State housing finance agencies (HFAs) have made a strong return to the bond market, issuing $11.7 billion of single-family and multifamily bonds through September, a 48% year-over-year increase, according to Moody’s Investors Service.
The sharp growth in activity means 2019 is on course to be the biggest year for HFA bond issuance since 2008.
“The continued rise in issuance is credit positive because HFAs are adding to their balance sheets profitable mortgage assets that generate stable, recurring revenues, which better match HFAs' operating expenses than the upfront income generated by secondary-market financings,” says Moody’s in a new report.
So far this year, HFAs have accessed the bond market more than 110 times to raise funds for mortgage production. Their strong bond sales are on course to continue in the fourth quarter and reach 47 in number, an 18% increase over the same quarter of 2018, reports Moody’s.
As a result, the agencies are on track to end the year with more than $15 billion in bond issuance.
“However, HFA bond issuance will likely plateau over the next two years as a result of decreasing interest rates and shrinking affordable housing stocks,” says Moody’s.
Overall, financial metrics remain healthy for HFAs, according to a separate report on 2018 medians data from the firm.
“Median HFA margins increased over 2017, from 13% to 15%, but were still below 2015 and 2016 levels of 17% and 16%,” said Timothy Mone, analyst at Moody’s and lead author of the report. “A 33% increase in HFA investment earnings offset a decline in other income as bonds grew as a source of financing for mortgage loans.”
