State housing finance agency (HFA) programs are “in a strong position to weather macroeconomic and housing market challenges” over the next year, reports Moody’s Investors Service.
Overall, the outlook for HFAs remains stable for 2023, according to the risk assessment firm.
“Margins will remain solid at approximately 15% as higher investment income and increased revenue from bond-financed loans help to counter declining revenue from secondary-market loan sales,” says Moody’s. “In addition, single- and multifamily loan portfolio delinquencies will remain at moderately low levels.”
However, if margins fall under 10%, with the possibility of further decline, the outlook could turn negative.
In its new 2023 outlook, Moody’s expects HFAs to continue to finance healthy levels of multifamily projects next year by using their own funds as well as state and federal sources to provide gap funding.
In addition to seeing a strong demand for affordable rental housing, most HFA multifamily portfolios benefit from an enhancement (such as the Federal Housing Administration-HFA Risk-Sharing Program) on a significant portion of their loans. HFAs also report that they expect state and federal funds, including American Rescue Plan Act, HOME, and Housing Trust Fund resources, to help cover gap funding needs.
Still, projects that are in the works face hurdles, and fewer projects may enter the pipeline for financing as a result of some of these issues, according to Moody’s.
The firm expects HFA single-family loan financings to slow but remain solid next year. Overall, the performance of HFA single-family portfolios is expected to remain stable. Moody’s notes that these portfolios can absorb higher delinquency rates if the economy weakens.
