HFA Multifamily Programs Remain Stable Through 2013

Moody’s Investors Service recently released a report entitled “2013 Medians Underscore Strength of State HFA Multifamily Programs.” It found that state housing finance agencies’ (HFA) multifamily bond programs continued to perform strongly in 2013. The report looked at 41 multifamily bond programs administered by 20 state HFAs. Here are the four major findings in the report:

• HFA Multifamily Portfolios Continued to Perform Strongly. According to the report, HFA multifamily loans continued to perform well throughout the financial crisis, with delinquency rates remaining around .5 percent over the last three years. In addition, the amount of troubled HFA multifamily loans dropped by 64 percent from 2011 to 2013, falling from 1.36 percent of all outstanding loans to .48 percent of outstanding loans. 
• A Healthy Multifamily Market Will Increase Program Profitability. Moody’s contends that a healthy national rental market should help HFA multifamily programs. Nationwide, apartment vacancies remained below 5 percent in 2013 and are likely to remain low in the near future. In addition, rents are projected to increase 2-3 percent over the next five years, which will result in additional revenues for HFA multifamily programs.
• HFA Multifamily Programs Have Strong Financials. HFA multifamily programs’ median program asset-to-debt ratio (PADR) was 1.19x, and profitability was 23 percent. Multifamily programs’ PADR and profitability have grown steadily over the past three years, outperforming HFA single-family programs, which had a median PADR of 1.10x and profitability of 13 percent in 2013.
• HFA Multifamily Programs Utilize Sound Lending Structures. Moody’s credits HFA multifamily programs for engaging in sound lending practices that increase the likelihood that their loans will generate a positive return on investment. HFA multifamily loans have sound credit metrics as 90 percent of loans are fully amortizing, first lien loans, which are the least volatile type of mortgage financing. And approximately 20 percent of multifamily programs’ loan portfolios utilize credit enhancement such as mortgage loan insurance and guarantees, making it more likely that HFAs will avoid losses on their loans.