New Fannie Mae Agreement for Massachusetts Housing Partnership

The Massachusetts Housing Partnership expects to sign a new funding agreement this week with the Federal National Mortgage Association, the government-sponsored company known as Fannie Mae.

The partnership, which does not issue bonds and describes itself as a "one-in-a-kind pool," instead enters into loan agreements with each of the banks it borrows through on a nonrecourse basis. Under the agreements, the partnership takes a 4% cash collateralized first-loss position, with banks covering the rest.

MHP has generated nearly $1.2 billion in capital since its inception in 1990.

Standard & Poor's this week assigned a AA-minus rating, its fourth-highest, to the partnership's fund board.

"Coming out of the recession, there's a pent-up demand for affordable rental housing in Massachusetts, and our loan portfolio has grown considerably over the last few years," MHP managing director Mark Curtiss said in an interview.

"We are well known in the affordable housing community, and to meet this increasing need for financing, we have been pursuing additional sources of capital," said Curtiss. "The S&P report and our AA-minus credit rating will be very helpful in our efforts to expand our capital sources."

As of June, MHP has used private-sector funds to provide roughly $970 million in low-interest, long-term loans and commitments to finance nearly 20,000 of rental units. According to S&P, the partnership has about $230 million in untapped funds.

"They have a well-performing portfolio. One thing that stood out is that they have minimal risk at 4%," said S&P analyst Lawrence Witte, whose report also cited a strong loan performance history and consistent profitability, among other metrics.

From 2009 to 2013, MHP posted positive net income each year, excluding grant activity.

"Its equity is low for HFAs, but its loan performance is exemplary," said S&P's report. "The organization has no debt other than its extensive loan portfolio, but MHO has minimal loan exposure to these loans in the case that they default."

According to Witte, the only MHP loan that remained delinquent as much as 60 days occurred in the late 1990s.

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