DHFC hears Stifel presentation on single‑family mortgage bond program and options for a local program

At the Dallas Housing Finance Corporation meeting on June 10, 2025, the board heard a presentation from Mike Erinhardt, managing director at Stifel, Nicholas & Company, on the mechanics, risks and market prospects for a DHFC‑sponsored single‑family mortgage revenue bond program with down‑payment assistance.

Stifel presented a model of a roughly $25 million mortgage revenue bond deal that would pair below‑market mortgages with down‑payment assistance (commonly 3%–3.5% in the model). Under the scenario shown, an issuer contribution of about $1,335,000 would be required up front to capitalize interest, cover lender compensation and create a down‑payment assistance account. The presentation modeled an indicative note rate to borrowers near 6.48% and used market assumptions from June 2025.

Why it matters: A DHFC-run single‑family bond program could offer below‑market mortgage rates and targeted down‑payment assistance to eligible homebuyers in Dallas, increasing home‑purchase opportunities for lower‑ and moderate‑income households. Board members and staff said DHFC can either assign up to the full 2025 allocation to TDHCA or reserve part for a DHFC program; the board approved a separate resolution authorizing application and potential assignment for up to $61,000,000.

Program structure, market and timing

Stifel recommended lining up a master servicer and a set of correspondent lenders before pricing bonds. The firm said it has worked with servicers such as Land Home and others, and described experiences in other jurisdictions (for example Tulsa and Cleveland County) where similar programs originated rapidly with heavy outreach to lenders and realtors. Stifel provided a high‑level cash‑flow summary showing how bond premium can fund down‑payment assistance and how capitalized interest accounts support debt service during the origination window.

Staff and advisers discussed timing constraints tied to Texas bond‑allocation rules: board members were told there is an early August window and other administrative dates that affect whether DHFC can assign the 2025 allocation to TDHCA or retain some for a local program; staff recommended making allocation decisions at the July meeting if the board intends to reserve capacity for a DHFC program rather than assign all to TDHCA.

Risks and mitigations discussed

Erinhardt described interest‑rate risk: if DHFC issues long‑term tax‑exempt bonds to fund the program and market interest rates later fall, the program’s fixed spread between the bond cost and borrower note rate could be less favorable. To mitigate risk, Stifel recommended pre‑marketing to and executing program agreements with multiple lenders so originations occur quickly after pricing. The presentation also reviewed options for down‑payment assistance structures, including forgivable liens that lapse after a period (five‑year forgivable liens were discussed as a precedent used elsewhere).

Staffing and operations

Stifel and outside advisers said the program does not require a large DHFC staffing addition; they described turnkey program administration in other jurisdictions that relied on program administrators, master servicers and marketing support. One example cited: a nearby county that executed a $25 million bond transaction with minimal local staff by leveraging outside servicers and program administration.

Board reaction and next steps

Board members asked for more detail on underwriting assumptions, present‑value returns and potential issuer‑investment sizing under alternate prepayment scenarios. Stifel said more detailed cash‑flow and sensitivity work would follow if DHFC authorizes moving toward inducement documents. The board previously adopted a resolution authorizing the application for up to $61,000,000 in single‑family allocation; staff noted a July decision point to preserve DHFC’s option to reserve part of the 2025 allocation for a local program.

Ending

Stifel’s presentation supplied a practical timeline and model for DHFC to consider entering the single‑family mortgage bond market. Staff and advisers will provide follow‑up financial modeling and timetable options for a possible inducement and issuance if the board chooses to pursue a DHFC-run program.