Some HFAs Change Their Business Models for MRBs

Despite several turbulent years and the gloomy outlook for single-family housing bonds, municipal bond housing experts are optimistic about the future of housing finance agencies.

Some housing experts, as well as a high-level Treasury Department official, say the HFA business model for mortgage revenue bonds is temporarily broken and out-of-date in the current low interest rate environment.

Despite their prominent role in the housing market, the forecast doesn’t bode well for HFAs.

The outlook for state HFAs remains negative in 2012, for the fourth straight year, Moody’s Investors Service said in a February report that focused on the fundamental credit conditions in the sector over the next 12 to 18 months.

Moody’s said six primary factors will drive the negative outlook through at least mid-2013. They are low conventional mortgage rates, low interest rates on investments, deterioration of counterparty credit quality, high unemployment, high liquidity fees for variable-rate debt and new strategies for financing loan origination.

Standard & Poor’s doesn’t have the entire housing sector on watch, but some HFAs, which have seen consistent drops in profitability over the past few years, have been downgraded.

–  Bond Buyer


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