The overall outlook for state housing finance agencies (HFAs) continues to be negative as challenging conditions persist, according to Moody’s Investors Services in a new report.
“The growth of delinquencies and foreclosures in HFA mortgage loan portfolios shows no clear signs of abating in the near term, and we believe that they will translate into increased loan losses for many HFAs,” says Roadmap 2010: State Housing Finance Agencies, which was released in July.
However, the Treasury Department’s New Issue Bond Program and the Temporary Credit and Liquidity Program should provide some help. In addition, the financial strength of many HFAs plus management experience will help them mitigate the challenges.
Moody’s says it expects four factors to be most critical in determining the impact of the current environment on the ratings for most HFA bond programs:
- HFA Portfolio and Asset Quality—Levels of mortgage loan delinquencies and foreclosures, breakdown of each loan type, and distribution of loan vintages;
- Housing Market Performance and State Economy—Home price depreciation, unemployment, and delinquency rate trends within the HFA’s state;
- Variable-Rate Debt—HFA’s level of exposure to increased costs related to variable-rate debt, including increased interest and liquidity expense and reduced availability of external liquidity;
- Counterparty Exposure—HFA’s concentration of counterparty risk and exposure to weakened counterparties, such as private mortgage insurers, swap counterparties, and guaranteed investment contract providers.