CalHFA gets second rating upgrade to highest in conduit’s history

The California Housing Finance Agency had its rating upgraded to Aa2 by Moody’s Investors Service, which cited the state treasurer conduit’s improved financial strength.

It is the highest rating in agency history, according to CalHFA, and is among the top ratings that Moody’s assigns to housing finance agencies nationwide.

“This rating has CalHFA well-positioned to explore creative new approaches to address the ongoing housing crisis in our state and, for that reason, this is great news for Californians who need a place to call home,” said CalHFA Board Chair Jim Cervantes, a former managing director in the public finance department of Stifel, Nicolaus & Co.

CalHFA, an agency of the state of California created in 1975, is governed by a board with 13 voting members. The agency shares certain functions with the state’s housing department but has independence on its bonds and housing loan programs.

The agency’s primary activities are the financing of single-family mortgage loans to low- and moderate-income borrowers and financing loans to developers of affordable apartment complexes. The Agency also administers certain state-funded programs.

It has no outstanding general obligation bonds, according to Moody’s.

This is the second rating upgrade for CalHFA in recent months.

These upgrades are a clear indication of the agency’s financial strength, and they empower CalHFA as it continues to develop new strategies to finance affordable housing opportunities for low- and moderate-income Californians, according to a CalHFA release.

S&P Global Ratings upgraded CalHFA to AA from AA-minus in December.

“The Aa2 rating is based on very strong metrics in excess of agency peers as demonstrated by asset-to-debt ratio in excess of 7 times, (HFA median of 1.44 times), and margins of 63% (HFA median of 20%), solid loan performance, as well as management’s strong governance,” Moody’s analysts wrote. “The recommendation also incorporates the significant reduction in longer term constraints associated with variable rate debt and related interest rate swap contracts.”

Moody’s also highlighted its favorable trends in loan performance resulting from low delinquency and program run-off.

Last fiscal year, CalHFA used $112 million in down payment and closing cost assistance to help 5,600 low- and moderate-income homebuyers buy their first home and financed the creation and preservation of more than 3,500 units of affordable rental housing, according to the agency.

“CalHFA is committed to finding inventive ways to finance California’s continuum of housing needs, from people in danger of homelessness to first-time homebuyers who are taking the first step towards building generational wealth for their families,” said CalHFA Executive Director Tiena Johnson Hall. “The ratings upgrade also recognizes the hard work and progressive thinking of our team over the past decade that has put the agency in position to fulfill that commitment.”

Both rating agencies assigned a stable outlook.

Moody’s analysts assigned its stable outlook “based on very strong and significantly improved financial performance and deleveraging, favorable trends in loan performance resulting from low delinquency and program run-off, and strong management, which will help mitigate any potential weakening of the loan portfolio.

Moody’s upgraded CalHFA’s issuer rating to Aa3 from A1 in 2021.