WASHINGTON — The Virginia Housing Development Authority will sell $175 million of taxable rental housing bonds in a negotiated deal Tuesday.

The bonds are secured by mortgage loans, revenues, and the material assets of the Housing Authority, which does not have general taxing power. Raymond James/ Morgan Keegan is lead underwriter on the bonds, and Richmond firm Hunton & Williams, LLP is the bond counsel. Moody's Investors Service has rated the bonds Aa1, and Standard and Poors assigned the debt a AA-plus rating.

The authority, created in 1972, goes to market to finance loans for first-time home buyers or developers of affordable rental housing. VHDA will use $78.8 million of the proceeds to refund outstanding rental housing bonds, and $96.2 million to purchase multi-family mortgage loans, according to the preliminary official statement.

The VHDA describes itself as a "quasi-government" agency, a self-supporting not-for profit overseen by an 11-member board appointed by the governor of Virginia. Families and individuals seeking to occupy VHDA developments are restricted based on income. Current rules require that adjusted family income cannot exceed 150% of the area median gross income. The authority produces a quarterly analysis of the risk of loan loss due to delinquencies and foreclosures, and includes on its books an "allowance for loan loss."

On June 30, the VHDA analysis showed 104 developments representing $322.6 million of investment, of which 10 developments were tagged as being at a high risk of foreclosure. Eight were classified as medium risk, and 34 as low risk. The remainder were classified as a "possible" risk. All told, the VHDA included a $22.4 million loan loss allowance on the developments.

Moody's affirmed the Aa1 rating on the VHDA's more than $2 billion in outstanding debt in July, but noted that the lack of a debt service reserve could "marginally weaken the credit quality over the mid-to-long term." The VHDA is still one of only five state housing finance authorities rated Aa1 or higher.

The bonds are dated Oct. 1 and closing is expected on or about Oct. 30, the VHDA said.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.