Fitch Affirms Illinois Housing Development Authority's GOs at 'A+'.

NEW YORK -- Fitch Ratings affirms Illinois Housing Development Authority's (IHDA) general obligation (GO) debt pledge at 'A+'. The rating, while not assigned to any specific class of debt, represents an overall credit assessment of the authority's ability to meet its GO pledge requirements.

IHDA continues to report a positive financial position as evidenced by improved leverage ratios and increased returns on assets and equity. Management remains solid. For the fiscal year ended June 30, 2007, IHDA's adjusted debt-to-equity ratio held constant at 4.8 times (x) in 2007 and 2006, placing it slightly better than the median for state housing finance agencies (HFAs). The Fitch 2007 median adjusted debt-to-equity ratio was 5.7x based on 51 state HFAs reporting. IHDA's total outstanding debt increased slightly to $1.6 billion.

The authority continues to show improvement in its financial position, as it has over the past several years despite the decline in profitability during fiscal 1999 and again in fiscal years 2002-2004. In fiscal years 2005 through 2007, the authority returned to profitability. For the last three fiscal years, authority operating margins continue to increase. In fiscal years 2005, 2006, and 2007 operating income as a percentage of revenue was 8.8%, 10.0% and 24.3%, respectively. Increases in fiscal years 2005 through 2007 were mainly due to increases in interest income and investment revenue as a result of higher investment yields. Operating margins in 2007 received an additional boost from reversals on previously estimated losses on program loans based on the authority's adoption of a revised loan loss rating policy. Returns on average assets and equity also increased for the third consecutive fiscal year to 1.7% in 2007 following 0.8% in 2006 and 5.3% in 2005.

IHDA has $262 million of risk-sharing debt outstanding in the form of mortgage participation certificates (MPCs), up again from $256 million in the prior year. IHDA's aggregate risk-sharing loss exposure to the MPCs is $205 million in fiscal 2007 which held constant from 2006. Of IHDA's $205 million exposure, $64 million represents the authority's exposure based on its FHA Risk Sharing Agreements and $141 million represents the total loan amount under the AMBAC MPC program whereby the authority assumes a first loss position for a portion of the loan.

Overall, the multifamily program is performing well, while the single-family program loans are demonstrating delinquencies that are slightly above state averages. Other contributing credit factors that support the 'A+' rating include the authority's sufficient levels of liquidity and reserves, the quality of its asset base and earnings stream in light of its public purpose mandate and the authority's capable management.

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