TEXT-S&P Report: HFAs' High Equity Helps Counter Low Profitability

(The following was released by the rating agency)

SAN FRANCISCO (Standard & Poor's) Oct. 9, 2012--Although U.S. housing finance agency (HFA) profitability and loan performance have declined since 2008 because of low interest rates, equity is stable and high because of intact reserves, providing more security for these issuers' general obligation debt and some other obligations, according to a report published today on RatingsDirect on the Global Credit Portal.

"We believe that equity could continue growing as a percentage of assets if the HFA loan pool shrinks and HFAs use refinanced loan proceeds to pay down debt," said Standard & Poor's credit analyst Lawrence Witte.

The report does also state that low profitability and deteriorating loan performance will likely continue and possibly lead to negative rating actions in the absence of alternate revenue sources.

RELATED CRITERIA AND RESEARCH USPF Criteria: Housing Finance Agencies, June 14, 2007