Moody’s: Hardest Hit Fund a Credit Positive for HFAs

 

On August 11, the Administration announced that it will make $2 billion in new federal assistance available through Treasury to the HFAs of 17 states and the District of Columbia to provide relief to homeowners struggling with mortgage payments because of unemployment. The additional assistance represents the third round of HHF funding and nearly doubles the size of the program.  See NCSHA’s press release hailing the HHF program’s expansion.

 

The Moody’s report indicates that while the expanded program funding could enhance the credit of all 18 participating HFAs, the greatest benefits could be realized by those 11 HFAs that operate mortgage revenue bond programs secured by their own whole loans (rather than federally guaranteed mortgage-backed securities).  The bonds in whole-loan programs are secured by a pledge of the mortgages, with careful oversight by HFAs.  HFAs have typically been conservative in their lending practices, says Moody’s, but even the most conservative programs have experienced an increase in delinquencies as housing markets nationwide have deteriorated.  The report says, “the credit benefits for the HFA program will be determined by the number of loans in the HFA program that are selected to receive assistance.”

 

The HHF program represents the third federal initiative targeting HFAs in the past year – the other two programs include funding for HFA mortgage lending under the New Issue Bond Program and providing liquidity and credit support for HFA variable rate demand bonds under the Temporary Credit and Liquidity Program.  Moody’s suggests that this confidence in HFAs, further evidenced by the expansion of HHF program last week, reinforces federal recognition of the significant role that HFAs play in addressing the housing crisis, and is an overall credit positive for HFAs across the country.

 

View NCSHA’s continuing coverage of everything related to the Hardest-Hit Fund here.