently take all steps necessary or desirable to enforce all
    terms of the MBS and all such other documents evidencing
    obligations to the HFA.



 



    (d) The HFA shall not issue any bonds senior in priority to
    the Program Bonds and the HFA hereby represents and warrants
    that the Program Bonds are at least equal in priority with
    respect to payment and security to the most senior Outstanding
    Bonds under the Complete Indenture.





    

    D-5-5