DALLAS -- Michigan's State Housing Development Authority single family revenue bonds could get a credit boost from $74.5 million in federal funds the U.S. Treasury has appropriated for its Hardest Hit Fund homeowner program, Moody's Investors Service said in a commentary.

HHF was first announced by Treasury in 2010 in response to the housing crisis that led to unprecedented home price declines. Treasury provides funding to 18 of the hardest hit states plus the District of Columbia to help struggling homeowners. Michigan's HHF, administered by the MSHDA, is known as Step Forward Michigan.

HHF funds are used for loans throughout Michigan, with a portion used by MSHDA for its single-family portfolio, according to Moody's housing analyst Omar Ouzidane.

While the presence or absence of HHF has no impact on the rating and/or outlook of the bonds, which are secured by the single-family loans, the federal money can improve the loan portfolio, Moody's said in the commentary, released late last week. The infusion of funds could also help MSHDA reduce foreclosures and boost its financial performance.

"The infusion will help MSHDA reduce foreclosures and boost its financial performance. In addition, the bulk (75%) of the latest HHF distribution will be used to eliminate blight in Detroit and Flint, which may also benefit MSHDA by improving property values on current and future foreclosed homes," Moody's said.

MSHD's Single-Family Mortgage Revenue Bond program finances mortgages for low- and moderate-income first-time homebuyers. The bonds are secured in part by a pledge of the mortgages. Moody's rates the bonds at Aa2 with a stable outlook.

MSHDA plans to allocate 75% of the HHF funding to its blight elimination program and 25% to support mortgage assistance programs – both part of the Step Forward Michigan initiative. Blight funds will be divided among the two cities with the largest number of blighted structures with Detroit getting $41.9 million and Flint receiving $13.9 million.

Wayne County, where Detroit is located, accounts for 21% of the housing authority's total loan portfolio and 4% of its total loan portfolio is in the Genesee County, home of Flint. Many of these loans could potentially benefit from the new HHF funding, according to Moody's.

"These funds have been critical in helping people stay in their homes and avoid foreclosure while helping Detroit, Flint and other cities across our state eliminate blight and revitalize neighborhoods," Gov. Rick Snyder said in a recent press release.

MSHDA, which had previously closed the online application portal for Step Forward Michigan, plans to reopen the site in May.

The U.S. Treasury's $74.5 million allocation to Michigan's program is on top of $498 million the state has already received from in federal funding since the program was announced in 2010.

The U.S. Department of Treasury appropriated $2 billion to its HHF in February. The funding is being allocated among participating states in two phases.

MSHDA Executive Director Kevin Elsenheimer said the housing authority has already applied for a for an additional HHF allocation of $249.3 million. He said he expects a response from the U.S. Treasury on that request in the coming weeks.

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