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Moody's Investors Service Inc.

Moody's Assigns Aa1/VMIG 1 Rating to Minnesota Housing Finance Agency's Proposed $25 Million Residential Housing Finance Bonds

Strategic Insights

— 2 min read

Moody's Investors Service has assigned an Aa1 rating to Minnesota Housing Finance Agency's (MHFA) proposed $25 million Residential Housing Finance Bonds, 2025 Series J, and maintained Aa1 ratings on approximately $4.4 billion of outstanding Residential Housing Finance Bonds. The outlook on Aa1 ratings is stable, driven by the agency's strong financial profile, evidenced by a 14% margin and a 1.22x program asset-to-debt ratio as of June 30, 2024. The proposed bonds are secured by a general obligation pledge, providing a high level of creditworthiness.

Key Takeaways:

  • Moody's has assigned an Aa1/VMIG 1 rating to Minnesota Housing Finance Agency's (MHFA) proposed $25 million Residential Housing Finance Bonds, 2025 Series J.
  • The rating is based on the general obligation (GO) pledge of MHFA, with further support from pledged assets and financial performance of the Program.
  • The GO pledge shows a consistently strong financial profile, evidenced by a 14% margin and a 1.22x program asset-to-debt ratio (PADR) as of June 30, 2024.
  • MHFA's PADR and margin have decreased due to continued issuance, but the growing concentration of mortgage-backed securities (MBS) within the RHFB program insulates the Program from mortgage delinquency risk.
  • Approximately 90% of MHFA's loan portfolio was guaranteed or insured by the US Government at the end of 2024, primarily through single-family mortgage-backed securities (MBS) and government-insured mortgages.
  • The VMIG 1 rating is based on the Aa1 long-term rating on the RHFB parity bonds, the P-1 short-term rating of the liquidity provider Federal Home Loan Bank of Des Moines, and the Bank's obligation under the related standby bond purchase agreement (SBPA).
  • The stable outlook reflects the stable outlook on MHFA's issuer rating and the agency's consistent operating results, characterized by a 2024 margin around 14%.
  • Factors that could lead to an upgrade of the ratings include an upgrade of MN Housing's issuer rating or substantially stronger RHFB financial performance.
  • Factors that could lead to a downgrade of the ratings include a downgrade of MN Housing's issuer rating, a substantial decline in PADR, or a downgrade of the SBPA provider's short-term rating.

Statistics:

  • The proposed bonds are secured by a general obligation pledge of Minnesota Housing Finance Agency (Aa1 Stable).
  • The 2024 margin is around 14%.
  • The program asset-to-debt ratio (PADR) is 1.22x as of June 30, 2024.
  • Approximately 90% of MHFA's loan portfolio was guaranteed or insured by the US Government at the end of 2024.
  • The RHFB portfolio features high-quality single-family MBS and sustained program financial performance.

Sources:

  • Moody's Investors Service, "US Housing Finance Agency Issuer Ratings" (April 2024)
  • Moody's Investors Service, "US Municipal Short-term Debt" (October 2024)

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