Community Development Administration Maryland Department of Housing and Community Development Multi-Family Mortgage Revenue Bonds

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1 Maryland Department of Housing and Community Development QUARTERLY UPDATE TO ANNUAL REPORT PROVIDED PURSUANT TO SECURITIES AND EXCHANGE COMMISSION RULE 15c2-12 The following financial information is being provided by the Community Development Administration (the Administration ), an agency in the Division of Development Finance of the Department of Housing and Community Development, a principal department of the government of the State of Maryland (the "Department"). This information updates the Report dated October 26, 2011 for the Administration's program. Reference is made to the Administration s official statement with respect to its (the "Bonds"), the most recent which is dated November 18, 2011 and relates to the Administration s Multi- Family Mortgage Revenue Bonds, Series 2011 C/2009 A-7 and is herein referred to as the "Official Statement", for definitions of terms used herein, additional information about the Administration, the Department and their programs and the annual financial information contained therein. The information included in this disclosure is current as of March 31, The Bonds are issued pursuant to The Resolution providing for the Issuance of the dated December 1, ( The Bond Resolution ). In addition to the annual report provided pursuant to SEC Rule 15c2-12, the Administration may provide quarterly updates to the annual Electronic Municipal Market Access ( EMMA ) filing on a voluntary basis. The policy of voluntarily disseminating information is not a contractual obligation to anyone, and the Issuer may discontinue this practice at any time in its discretion without notice. Financial Statements of the Administration The financial statements for the years ending June 30, 2011 and June 30, 2010 of the Multi- Family Mortgage Revenue Bonds of the Administration have been audited by Reznick Group, P.C., all as described in the Independent Auditor s Report of Reznick Group, P.C., accompanying the financial statements in Appendix A to this report. As indicated in the report of the auditors, such financial statements have been prepared in conformity with accounting principles and the audits conducted in accordance with auditing standards generally accepted in the United States. Unaudited financial statements of the of the Administration for the nine months ended March 31, 2012 are also included in Appendix A.

2 Credit Enhancement of the Rental Housing Loans As of March 31, 2012, the Loans financing rental housing developments ( Rental Housing Loans ) were insured or credit enhanced as follows: Distribution of Mortgage Insurance/Guarantees As of 3/31/2012 Insurer or Guarantor Number of Loans Number of Units Percentage of Total Units Insured Outstanding Loan Amount (3) Percentage of Outstanding Loan Amount LOC 5 $ 3,745,071 3% FHA Risk Sharing (2) 17 1,988 94% 106,029,178 89% FHLMC (4) % 8,216,623 6% Totals (1) 23 2, % $117,990, % (1) Amounts and percentages may not total exactly because of rounding. (2) An outstanding amount of $106,029,178 is insured under the Risk Sharing Program. Upon payment of a claim, the Administration would be responsible for reimbursement to FHA of up to 50 percent of such claim. (3) The "Outstanding Loan Amount" represents bond proceeds disbursed as of March 31, (4) The FHLMC loan represents Poppleton II Apartments which is a stand-alone project that is a non-parity issue within the MFMRB indenture.

3 MFMRB Series Letters of Credit Negative Arbitrage Letters of Credit Series Project LOC Bank LOC # Amount Expiration Comments 2009A-1/2010A Indian Bridge 2009A-2/2010B Rainier Manor Bank of America $ 271,298 N/A 6/23/2012 Project must post cash by 6/23/ A-4/2010D Harper House JPMorganChase CTCS $ 549,270 Last draw 12/7/12. Short term bonds being called in full on 12/2/2012 6/1/12. LOC will be returned for cancellation on 6/1/ A-5/2011A Park View at Randallstown PNC $ 56,965 8/2/2012 Last draw 12/1/ A-6/2011B Edinburgh House Bank of America $ 137,059 6/6/ A-6/2011B Glenarden Woods 2009A-6/2011B Glenreed Apts M&T Bank M&T Bank SB SB $ $ 227, ,360 11/1/ /1/2012 Bank of New York Bank of New York S S $ $ 227, ,360 11/1/ /1/ A-6/2011B Union Rowe Bank of America $ 177,882 6/6/ A-7/2011C Halpine Hamlet Bank of America $ 101,724 7/2/ A-7/2011C Hilltop Phase I Bank of America $ 1,765,272 3/31/ A-7/2011C Park View at Fullerton PNC $ 50,114 1/31/2013 Debt Service Letters of Credit ("LOC BONDS") Series Project LOC Bank LOC # Amount Expiration Comments $550,000 Maturity 1/1/2013; Short term bonds being called in full 2009A-4/2010D Harper House JPMorganChase CTCS $ 554,195 12/2/2012 on 6/1/12. LOC will be returned for cancellation on 6/1/ A-6/2011B Edinburgh House Bank of America $ 2,012,200 6/6/2013 $2,000,000 Maturity 6/1/ A-6/2011B 2009A-6/2011B Glenarden Woods Glenreed Apts M&T Bank SB $ 1,398,479 6/5/2013 $1,390,000 Maturity 6/1/2013 Bank of New York S $ 1,398,479 6/5/2013 M&T Bank SB $ 1,076,527 6/5/2013 $1,070,000 Maturity 6/1/2013 Bank of New York S $ 1,076,527 6/5/ A-6/2011B Union Rowe Bank of America $ 301,830 6/6/2013 $300,000 Maturity 6/1/2013 Debt Service Reserve Fund On March 31, 2012, the balance in the Debt Service Reserve Fund is $3,923,613. The balance on deposit satisfies the Debt Service Reserve Requirement and reference is made to the Official Statement for an explanation of the use of the Debt Service Reserve Fund. Outstanding Indebtedness under the Bond Resolution As of March 31, 2012, the Bond Resolution had outstanding Bonds having a principal amount of $155,610,000. Appendices A B C D, Audited Financial Statements for the year ended June 30, 2011 and June 30, 2010 and Unaudited Financial Statements for the nine months ended March 31, The Program Description of Loans and Developments Outstanding Indebtedness of the Administration Dated: June 18, 2012

4 APPENDIX A FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS REPORT

5 FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS REPORT COMMUNITY DEVELOPMENT ADMINISTRATION MULTI-FAMILY MORTGAGE REVENUE BONDS JUNE 30, 2011 AND 2010

6 TABLE OF CONTENTS PAGE INDEPENDENT AUDITORS REPORT 3 FINANCIAL STATEMENTS STATEMENTS OF NET ASSETS 4 STATEMENTS OF REVENUE, EXPENSES AND CHANGES IN NET ASSETS 5 STATEMENTS OF CASH FLOWS 6 NOTES TO FINANCIAL STATEMENTS 8

7 INDEPENDENT AUDITORS REPORT Office of the Secretary Department of Housing and Community Development We have audited the accompanying financial statements of the Community Development Administration (the Fund) of the Department of Housing and Community Development of the State of Maryland as of the year ended June 30, 2011 and the period December 18, 2009 (date of establishment) through June 30, 2010, as listed in the table of contents. These financial statements are the responsibility of the Fund s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As discussed in Note 1, the financial statements present only the Community Development Administration and do not purport to, and do not, present fairly the financial position of the Department of Housing and Community Development of the State of Maryland as of the year ended June 30, 2011 and the period December 18, 2009 (date of establishment) through June 30, 2010, in conformity with accounting principles generally accepted in the United States of America. In our opinion, the financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of the Community Development Administration of the Department of Housing and Community Development of the State of Maryland as of the year ended June 30, 2011 and the period December 18, 2009 (date of establishment) through June 30, 2010, and the changes in its net assets and its cash flows for the year ended June 30, 2011 and the period December 18, 2009 (date of establishment) through June 30, 2010, in conformity with accounting principles generally accepted in the United States of America. Baltimore, Maryland September 29,

8 STATEMENTS OF NET ASSETS June 30, 2011 and RESTRICTED ASSETS Restricted current assets Cash and cash equivalents on deposit with trustee $ 45,220 $ - Cash and cash equivalents on deposit with US Bank 23,234 92,086 Accrued interest and other receivables Total restricted current assets 68,711 92,086 Restricted long-term assets Multi-family construction financing 67,030 - Deferred bond issuance costs - 90 Total restricted long-term assets 67, Total restricted assets $ 135,741 $ 92,176 LIABILITIES AND NET ASSETS Current liabilities Accrued interest payable $ 1,532 $ 46 Bonds payable 23,300 - Deposits by borrowers Total current liabilities 25, Long-term liabilities Bonds payable, net of current portion 106,220 92,040 Deposits by borrowers, net of current portion 2,967 - Total long-term liabilities 109,187 92,040 Total liabilities 134,721 92,086 NET ASSETS Restricted 1, Total liabilities and net assets $ 135,741 $ 92,176 See notes to financial statements - 4 -

9 STATEMENTS OF REVENUE, EXPENSES AND CHANGES IN NET ASSETS Year ended June 30, 2011 and the period December 18, 2009 (date of establishment) through June 30, Operating revenue Interest on mortgage loans $ 1,966 $ - Interest income on investments Fee and deferred income 23 - Other operating revenue 127-2, Operating expenses Interest expense on bonds 2, Professional fees and other operating expenses , Operating income (loss) 746 (145) Transfers of funds, net, as permitted by the various bond indentures Change in net assets Net assets - restricted at beginning of period 90 - Net assets - restricted at end of period $ 1,020 $ 90 See notes to financial statements - 5 -

10 STATEMENTS OF CASH FLOWS Year ended June 30, 2011 and the period December 18, 2009 (date of establishment) through June 30, Cash flows from operating activities Principal and interest received on mortgage loans $ 1,829 $ - Escrow funds received 4,132 - Escrow funds paid (463) - Loan fees and deferred income received 1,525 - Purchase of mortgage loans (68,532) - Professional fees and other operating expenses (12) (145) Other income received Other reimbursements (11) - Net cash used in operating activities (61,405) (145) Cash flows from investing activities Interest received on investments Net cash provided by investing activities Cash flows from noncapital financing activities Proceeds from sale of bonds 42,890 92,040 Reimbursement of bond costs 90 - Interest on bonds (724) - Bond issuance costs - (90) Escrow funds released for non-parity bonds (5,410) - Transfers among Funds Net cash provided by noncapital financing activities 37,030 92,185 NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (23,632) 92,086 Cash and cash equivalents at beginning of period 92,086 - Cash and cash equivalents at end of period $ 68,454 $ 92,086 (continued) - 6 -

11 STATEMENTS OF CASH FLOWS - CONTINUED Year ended June 30, 2011 and the period December 18, 2009 (date of establishment) through June 30, Reconciliation of operating income (loss) to net cash used in operating activities Operating income (loss) $ 746 $ (145) Adjustments to reconcile operating income (loss) to net cash used in operating activities Increase in assets Mortgage loans (68,532) - Accrued interest and other receivables (257) - Increase in liabilities Accrued interest payable 1, Deposits by borrowers 3,669 - Amortizations Deferred income on loans (23) - Loan fees deferred 1,525 - Interest received on investments (743) (46) Interest on bonds Net cash used in operating activities $ (61,405) $ (145) See notes to financial statements - 7 -

12 NOTES TO FINANCIAL STATEMENTS June 30, 2011 and 2010 NOTE 1 - AUTHORIZING LEGISLATION AND PROGRAM DESCRIPTION The Community Development Administration (CDA) is authorized to issue Multi- Family Mortgage Revenue Bonds pursuant to Sections through of the Housing and Community Development Article of the Annotated Code of Maryland to meet the shortage of adequate, safe and sanitary housing in the State of Maryland, particularly for persons or families of limited income. CDA is in the Division of Development Finance in the Department of Housing and Community Development (DHCD) of the State of Maryland. CDA entered into a Securitization Agreement on December 18, 2009 with the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC), using federal legislative authority under the Housing and Economic Recovery Act of 2008 to provide affordable mortgage financing for individual households and multifamily rental properties. Subject to the Securitization Agreement, the New Issue Bond Program (NIBP) was created under which CDA will issue mortgage revenue Program Bonds, FNMA and FHLMC will securitize and issue securities for these bonds, and the United States Department of the Treasury (Treasury) will purchase these securities. Under the Multifamily NIBP and pursuant to the Resolution (Resolution), CDA issued Series 2009 A bonds in the amount of $92,040 as escrow bonds which will bear interest at a short-term rate until conversion to Program Bonds secured by mortgage loans or mortgage-backed securities backed by mortgage loans. The short-term rate will convert to a permanent fixed rate at time of conversion. The escrow bonds can be converted in up to six tranches prior to December 31, 2011, unless extended by the Treasury. CDA has the option, at the time of each of the six conversions, to issue market bonds along with the issuance of Program Bonds, but not to exceed 40 percent of the total allocation of which the escrow bonds represent the 60 percent share. The accompanying financial statements only include CDA s Multi-Family Mortgage Revenue Bonds (the Fund). CDA s other Funds are not included. However, CDA has also separately issued combined financial statements for the Revenue Obligation Funds and Infrastructure Program Funds, and financial statements for the Single Family Housing Revenue Bonds. The Fund was established to provide construction and permanent financing for multi-family housing projects

13 NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2011 and 2010 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The Fund is accounted for as an enterprise fund. Accordingly, the accompanying financial statements have been prepared using the accrual method of accounting and on the basis of accounting principles generally accepted in the United States of America (GAAP). Generally Accepted Accounting Principles CDA reports its financial activities by applying Standards of Governmental Accounting and Financial Reporting as promulgated by the Governmental Accounting Standards Board (GASB). Consequently, CDA applies all applicable GASB pronouncements as well as Financial Accounting Standards Board (FASB) Statements and Interpretations, APB Opinions, and ARBS of the Committee on Accounting Procedure issued on or prior to November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements. In accordance with accounting guidance issued by GASB, net assets should be reported as restricted when constraints placed on net asset use are either: externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments; or are imposed by law through constitutional provisions or enabling legislation. Accordingly, all net assets of the Fund are restricted as to their use as all net assets are pledged to bondholders. The Annual Financial Report may include a Management s Discussion and Analysis. Since CDA is an enterprise fund included in the State of Maryland s Comprehensive Annual Financial Report, a separate Management s Discussion and Analysis is not required in these financial statements. CDA prepares a Management s Discussion and Analysis for the General Accounting Division of the State of Maryland that is not part of these financial statements

14 NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2011 and 2010 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Cash and Cash Equivalents on Deposit Cash equivalents for escrow bond proceeds are invested pursuant to the NIBP s Global Escrow Agreement. Cash equivalents for revenue bond proceeds may include money market funds, repurchase agreements, investment agreements and any other investments, primarily obligations of the U.S. Treasury and U.S. Government Agencies, which have maturities of 90 or less days at the time of purchase. As of June 30, 2011 and 2010, all of the Fund s cash equivalents were invested in money market mutual funds which are more fully described in Note 3. Mortgage Loans Mortgage loans are carried at their unpaid principal balances, net of unamortized loan fees. Loan fees are deferred and amortized over the life of the related loans using the effective interest method. See Notes 4 and 10 for additional information on mortgage loans and mortgage insurance, respectively. Accrued Interest and Other Receivables Accrued interest and other receivables include interest on loans and investments. On insured multi-family mortgage loans that are in default, CDA continues to accrue interest until receipt of a mortgage insurance claim. See Note 5 for additional information. Bonds Payable Bonds payable are carried at their unpaid principal balances. See Notes 6, 7 and 8 for additional information

15 NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2011 and 2010 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Deposits by Borrowers This account consists of escrows and reserves held by CDA on behalf of multi-family housing developments. CDA invests these deposits and, for reserves, allows earnings to accrue to the benefit of the mortgagor. Escrows represent amounts held by CDA for mortgage insurance and hazard insurance premiums and real estate taxes, all of which are generally paid annually and which are classified as a current liability. Based on the current year s reserve disbursements, CDA has estimated the current reserve liability. The balance of the reserves is classified as long-term. See Note 8 for further information on changes in long-term obligations. Mortgage Yield Limitations All mortgage loans are subject to yield limitations under the Internal Revenue Service Code (the Code) in order for the associated bonds to maintain their tax-exempt status. At the time of bond issuance and over the term of the bonds, CDA determines and maintains compliance with the permitted mortgage yield on the loans. In certain bond refunding transactions, CDA transfers loans from prior series of bonds to the refunding series. CDA monitors the yield on these transferred loans to ensure that the composite yield over the term of the bonds is within the yield limitations of the Code. If at any time the composite yields on the transferred loans are out of compliance with the Code, CDA has certain remedies available to bring the yield into compliance. As of June 30, 2011, all mortgage loan yields were in compliance with the Code. Interest on Mortgage Loans Interest on mortgage loans is calculated using the effective interest method. Fee Income CDA receives multi-family financing fees at loan origination. These fees are deferred and amortized over the life of the loan

16 NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2011 and 2010 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Administrative Support In addition to expenses incurred directly by the Fund, CDA receives certain support services from other divisions of DHCD. Support services and the operating expenses of CDA have been allocated to CDA s General Bond Reserve Fund and reported in the financial statements of CDA s Revenue Obligation Funds. The General Bond Reserve Fund records these expenses as invoiced by DHCD for the fiscal year. The employees of CDA are covered by the Maryland State Retirement and Pension System and the costs of employees retirement benefits are included in the salaries and related costs charged to CDA s General Bond Reserve Fund. See Note 12 for additional information. Revenue and Expenses CDA distinguishes operating revenue and expenses from nonoperating items in accordance with accounting guidance issued by GASB. Operating revenue and expenses are identified as those activities that are directly related to providing affordable housing in the State of Maryland. All of the Fund s activities are considered to be operating. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue, expenses, gains and losses during the reporting periods. Actual results could differ from these estimates

17 NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2011 and 2010 NOTE 3 - CASH AND CASH EQUIVALENTS Escrow Bonds Escrow bond proceeds were deposited into Series 2009 A Escrow Account and invested pursuant to the Global Escrow Agreement entered into by CDA with FNMA, FHLMC, and U.S. Bank National Association (US Bank), as escrow agent, within NIBP. The escrow bond proceeds are invested, pursuant to the Global Escrow Agreement, equally between four money market mutual funds and, if drawn, the investments are reduced in equal amounts, accordingly. As of June 30, 2011, the escrow bond proceeds, invested in money market mutual funds and held by US Bank, as the escrow agent, are invested equally in the following money market mutual funds: Fair Percentage Money market fund rating Asset Value Invested Moody s Fitch S&P First American Funds Prime Obligations Class Z $ 5,809 25% Aaa AAA AAAm Fidelity Prime Obligations Class I 5,809 25% Aaa - AAAm Goldman Prime Obligations Institutional 5,809 25% Aaa AAA AAAm Blackrock Liquidity Funds TempFunds (Institutional) 5,809 25% Aaa - AAAm Total $ 23,236 * * the difference from actual total of $23,234 is due to rounding. All investments are equally funded. As of June 30, 2011, the cost of the money market mutual funds approximated fair value

18 NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2011 and 2010 NOTE 3 - CASH AND CASH EQUIVALENTS (Continued) As of June 30, 2010, the escrow bond proceeds, invested in money market mutual funds and held by US Bank, as the escrow agent, are invested equally in the following money market mutual funds: Fair Percentage Money market fund rating Asset Value Invested Moody s Fitch S&P First American Funds Prime Obligations Class Z $ 23,022 25% Aaa AAA AAAm Fidelity Prime Obligations Class I 23,022 25% Aaa - AAAm Goldman Prime Obligations Institutional 23,022 25% - AAA - Blackrock Liquidity Funds TempFunds (Institutional) 23,022 25% Aaa AAA AAAm Total $ 92,088 * * the difference from actual total of $92,086 is due to rounding. All investments are equally funded. As of June 30, 2010, the cost of the money market mutual funds approximated fair value. Revenue Bonds Bond proceeds and revenues from mortgages and investments are invested in authorized investments as defined in the Resolution (the Resolution) and in CDA s Investment Policy until required for originating mortgage loans, funding reserves, paying bond debt service, and funding program expenses. Authorized investments include obligations of the U.S. Treasury, U.S. Government Agencies, repurchase agreements, investment agreements, money market funds and certificates of deposit. As of June 30, 2011, the Fund has $45,220 invested in a money market mutual fund (Federated Treasury Obligations Fund) which is classified as cash and cash equivalents. The following represents the GASB evaluation of this asset for interest rate risk, credit risk, concentration of credit risk and custodial credit risk

19 NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2011 and 2010 NOTE 3 - CASH AND CASH EQUIVALENTS (Continued) Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. As a means of limiting its exposure to fair value losses from rising interest rates, CDA s Investment Policy requires that the maturies of the investment portfolio are scheduled to meet the cash requirements for bond debt service, projected loan originations and ongoing operations. The Federated Treasury Obligations Fund invests primarily in repurchase agreements collateralized by Treasury securities and U.S. Treasuries. It is operated in accordance with Rule 2a-7 of the Investment Company Act of 1940, as amended. It can reasonably be expected to have a fair value that will be unaffected by interest rate changes because the interest rates are variable and the principal can be recovered on demand. As of June 30, 2011, the cost of this money market mutual fund approximated fair value. Credit Risk and Concentration of Credit Risk Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Neither CDA s Investment Policy nor the Resolution requires investment agreements or deposits to be collateralized. CDA s Investment Policy places no limit on the amount that CDA may invest in any one issuer or counterparty. According to the Resolution and CDA s Investment Policy, securities must be at a rating no lower than the rating on the bonds or, if an investment maintains only a short-term rating, a rating not less than F1/P-1; and financial institutions who are a counterparty to CDA in investment agreements must be rated at least comparable to the existing rating on CDA bonds unless counterparty ratings lower than the bond ratings are permitted and do not affect the ratings on the bonds. In addition, certain investment and repurchase agreements require counterparty ratings no less than the ratings on the bonds. As of June 30, 2011 and 2010, the ratings on Multi-Family Mortgage Revenue Bonds were Aaa by Moody s Investors Service. As of June 30, 2011, the Federated Treasury Obligations Fund was rated AAAm by Standard and Poor s and Aaa by Moody s Investors Service

20 NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2011 and 2010 NOTE 3 - CASH AND CASH EQUIVALENTS (Continued) Custodial Credit Risk Custodial credit risk is the risk that in the event of a bank or counterparty failure, CDA will not be able to recover its deposits or the value of its collateral securities that are in the possession of an outside party. As of June 30, 2011, the Fund s investments were not subject to custodial credit risk under accounting guidance issued by GASB. This money market fund is held in trust by the trustee, kept separate from the assets of the bank and from other trust accounts and is held in CDA s name. NOTE 4 - MORTGAGE LOANS All of the Fund s mortgage loans are secured by first liens on the related property and fully insured or credit enhanced by FHA, MHF, FHLMC, or bank letters of credit. As of June 30, 2011 interest rates on originated loans range from 1% to 4.55%, with remaining loan terms ranging from 18 months to 40 years. At June 30, 2010, no loans had been originated under the Fund. NOTE 5 - ACCRUED INTEREST AND OTHER RECEIVABLES Accrued interest and other receivables as of June 30, 2011 and 2010 were as follows: Accrued mortgage loan interest $ 137 $ - Negative arbitrage due from mortgagors Miscellaneous billings 11 - NOTE 6 - BONDS PAYABLE $ 257 $ - The bonds issued by CDA are special obligations of CDA and are payable from the revenue and special funds of the Resolution. These bonds do not constitute debt of and are not guaranteed by the State of Maryland or any other program of the State of Maryland or any political subdivision

21 NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2011 and 2010 NOTE 6 - BONDS PAYABLE (Continued) Escrow Bonds CDA issued Series 2009 A escrow bonds in the amount of $92,040 dated December 30, The bonds are taxable and bear interest at variable short-term rates until the escrow bonds are converted to Program Bonds with permanent fixed rates to fund mortgage loans and mortgage-backed securities backed by mortgage loans. As of June 30, 2011, $23,190 of Series 2009 A bond proceeds were still in escrow. If any escrow bond proceeds remain in the Series 2009 A Escrow Account on January 1, 2012, such remaining proceeds must be used to redeem the outstanding escrow bonds; otherwise, issued Program Bonds will have a maturity date of July 1, As of June 30, 2011, the required escrow bond principal payment for bonds is $23,190 for the period ending June 30, As of June 30, 2010, the required escrow bond principal payments for bonds for each of the next two years were $0 for the period ending June 30, 2011 and $92,040 for the period ending June 30, Revenue Bonds The provisions of the Resolution require or allow for the special redemption of bonds at par through the use of unexpended bond proceeds and excess funds accumulated primarily through prepayment of mortgage loans. All outstanding bonds, except the Series 2009 bonds, are subject to optional redemption, in whole or in part at any time, after certain dates, as specified in the respective series resolutions, at a redemption price equal to the principal amount thereof to be redeemed. The Series 2009 A-1 through A-6 bonds are subject to optional redemption in minimum denominations of $10 and integral multiples of $10 in excess thereof, in whole or in part, from any source of funds, on the first business day of any month, at a redemption price equal to 100% of the principal amount thereof to be redeemed. All bonds are tax-exempt and have fixed interest rates

22 NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2011 and 2010 NOTE 6 - BONDS PAYABLE (Continued) The following is a summary of the bond activity for the year ended June 30, 2011 and the bonds payable as of June 30, 2011: Bonds Bond Activity Bonds payable New Scheduled Escrow payable Issue Range of Range of at June 30, bonds maturity Bonds at June 30, dated interest rates maturities 2010 issued payments Reissued 2011 Multi-Family Mortgage Revenue Bonds Series 2009 A 12/30/09 Variable Rate 7/1/2051 $ 92,040 $ - $ - $ (68,850) $ 23,190 Series 2009 A-1 12/30/ % 7/1/ ,380 24,380 Series 2010 A 07/22/ % % , ,410 Series 2009 A-2 12/30/ % 7/1/ ,610 6,610 Series 2010 B 09/29/ % % , ,730 Series 2009 A-4 12/30/ % 7/1/ ,760 10,760 Series 2010 D 12/02/ % % , ,880 Series 2009 A-5 12/30/ % 7/1/ ,460 8,460 Series 2011 A 02/24/ % % , ,190 Series 2009 A-6 12/30/ % 7/1/ ,230 13,230 Series 2011 B 05/25/ % % , ,680 Total $ 92,040 42,890 $ - $ (5,410) $ 129,520 Refer to Note 11 for further detail of the $5,410 reissued from escrow bonds

23 NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2011 and 2010 NOTE 7 - DEBT SERVICE REQUIREMENTS As of June 30, 2011, the required principal payments for bonds (including mandatory sinking fund payments and special and optional redemptions that occurred subsequent to June 30, 2011) and interest payments for each of the next five years and in 5-year increments thereafter, were as follows: Years ended June 30, Interest Principal 2012 $ 3,370 $ 23, ,835 6, ,737 1, ,721 1, ,700 1, ,001 6, ,748 7, ,952 9, ,733 12, ,102 14, ,907 18, ,202 21, ,300 Total $ 101,104 $ 129,

24 NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2011 and 2010 NOTE 8 - LONG-TERM OBLIGATIONS Changes in long-term obligations for the years ended June 30, 2011 and 2010 were as follows: Bonds payable Beginning balance at 6/30/2010 $ 92,040 $ - Additions 42,890 92,040 Reductions (5,410) - Ending balance at 6/30/ ,520 92,040 Less due within one year (23,300) - Total long-term bonds payable 106,220 92,040 Deposits by borrowers Beginning balance at 6/30/ Additions 4,132 - Reductions (463) - Ending balance at 6/30/2011 3,669 - Less due within one year (702) - Total long-term deposits by borrowers 2,967 - Total long-term liabilities $ 109,187 $ 92,040 NOTE 9 - INTERFUND ACTIVITY In accordance with the Resolution, net assets in the Fund are restricted and pledged to bondholders. However, restricted assets may be transferred to other Funds, subject to the provisions of the Resolution. Generally, an officer of CDA must authorize such withdrawals and a cash flow analysis must demonstrate that sufficient monies remain in the Resolution to meet the obligations of the Fund in current and future years

25 NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2011 and 2010 NOTE 9 - INTERFUND ACTIVITY (Continued) During the years ended June 30, 2011 and 2010, the Fund transferred the following amounts, as permitted, among Funds: Costs of issuance and other expenses transferred from the General Bond Reserve Fund $ - $ 235 Reimburse costs of issuance and other expenses transferred to the General Bond Reserve Fund (207) - Funds used for debt service reserve and revenue accounts transferred from the General Bond Reserve Fund NOTE 10 - MORTGAGE INSURANCE $ 184 $ % of the Fund s mortgage loans are insured or credit enhanced as described in Note 4. Multi-family mortgagors pay premiums for mortgage insurance and insurance coverage is 100% of the unpaid principal balance of the loan. NOTE 11 - OTHER OUTSTANDING BONDS ISSUED BY CDA (UNAUDITED) On September 29, 2010, CDA issued $4,105 of Series 2010 C. Also, on September 29, 2010, $5,410 of Series 2009 A escrow bonds were released and issued as Series 2009 A-3. These bonds are non-parity bond issuances under the indenture and are secured by a Credit Enhancement Agreement with the Federal Home Loan Mortgage Corporation (Freddie Mac)

26 NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2011 and 2010 NOTE 12 - PENSION AND OTHER POST-RETIREMENT BENEFITS Eligible employees of CDA and employees of the State of Maryland are covered under the retirement plans of the State Retirement and Pension System of Maryland (the System) and are also entitled to certain healthcare benefits upon retirement. CDA s only obligation for retirement and post-employment benefits is its required annual contribution, which was paid in full by CDA to the State of Maryland prior to year end. The System prepares a separate audited Comprehensive Annual Financial Report, which can be obtained from the State Retirement and Pension System of Maryland, 120 East Baltimore Street, Baltimore, Maryland or by visiting the website at NOTE 13 - SUBSEQUENT EVENTS Events that occur after the date of the statement of net assets but before the financial statements were available to be issued must be evaluated for recognition or disclosure. The effects of subsequent events that provide evidence about conditions that existed at the date of the statement of net assets are recognized in the accompanying financial statements. Subsequent events which provide evidence about conditions that existed after the date of the statement of net assets require disclosure in the accompanying notes. Management evaluated the activity of CDA through September 29, 2011 (the date the financial statements were available to be issued) and concluded that no subsequent events have occurred that would require recognition in the financial statements or disclosure in the notes to the financial statements. As of the report date, there were no subsequent events reported by CDA

27 COMMUNITY DEVELOPMENT ADMINISTRATION MULTI-FAMILY MORTGAGE REVENUE BONDS Unaudited Interim Financial Statements For the nine month period ended March 31, 2012

28 Balance Sheets As of March 31, 2012 and June 30, /31/2012 6/30/2011 (Unaudited) (Audited) Restricted assets Restricted current assets Cash and cash equivalents on deposit with trustee $ 45,972 $ 45,220 Cash and cash equivalents on deposit with US BANK - 23,234 Multi-family mortgage loans Accrued interest and other receivables Total restricted current assets 47,209 68,711 Restricted long-term assets Multi-family mortgage loans, net of current portion 107,062 67,030 Total restricted long-term assets 107,062 67,030 Total restricted assets $ 154,271 $ 135,741 Liabilities and net assets Current liabilities Accrued interest payable $ 1,261 $ 1,532 Bonds payable 1,385 23,300 Deposits by borrowers 1, Due to other funds 24 - Total current liabilities 3,714 25,534 Long-term liabilities Bonds payable, net of current portion 144, ,220 Deposits by borrowers, net of current portion 4,079 2,967 Total long-term liabilities 148, ,187 Total liabilities 152, ,721 Net assets Restricted 1,768 1,020 Total net assets 1,768 1,020 Total liabilities and net assets $ 154,271 $ 135,741 See accompanying notes.

29 Statements of Revenue, Expenses and Changes in Net Assets For the nine months ended March 31, 2012 and March 31, /31/2012 3/31/2011 (Unaudited) (Unaudited) Operating revenue Interest on mortgage loans $ 3,087 $ 1,261 Interest income on investments Fee and deferred income Other operating revenue ,886 1,950 Operating expenses Interest expense on bonds 3,174 1,403 Professional fees and other operating expenses ,242 1,411 Operating income Transfers of funds, as permitted Changes in net assets Net assets - restricted at beginning of period 1, Net assets - restricted at end of period $ 1,768 $ 780 See accompanying notes.

30 Statements of Cash Flows For the nine months ended March 31, 2012 and March 31, /31/2012 3/31/2011 (Unaudited) (Unaudited) Cash flows from operating activities Principal and interest received on mortgage loans $ 3,045 $ 1,050 Escrow funds received 1,896 1,958 Escrow funds paid (442) (395) Loan fees and deferred income received 498 1,047 Purchase of mortgage loans (41,472) (56,611) Professional fees and other operating expenses (44) (8) Other income received Other reimbursements - (20) Net cash from operating activities (36,502) (52,866) Cash flows from investing activities Interest received on investments Net cash from investing activities Cash flows from noncapital financing activities Proceeds from sale of bonds 16,685 34,210 Payments on bond principal (110) - Reimbursement of bond costs - 90 Interest on bonds (3,445) (690) Bond escrow funds released for non-parity bonds (note 4) - (5,410) Transfers among Funds Net cash from noncapital financing activities 13,234 28,351 Net decrease in cash and cash equivalents on deposit (22,482) (24,042) Cash and cash equivalents on deposit at beginning of period 68,454 92,086 Cash and cash equivalents on deposit at end of period $ 45,972 $ 68,044 (continued)

31 Statements of Cash Flows - continued For the nine months ended March 31, 2012 and March 31, /31/2012 3/31/2011 (Unaudited) (Unaudited) Reconciliation of operating income to net cash from operating activities Operating income $ 644 $ 539 Adjustments to reconcile operating income to net cash from operating activities Increase in assets Mortgage loans (41,242) (56,612) Accrued interest and other receivables (234) (319) Due from other Funds - (156) (Decrease) increase in liabilities Accrued interest payable (271) 713 Deposits by borrowers 1,454 1,563 Due to other Funds 24 - Amortizations Deferred income on loans (34) (14) Loan fees deferred 498 1,203 Interest received on investments (786) (473) Interest on bonds 3, Net cash from operating activities $ (36,502) $ (52,866) See accompanying notes.

32 1. Basis of Presentation: In the opinion of management, the accompanying interim financial statements of the Community Development Administration (CDA) present fairly the financial position at March 31, 2012 and the results of its operations for the nine months ended March 31, 2012 and March 31, These interim financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial position and results of operations. The March 31, 2012 financial statements are unaudited, and certain information and footnote disclosures normally included in the annual financial statements have been omitted. Readers of these statements should refer to the financial statements and notes thereto as of June 30, 2011 and for the year then ended, which have been included elsewhere in this disclosure. The results of operations presented in the accompanying financial statements are not necessarily representative of operations for the entire year. 2. Mortgage Loans: During the nine months ended March 31, 2012, CDA purchased multi-family mortgage loans in the amount of $41, Bonds payable: On December 1, 2011, CDA issued $16,685 of Series 2011 C with interest rates ranging from.75% to 4.95% and maturity dates ranging from July 1, 2013 to July 1, Also, on December 1, 2011, $23,190 of Series 2009 A escrow bonds were released and issued as Series 2009 A-7 at a permanent rate of 2.32% effective February 1, The bonds mature on July 1, Non-parity Bonds: On September 29, 2010, CDA issued $4,105 of Series 2010 C due September 1, Also, on September 29, 2010, $5,410 of Series 2009 A escrow bonds were released and issued as Series 2009 A-3 with a maturity date of January 1, The proceeds of the bonds will be used for the acquisition and rehabilitation of a multifamily residential rental housing project, Poppleton Phase II, with a mortgage in the amount of $9,515. The bonds are secured by a Credit Enhancement Agreement with the Federal Home Loan Mortgage Corporation (Freddie Mac). 5. Subsequent events: Community Development Administration Notes to Unaudited Interim Financial Statements March 31, 2012 On June 1, 2012, CDA redeemed, prior to maturity, $550 of.

33 APPENDIX B THE PROGRAM On December 18, 2009, CDA entered into a Securitization Agreement with the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC), using federal legislative authority under the Housing and Economic Recovery Act of 2008 to provide affordable mortgage financing for individual households and multifamily rental properties. Subject to the Securitization Agreement, the New Issue Bond Program (NIBP) was created under which CDA will issue mortgage revenue Program Bonds, FNMA and FHLMC will securitize and issue securities for these bonds, and the United States Department of the Treasury (Treasury) will purchase these securities. Under the Multifamily NIBP and pursuant to the Resolution (Resolution), CDA issued Series 2009 A bonds in the amount of $92,040,000 as escrow bonds which will bear interest at a short-term rate until conversion to Program Bonds secured by mortgage loans or mortgage-backed securities backed by mortgage loans. The shortterm rate will convert to a permanent fixed rate at time of conversion. The escrow bonds can be converted in up to six tranches prior to March 31, 2012, unless extended by the Treasury. CDA has the option, at the time of each of the six conversions, to issue market bonds along with the issuance of Program Bonds, but not to exceed 40 percent of the total allocation of which the escrow bonds represent the 60 percent share. Existing Portfolio Under the Bond Resolution, as of March 31, 2012, the Administration had 22 construction loans outstanding, for 17 Rental Housing properties, which had a total outstanding principal balance of $109,774,249. The following table sets forth as of March 31, 2012, for each county of the State and Baltimore City, the number of Rental Housing Developments, units within such Rental Housing Developments, and, on an aggregate basis, the outstanding principal balance of Loans. Distribution of Developments by County as of 3/31/2012 County Number of Developments Number of Units Units as a Percentage of Total Current Loan Amount Percentage of Current Loan Amount Anne Arundel % $17,656, % Baltimore City (2) % $ 2,496, % Baltimore % $14,262, % Calvert % $12,470, % Charles % $ 7,301, % Howard % $14,439, % Montgomery % $ 7,068, % Prince George's % $27,022, % St. Mary's % $ 7,057, % Totals (1) 17 1, % $109,774, % (1) Amounts and percentages may not total exactly because of rounding. (2) Poppleton II Apartments is a stand-alone project located in Baltimore City and includes 111 units. The current loan amount is $8,216,623. This is a non-parity issue within the MFMRB indenture and is not included in the above chart.

34 Table C-1, Developments Currently Financed with the Proceeds of Prior Series of Bonds: Appendix C Description of Loans and Developments Multifamily Projects Name Footnote Location Owner/Developer Subsidy No. of No. of Total Credit Units Subsidized Enhancement Units Subsidy Term (Months) Original Loan Term (Months) Remaining Loan Term (Months) Interest Rate Original Mortgage Loan Balance Amount Scheduled Loan Balance as of 03/31/2012 Current Loan Balance as of 03/31/2012 Reserve for Occupancy Inspection Replacements (2) Rating as of (3) 03/31/2012 Bond Series Bay Ridge Gardens 3, 4, 5, 10, 14 Anne Arundel County BRG 2, LLC RISK SHARE % $16,245,000 $16,232,656 $16,232,656 $220,804 MRB09A10B Section Edinburgh House 3, 4, 7, 8, 14 Montgomery County MHP Edinburgh House LP None RISK SHARE % 2,620,000 2,212,054 2,212,054 55,958 MRB09A61B Edinburgh House II 8 Montgomery County MHP Edinburgh None House LP LOC % 2,000, , ,071 MRB09A61B Glenarden Woods Apts III Prince George's County Glenarden Affordable LLC None LOC % 1,390,000 1,390,000 1,390,000 MRB09A61B Glenarden Woods Apts II 3, 4, 7, 14 Prince George's County Glenarden Affordable LLC None RISK SHARE % 6,050,000 6,050,000 6,050, ,012 MRB09A61B Glenreed Apartments I 3, 4, 7, 14 Prince George's County Glenreed Affordable LLC None RISK SHARE ,380,000 4,380,000 4,380, ,009 MRB09A61B % Glenreed Apartments III Prince George's County Glenreed Affordable LLC None LOC % 1,070,000 1,070,000 1,070,000 MRB09A61B Halpine Hamlet 3, 4, 7, Montgomery County MHP Halpine LP None RISK SHARE % 6,595,000 4,420,954 4,420,954 MRB09A71C 8, 14 Harper House Howard County Harper House Limited Partnership None LOC % 550, , ,000 MRB09A10D Harper House 3, 4, 13, Howard County Harper House Limited 14 Partnership Section RISK SHARE % 9,005,000 9,005,000 9,005, ,012 MRB09A10D Hilltop Phase One 3, 4, 7, 8, 14 Anne Arundel County Milltowne Associates, LP Section RISK SHARE % 27,305,000 1,423,356 1,423,356 MRB09A71C 4/17/ :56:26 AM C - 1

35 Name Footnote Location Owner/Developer Subsidy No. of No. of Total Credit Units Subsidized Enhancement Units Subsidy Term (Months) Original Loan Term (Months) Remaining Loan Term (Months) Interest Rate Original Mortgage Loan Balance Amount Scheduled Loan Balance as of 03/31/2012 Current Loan Balance as of 03/31/2012 Reserve for Occupancy Inspection Replacements (2) Rating as of (3) 03/31/2012 Bond Series Indian Bridge Apartments 3, 4 St. Mary's County Indian Bridge, LLC None RISK SHARE % $7,100,000 $7,057,627 $7,057,627 $22,400 MRB09A10A LaPlata Manor 3, 4, 6, Charles County Victory La Plata 14 Limited Partnership Section RISK SHARE ,345,000 7,301,165 7,301, ,884 MRB09A10A % Park View at Columbia 3, 4 Howard County Columbia, LLLP None RISK SHARE % 4,910,000 4,884,293 4,884, ,241 MRB09A10A Park View At Fullerton 3, 4, 7, Baltimore County Fullerton LLLP 8, 14 c/o Shelter Development LLC None RISK SHARE % 5,100,000 3,875,378 3,875, ,487 MRB09A71C Park View at Laurel 3, 4, 14 Prince George's Laurel, LLLP None County Shelter Dev., LLC RISK SHARE % 7,655,000 7,637,642 7,637, ,494 MRB09A10D Park View at Randallstown 3, 4, 14 Baltimore County Randallstown, LLLP None RISK SHARE % 5,090,000 5,090,000 5,090, ,011 MRB09A51A Park View at Rosedale 3, 4, 14 Baltimore County Rosedale, LLLP None RISK SHARE % 5,305,000 5,296,959 5,296, ,461 MRB09A51A Rainier Manor 3, 4, 14 Prince George's Rainier None County Redevelopment Assoc., LP RISK SHARE ,500,000 6,495,061 6,495,061 2,500 MRB09A10B % Silverwood Farm Apartments P&I 3, 4, 14 Calvert County Silverwood None Apartments, LLC RISK SHARE ,545,000 12,470,132 12,470,132 42,001 MRB09A10A % Union Rowe Apts. 3, 4, 7, Baltimore City Franklin Square 8, 14 Housing LP Section RISK SHARE ,680,000 2,196,901 2,196,901 MRB09A61B % Union Rowe Apts. II 8 Baltimore City Franklin Square None Housing LP LOC , , ,000 MRB09A61B % Total: (1) 1, $142,740,000 $109,774,249 $109,774,249 $1,599,274 4/17/ :56:26 AM C - 2