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CONFRONTING THE COMMONWEALTH’S HOUSING CHALLENGES

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MASSHOUSING BOARD OF DIRECTORS CHAIRMAN Michael J. Dirrane Senior Managing Director ‐ National Accounts National Mortgage Insurance Corporation Chrystal Kornegay Undersecretary Department of Housing and Community Development Commonwealth of Massachusetts Rachel Madden Undersecretary Executive Office for Administration and Finance Commonwealth of Massachusetts (Designee of Secretary Kristen Lepore) VICE CHAIR Ping Yin Chai President & CEO Salem Five Bancorp Carolina Avellaneda VP of Operations and General Counsel Fisher College Mary Nee President Animal Rescue League of Boston TREASURER Andris J. Silins General Secretary‐Treasurer United Brotherhood of Carpen‐ ters and Joiners of America Marc D. Cumsky, Esq. Founder and Managing Partner Cumsky & Levin LLP Lisa S. Serafin Principal Redgate EXECUTIVE STAFF Timothy C. Sullivan MassHousing Executive Director Karen E. Kelleher MassHousing Deputy Director

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MESSAGE FROM THE CHAIRMAN, EXECUTIVE DIRECTOR This year our annual report takes a different direction in honor of MassHousing’s 50th anniversary. We have chosen to take this opportunity to look back at some of the major housing challenges of the last five decades and demonstrate MHFA’s – and now MassHousing’s – ability to rise to the occasion with effective solutions. In addition to this collection of stories, you will find a brief synopsis of the rental and homeownership highlights for fiscal year 2016. It was the single best lending year we have ever had for rental ($783 million) and the second best lending year in Agency history ($1.5 billion). The Massachusetts Housing Finance Agency was created in 1966 by the Massachusetts Legislature. For several years no housing was financed as the issue of whether or not a newly created public entity could sell bonds to finance privately owned housing was litigated in the courts. Eventually the Supreme Judicial Court ruled in favor the concept. The Legislature appropriated $300,000 to help get the MHFA started and in 1970 the Agency made its first loan to finance a new mixed‐ income community called Rolling Green at Amherst. Fifty years later, MassHousing has provided more than $20 billion for affordable housing across Massachusetts from Pittsfield to Provincetown – a remarkable return on the Commonwealth’s investment of $300,000. MHFA and its sister Agency the Massachusetts Home Mortgage Finance Agency ‐ which was created to finance home mortgage loans for low‐ and moderate‐income homebuyers ‐ merged and eventually in 2001, became known collectively as MassHousing. We are proud to have collaborated with so many public sector partners, developers, management companies, architects, local officials, lenders, homebuyer counselors, non‐profits and others to confront some of the most challenging housing issues in the nation. We have helped to transform failed public housing projects, redefined the notion of private mortgage insurance, helped families avoid homelessness, promoted diversity and equal access to opportunity, financed homes for returning Veterans, found new and innovative ways to finance housing and more. As we begin our next half‐century of service we find ourselves faced with numerous housing challenges, but we are more energized than ever and confident in the ability of the professionals at MassHousing to deliver cost‐effective and creative solutions. We hope you enjoy this look back as well as the summary of our fiscal year. Michael J. Dirrane Chairman Timothy C. Sullivan Executive Director

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MassHousing will confront the housing challenges facing the Commonwealth to improve the lives of its people.

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AN HISTORIC 2016 MASSHOUSING CUMULATIVE PRODUCTION CY 2010 - CY 2016 $2,000,000,000 $1,500,000,000 $1,000,000,000 $500,000,000 At $1.737 billion, 2016 represents the best calendar lending year in MassHousing’s 50-year history (surpassing $1.53 billion in CY2013). The Agency’s business lines both had impressive years; Homeownership lending of $800+ million, Rental lending of $900+ million. 2010 2011 2012 2013 2014 2015 2016 BOND RATING UPGRADES MassHousing received three bond rating upgrades at the end of CY 2016 based on strong financial performance, sound management and succession planning. Moody’s Investors Service upgraded MassHousing’s credit rating for Single-Family Housing Revenue Bonds to Aa1 from Aa2. Standard & Poor’s Global Ratings and Moody’s both upgraded the Agency’s Multi-Family Bond Program – S&P to AA from AA- and Moody’s to Aa2 from Aa3. GATEWAY NORTH, LYNN In December 2016, ground was broken for Gateway North in Lynn, a 71-unit mixed-income housing community that was the first to be financed through MassHousing’s $100 million Workforce Housing Initiative. The initiative will create up to 1,000 workforce housing units for middle-income households that are being squeezed out of the housing market by increasing rents.

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RENTAL LENDING AND MANAGEMENT FISCAL YEAR 2016 HIGHLIGHTS RENTAL LENDING 40 developments, 6,010 units $783.3 MILLION in total lending 8 developers new to MassHousing Developments located in 27 cities and towns AFFORDABLE HOUSING TRUST FUND $ 29 developments 1,620 units (1,492 affordable) $31.7 MILLION in awards funded 26 rental communities 3 home ownership RENTAL MANAGEMENT Multifamily Loan Portfolio 20 NEW developments 426 developments 53,701 units $3.4 BILLION outstanding 0.47% delinquency rate (3 developments) Subsidy Administration $725 MILLION in federal subsidy payments processed more than 500 developments - more than 60,000 units

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HOME OWNERSHIP FISCAL YEAR 2016 HIGHLIGHTS MassHousing makes home mortgage loans to low- and moderate-income borrowers to purchase or refinance a home. We also make loans to remove lead paint or upgrade sepƟc systems. We make our loans through a network of more than 150 partner lenders. $656.4 MILLION in total lending 2,854 loans closed 79% 87% 13% 36% Loans for first-time buyers Loans for home purchase Loans for septic repair, lead paint and refinancing Loans made in Gateway Cities (1,025) 37% 27% 61% 31% Loans made to borrowers with Loans made to borrowers incomes at or below 80% of with incomes between 80% median income (1,013) and 100% of median Loans made for singlefamily homes Loans made for condominiums $ $$27571,7,46862 AvAevreargaegeanpnuuraclhainsceopmreiceof a MassHoof uashinogmbeorrower $251,482 Average purchase price of a home 3.12% First mortgage delinquency rate as of close of fiscal year TOP 10 PRODUCING LENDERS AND NUMBER OF LOANS CLOSED (254 loans) (192) (134) (78) (178) (163) (68) TM (64) (138) (64)

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1966 CHALLENGE: SLUM CONDITIONS AND BLIGHT... AN ACUTE SHORTAGE OF HOUSING By the mid-1960s, many Massachusetts cities and towns faced blighted conditions. There was not enough decent, safe and sanitary housing for lowincome families, the elderly and returning Vietnam veterans. Public housing, with high concentrations of low-income residents, was beginning to be viewed as less than ideal. In 1966 the Legislature created the Massachusetts Housing Finance Agency as a new approach to affordable housing. One of the first agencies of its kind in the nation, the quasi-public MHFA would loan the proceeds of bond sales to developers who build mixed-income housing, where residents of varying means live side by side. The legislature appropriated $300,000 to establish the MHFA, which would go on to provide $20 billion in affordable housing financing over the next 50 years.

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1974 CHALLENGE: TURNING AROUND FAILED PUBLIC HOUSING In 1970 America Park in Lynn was one of the worst housing projects in Massachusetts. Of the original 408 units, 25% were boarded up and condemned. Similarly, in Boston by the early 1980s, three-quarters of the 1,504 units at the Columbia Point public housing project were vacant and the area had become crime-ridden. Public housing was at a crossroads in Massachusetts. Boston area developer Corcoran Jennison had a new vision to transform public housing into mixedincome planned communities with significantly improved architecture and a high degree of resident participation. MassHousing, which had been created to finance mixed-income rental communities, was the perfect partner. Using MassHousing loans, Corcoran Jennison transformed America Park into King’s Lynne, and Columbia Point into Harbor Point. Both communities have a blend of market and subsidized rents. Old flat-topped brick public housing was razed and replaced with more livable space, and many of the ideas would go on to be incorporated into what became known as “New Urbanism.” Both transformations featured resident organizations participating in every step along the way. These two seminal developments became the blueprint for HUD’s HOPE VI program, which transformed public housing into mixed-income housing across the nation.

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1978 CHALLENGE: HOMEOWNERSHIP OUT OF REACH FOR PEOPLE OF MODEST MEANS In the late 1970s, it became clear that people with modest incomes faced significant challenges in purchasing a home. Higher interest rates and prohibitive downpayment requirements were among them. Conventional lenders had few incentives to make high loan-to-value loans to this segment of the population. In 1978, the Legislature created the Massachusetts Home Mortgage Finance Agency to provide belowmarket interest rate loans to qualified homebuyers with modest incomes. A network of partner lenders signed on to underwrite and close the loans. Gradually it was proved that lending to low- and moderate-income borrowers was feasible and also could be profitable for lenders. MHMFA and MHFA merged in the early 1980s. To date, MassHousing has made more than 85,000 home mortgage loans and has an active portfolio of more than 22,000 loans valued at nearly $3.8 billion.

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1970s PROMOTING DIVERSITY AND ACCESS TO OPPORTUNITY CHALLENGE: MassHousing has long recognized the economic impact of our work, particularly in underserved communities. But ensuring that all Massachusetts residents are able to benefit from those opportunities has been a challenge from the Agency’s earliest days through today. SOLUTION: Diversity and equal opportunity have always been among MassHousing’s core values. In the 1970s, we promoted fair housing and confronted discrimination in the tenant selection process at our multifamily communities. We joined property owners and managers and even offered a training program to develop a diverse, qualified pool of site staff. Since the 1980s, when our Equal Opportunity (now Diversity & Inclusion) Division was formed, we have worked with property managers and developers to increase participation of minorityand women-owned companies. We’ve offered trade fairs, workshops, financing and support to minority-, women- and other disadvantaged businesses. The results have been profound. Since 2004, management companies at MassHousing-financed multifamily communities have spent more than $446 million with minority-owned businesses and $274 million with women-owned businesses. During the same time, $577 million of expenditures on MassHousing-financed construction projects have been spent with minority-owned businesses, and nearly $340 million with women-owned businesses.

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