hfa reserves: overview » introduction

In the course of their operations, state and local Housing Finance Agencies (HFAs) generate income -- typically through the fees charged on outstanding bonds and the spreads between the cost of funds to the HFA and the rates charged to borrowers. This income is generally used to support ongoing program operations and to build reserves that improve the agency's financial strength and bond rating.

There is nothing wrong with the generation of revenue by HFAs. In fact, it is one of their great strengths, as it makes them substantially less vulnerable to the vagaries of the annual appropriations process. Reserves also reduce financing costs by raising bond ratings, and protect against the possibility of losses from bond defaults. Unfortunately, a significant number of state housing finance agencies report that portions of their fiscal reserves are taken by the state for activities unrelated to the agencies' standard housing programs.

Click on the topic areas below to learn how to ensure that HFA reserves are used for affordable homes:

Avoid diversion of HFA reserves
or income for non-housing uses

Monitor reserve funds to ensure they are used productively

Develop a shared understanding of optimal reserve levels