Prior to 2009, housing finance agencies (HFAs) financed nearly all of their single-family mortgage loans with tax-exempt bond financings. Over the past five years as rates on conventional mortgage loans fell and remained at historical lows, HFAs found it difficult to compete using tax-exempt bonds to finance mortgage loans. Many HFAs turned to the secondary market to do mortgage financings or stopped making new mortgage loans.

Last week, the National Council of State Housing Agencies (NCHSA) made mention of two recent Moody’s reports, one of which speaks to Moody’s expectation that more HFA bonds will be issued in the near future. This report suggests that bond financings have re-emerged because the bond market is becoming more efficient and because of HFAs’ desire to rebuild their balance sheets. Further, HFAs have created mortgage subsidies from prior issues that may be used in conjunction with future bond issues to make mortgage loans that are competitive in the market. It will be interesting to watch the issuance of single-family bonds in the future and see if the volume does increase.