Stable Returns and Tax Benefits: The Oklahoma Housing Finance Authority's $100 Million Mortgage Revenue Bond Offering

The Oklahoma Housing Finance Authority (OHFA) has entered the municipal bond market with a $100 million issuance of mortgage revenue bonds, the Series 2025 B, designed to support affordable housing initiatives for low- and moderate-income families. Structured as non-Alternative Minimum Tax (non-AMT) securities with a top-tier Moody’s Aaa credit rating, these bonds offer investors a blend of tax efficiency, long-term stability, and alignment with socially impactful infrastructure. Below is an analysis of their features, risks, and investment appeal.

Key Features of the Series 2025 B Bonds

1. Structure and Maturities:
2. Serial Bonds ($23.9 million): Semi-annual interest payments begin March 1, 2026, with principal repayments through September 1, 2037.

3. Term Bonds ($76.1 million): Longer-dated maturities extend to September 1, 2056, offering investors exposure to decades-long cash flows.

4. Credit Quality:
   The bonds received a Moody’s Aaa rating, the highest possible, reflecting robust collateralization. Backed by mortgage loans, guaranteed securities, and pledged revenues—not the state’s general credit—the bonds isolate risk to the OHFA’s administrative capacity and the underlying housing assets.

5. Tax Advantages:
   Interest income is exempt from Oklahoma state taxes and federally taxable only if included in gross income (non-AMT status). This makes the bonds particularly attractive to taxable investors seeking tax-advantaged income streams.

6. Market Context:
   The issuance, led by Raymond James, occurred in April 2025 during a period of legislative activity in Oklahoma regarding private activity bonds. While House Bill 1549 (HB1549), which aims to streamline bond allocations, was pending in April, its direct impact on this offering remains unclear. However, the OHFA’s established role in housing finance and the Aaa rating suggest minimal legislative risk to the bonds’ performance.

This comparison highlights the tax-advantaged yields of municipal bonds, particularly for investors in high tax brackets, underscoring the Series 2025 B’s appeal.

Investment Considerations

Strengths:
- Creditworthiness: The Aaa rating signals minimal default risk, supported by the OHFA’s 40-year track record and the bonds’ diversified collateral pool.
- Tax Efficiency: Federal and state tax exemptions reduce the effective yield drag, enhancing net returns for Oklahoma-based investors.
- Liquidity: Managed by Raymond James, the bonds are likely to have strong secondary market liquidity, though their long maturities (up to 31 years) may limit immediate turnover.

Risks:
- Prepayment Risk: Mortgage-backed securities tied to the bonds could experience early payoff if housing markets shift, potentially reducing interest payments.
- Collateral Performance: The bonds’ creditworthiness hinges on the underlying mortgage loans and securities. A sharp decline in housing demand or defaults could strain cash flows.

Conclusion: A Secure, Impact-Driven Investment

The OHFA’s Series 2025 B bonds present a compelling opportunity for investors seeking high-credit-quality, tax-advantaged fixed income with a social mission. Backed by a Moody’s Aaa rating and Oklahoma’s affordable housing ecosystem, these securities offer:
- Stable Yields: Competitive interest rates bolstered by tax exemptions, particularly advantageous for in-state investors.
- Long-Term Diversification: Maturities stretching to 2056 provide exposure to multi-decade cash flows, aligning with long-term portfolio goals.
- Low Default Risk: The OHFA’s strong governance and the bonds’ non-state obligation structure insulate investors from broader economic or legislative shifts.

With a $100 million issuance size and management by Raymond James, these bonds are positioned to attract both institutional and retail investors. While risks like prepayment or collateral performance exist, the Aaa rating and tax benefits mitigate these concerns. For those prioritizing secure, socially impactful investments, the Oklahoma Housing Finance Authority’s Series 2025 B bonds are a standout option in the municipal market.