Moody's Investors Service continues to have a negative outlook on the state housing finance agency (HFA) sector as the housing market improves but many of the drivers of HFA credit quality do not.

Economic conditions such as high unemployment continue to challenge low and moderate income homeowners and renters that are the HFA's natural customers, while low interest rates continue to diminish returns on HFA investments, says the rating agency in a new report. Low conventional mortgage rates also persist, eroding the advantages of HFA-issued, tax-exempt bonds.

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