Standard & Poor’s last week revised its outlook to positive from stable on the Minnesota Housing Finance Agency’s AA-plus issuer ratings. The credit’s strengths include very strong financial performance, marked by strong capital adequacy ratios, which increased significantly due to a recent financial restructuring. The MHFA also has excellent overall asset quality, and prudent oversight. Analysts also praised management as being extremely capable and proactive. The agency also benefits from ongoing support from the top rated state.“The positive outlook reflects MHFA’s improved capital adequacy position after its financial restructuring became effective July 1, 2007,” analyst Jeffrey Previdi wrote. “The improved capital position, coupled with very strong financial performance, managerial strength, and a strong state economy, positions the agency for an upgrade in the near term.”However, if the agency’s capital base is significantly eroded by its housing activities so as not to warrant an upgrade, then Standard & Poor’s would return the outlook to stable.The agency’s asset base is comprised mostly of single-family and multifamily whole loans, which pose a moderately high risk. Overall, the MHFA’s loan portfolio has grown 33% since the end of fiscal 2004. The housing agency carries about $2.4 billion of debt rated at the issuer credit level of AA-plus.

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