Standard & Poor's Ratings Services said it raised its long-term issuer credit rating on District of Columbia Housing Finance Agency (DCHFA) by one notch to A from A-minus.

At the same time, Standard & Poor's raised its underlying rating on the agency's series 1998 (Radian Asset Guaranty-insured) certificates of participation by one notch to A-minus from BBB-plus. The outlook is stable.

The ratings reflect Standard & Poor's view of: the high quality and very low risk profile of DCHFA's asset base; the strong financial performance, with sufficient capital adequacy ratios at the A level; the minimal general obligation debt exposure; and the active management team, which has a strong, positive relationship with the district government.

Offsetting these strengths, however, is Standard & Poor's view of the agency's declining investment income.

"The stable outlook reflects our opinion of the high quality of DCHFA's asset base, low-risk profile, and its strong equity position. DCHFA's financial performance continues to improve and increase profitability, while its five-year average profitability ratios are comparable with those of its A rated peers," said Standard & Poor's credit analyst Stephanie Morgan.

"DCHFA's ability to maintain a strong financial performance while expanding its avenues for growth, and its ability to leverage the resources needed to fulfill its planned portfolio diversification, are keys to its improved credit quality. Conversely, should DCHFA witness significant declines in its financial performance in terms of profitability/equity position, and program management that impairs its financial strength, we could lower the ratings."

DCHFA continues to show what Standard & Poor's considers strong financial performance, reflected by improving profitability and leverage ratios, in Standard & Poor's view. The agency, has, in Standard & Poor's view, an active management team that has sustained a high-quality, low-risk asset portfolio consisting of mortgage loans and mortgage-backed securities (MBS) either insured by government and private mortgage insurance providers or backed by Ginnie Mae, Fannie Mae, or Freddie Mac MBS.

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