MoodyÕ: Falling delinquencies bolster single, multifamily HFA portfolios

Two reports show delinquencies down

Both single-family and multifamily portfolios securing housing finance agency bonds showed significant improvement in delinquency rates, Moody’s Investor Service says in two new reports. 

Following a decade of steady increases in single-family delinquencies, foreclosures have waned by 17%. Combined with a 9% drop in 60 days+ delinquencies, year-end 2014 saw a 9% decline in total delinquencies. This indicates new strengthening in these HFA loan portfolios and slower rates of foreclosures and potential loan losses.

“We expect continued improvement in HFA single-family portfolio performance buoyed by improving unemployment numbers and the upward movement of median home prices, helping homeowners faced with negative equity in their homes,” Moody’s AVP – Analyst Eileen Hawes says in the first report, “Strongest Rebound in HFA Single Family Delinquencies in 10 Years.”

Moody’s also says multifamily loan delinquencies fell to new lows of 0.30% from 0.50% over the past three years, which contributed to the strong performance of these loan portfolios and supported increasing credit enhancement.

Moody’s says a healthy national rental market will continue to support the solid performance of the multifamily portfolios, with vacancies projected to remain below 5% over the next five years.

“In 2014, only two HFAs reported losses on REO sales with losses totaling $25.6 million (0.15% of current outstanding principal) over the prior five years which is a slight improvement over 2013 levels of $25.8 million. We attribute this strong performance to the asset management strategies utilized by housing finance agencies,” Moody’s Analyst Richard Kubanik says in “HFA 2014 Multifamily Medians Reflect Strong Rental Markets Nationwide.”

Despite the solid 2014 multifamily performance, loans in foreclosure, workout or real estate owned have increased to 0.71% from 0.48% of outstanding loans, but still remain low overall.

Similarly, seven state HFAs are struggling with elevated single-family delinquencies with reported total delinquencies of over 10% for nine programs as of December 31.

The programs account for roughly 27% of the total loans in the HFA portfolios, and while elevated, the overall number of programs has fallen from 11 as of December 31, 2013. A primary factor for the higher delinquency levels revolves around the time needed to process a foreclosure.

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