OREANDA-NEWS. Positive issuer financial performance and the continued recovery of the broader housing market will position U.S. state housing finance agencies (SHFAs) for a stable outlook in 2016, according to Fitch Ratings in a new report.

Financial ratios for SHFAs remain sound thanks to deleveraging of bond programs, resulting in increased equity. 'What has also been taking place in recent months is the onset of replacing depleted SHFA assets largely through offering down payment assistance to first time homebuyers to boost new loan originations,' said Senior Director Maura McGuigan.

SHFAs have found down payment assistance (DPA) programs to be the single, most effective tool in originating new mortgage loans in the current mortgage market environment. Offering DPA will continue to present significant opportunities for growing SHFA loan production and profitability. Another development that may pick up steam next year is more SHFAs returning to some form of mortgage revenue bond (MRB) issuance to replenish assets on their balance sheet.

Factors that could adversely affect the outlook for SHFAs include a failure of SHFAs to grow balance sheets that could hamper long term profitability levels. Additionally, 'growing SHFA issuer and program equity may increase exposure to external taps, potentially decreasing fund balances and creating negative rating pressure,' said McGuigan.