Fitch Rates Massachusetts HFA's $66.6MM Housing Bonds 2003L & M 'AA-'.

Business Editors

NEW YORK--(BUSINESS WIRE)--Aug. 13, 2003

Fitch Ratings assigns an 'AA-' rating to Massachusetts Housing Finance Agency's (Mass Housing) $66.6 million housing bonds, 2003 series L and M. Fitch also affirms the outstanding ratings on all series of bonds issued under the program as listed below. The series L and M bonds are scheduled to be sold this week by a Lehman Brothers-led syndicate.

This is the fifth sale of bonds under a flexible general bond resolution adopted on Dec. 10, 2002. Bond proceeds will be used to transfer multifamily loans on existing properties that were funded by Mass Housing from its working capital fund into this resolution, and provide permanent financing for multifamily developments to be constructed or rehabilitated. Bond proceeds will also be used to fund costs of issuance. Loans transferred from the working capital fund will be transferred to this resolution as security for these bonds.

A debt service reserve fund in an amount equaling six months of debt service on the bonds will be deposited at bond closing.

The bonds' 'AA-' rating reflects the sound credit quality of the loan portfolio, the projected overcollateralization (OC) of bonds, as well as cash flow surpluses sufficient to offset potential cash flow interruptions from future loan payment delinquencies, adequate legal provisions of the resolution, and Mass Housing's strong programmatic oversight capabilities. Overall, the portfolio has performed favorably. Credit concerns center on the ability of Mass Housing to transfer surplus funds out of the resolution if minimal asset parity requirements are met, the annual appropriation risk associated with the commonwealth of Massachusetts' 13A subsidy program, and risks associated with cyclical economic pressure on the regional housing market.

Including loans to be transferred to the resolution in conjunction with this financing, the portfolio consists of 295 residential developments, almost all of which were initially financed from the early 1970s through the mid-1980s, with an aggregate outstanding mortgage balance of $1.1 billion as of Dec. 31, 2002. The vast majority of the approximately 38,000 dwellings receive federal or commonwealth subsidy payments. The portfolio has performed very well since inception and represents some of Mass Housing's best performing loans. None of the 295 developments are experiencing mortgage payment, escrow, or replacement reserve delinquencies.

The program's asset parity position, excluding the series L and M bonds, is projected to be 104.7% as of Dec. 1, 2003. This projected asset parity position is well above the 101% required by the general resolution and reflects an OC level sufficient to support the 'AA-' rating based on the composition of the portfolio.

The nature of the portfolio has the potential to change significantly as new loans continue to be added to the program -- the general resolution permits various types of loan financings, including both new and existing single family and multifamily mortgages. Fitch's ongoing credit analysis will be driven by the program's actual asset parity position, portfolio composition and performance, program financial results, and cash flow strength.

Fitch affirms the ratings on the outstanding Massachusetts Housing Finance Agency Housing Bonds as follows, prior to consideration of any bond insurance:

-- $490.3 million 2003 series A, B-1, B-2, H, I, J and K 'AA-';

-- $34.1 million 2003 series C, D (forward delivery expected Aug.

20) 'AA-';

-- $428.5 million 2003 series F (FSA insured) 'AAA/F1+';

-- $114.4 million 2003 series G 'AA-/F1+'.