State Housing Finance Agencies Experiencing Balance Sheet Shrinkage

State Housing Finance Agencies Experiencing Balance Sheet Shrinkage U.S. state housing finance agencies (SHFAs) saw their balance sheets shrink to unprecedented lows in 2011 due to the low interest rate environment's effect on their ability to issue debt to make SHFA program mortgage loans, according to a new Fitch Ratings report.

The median adjusted debt-to-equity ratio for the SHFAs declined to five times in fiscal year 2011, compared to 5.5 times in fiscal year 2010. According to Fitch Ratings, this is much lower than the 10-year average median of 5.9 times and is the lowest in the last decade for the 51 SHFAs.

The aggregate adjusted fund equity for the SHFAs has stayed relatively flat at $25.7 billion. For fiscal year 2011, 35 SHFAs held mortgage-backed securities in their portfolios. Year-over-year, their total assets decreased by 3.2% and total debt decreased by 5.3%.

‘Despite the fact that the interest rate environment is not conducive to making program loans – coupled with a troubled housing market – the industry stayed stable,’ says Charles Giordano, senior director at Fitch Ratings. ‘Net interest spreads stayed approximately the same, despite the difficult operating environment.’


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