Last week I posted some good news about Oregon Housing and Community Services (OHCS), based on my review of a November 2008 Moody's com "State Housing Finance Agencies-Sector Outlook" Special Report. (The complete report is available for download to subscribers at moodys.com; a basic subscription is free, but you have to register).
In my earlier post I also indicated that the Moody's report had data that was bad news for OHCS. Here it is:
1.Overall State HFA Profitability-OHCS Ranked Last Among 48 HFA's.
The first piece of bad news is that OHCS had the worst profitability of 48 state housing finance agencies.(Moody's defines profitability as "net revenue divided by total revenue").
Specifically, the average HFA overall profitability rate in 2007 was 14.01%, while the OHCS profitability rate was the lowest of all HFA's at 1.39%.
Oregon's overall HFA profitability ranking was lower than it's 45th place ranking in 2006, but was identical to its last place ranking in 2005. Washington State's overall HFA profitability rate in 2007 was 6.56% (37th), while Idaho's was 13.99% (25th).
2.HFA Single Family Bond Program Profitability-Oregon Ranked 34 out of 35 Single Family Whole Loan Programs.
Moodys.com report data include not only overall HFA profitability data but also the profitability of 35 state HFA single family loan programs.
The average HFA single family bond (whole loan) program overall profitability rate in 2007 was 15.85%, while the OHCS profitability rate was much lower, at 5.4%. However, the OHCS SF bond program profitability ranking of 33th in 2007 was slightly better than its 34th. place ranking in 2006 (3.12%), and the last place/35th. ranking it had in 2004 when profitability was -3.05%.
Alaska had the lowest single family whole loan profitability rate and ranking in 2007 at 3.17% while Idaho's rate at 9.23% ranked 27th. (Washington state's SF program profitability was not rated).
The higher rate of profitability for the OHCS SF whole loan program compared to overall OHCS HFA profitability suggests to me that the SF program is covering its own costs PLUS the costs of non SF programs. I expect this is likely the case for not only OHCS, but for other states as well.
(Note: the count of SF HFA programs is different than the count of all HFA's as data was not available for some bond (whole loan) programs, and some states had more than one SF bond (whole loan) program for which data was available).
3.Are High Rates of HFA of SF Program Profitability Good or Bad?
Having the very lowest profitability rate of all HFA's can't be a positive for OHCS. On the other hand, excessively high rates of HFA profitability are not good either as they might. signal risky investment strategies or excessive charges to developers and home buyers.
The highest HFA profitability rate in 2007 was in Wyoming x at 31.94%; Wyoming also had the highest HFA SF profitability rate in 2007 at 41.95% . This rate of profitability for public agencies seems clearly excessive and could be as big a problem as having the lowest level of profitability.
I guess where I would come out is that being in the middle range of profitability is much better than being very high or very low. I also welcome YOUR thoughts on what OHCS and HFA profitability rates mean; I encourage you to add your comments in the block below this post.
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