Fitch Affirms Florida HFC's Homeowner Mortgage Rev Bonds at 'AA+'; Outlook Positive

Business Wire

NEW YORK--(BUSINESS WIRE)--

Fitch Ratings has affirmed the 'AA+' rating and assigned a Positive Outlook to the Florida HFC (FHFC) Homeowner Mortgage Revenue Bonds issued under the 1995 master indenture.

This rating action resolves the Rating Watch Negative on which the ratings were placed on Oct. 16, 2013 based on the bonds' linkage to the U.S. sovereign rating. The Outlook revision to Positive reflects the shift in the portfolio's underlying assets to an amount of mortgage backed securities (MBS) that is nearly equal to or exceeds the amount of bonds outstanding.

SECURITY

The bonds are a limited obligation of the issuer, payable solely from the assets and revenues secured under the trust indenture. The assets pledged are primarily MBS and whole loans.

KEY RATING DRIVERS

STRENGTH OF PORTFOLIO: At Dec. 31, 2013, the single-family portfolio consisted of 86% mortgage-backed securities rated 'AAA' with a Stable Outlook, which is the prime reason for the Outlook revision.

STRONG ASSET-TO-DEBT RATIO: The program has a current asset parity ratio of over 110% based on consolidated cash flows.

STATE HOUSING PRESSURES: Florida remains one of the states with the highest mortgage delinquency rates in the U.S.; however, the single-family whole loan portfolio performs close to the state and national average in comparison to mortgage delinquencies of 30-year fixed rate FHA loans.

HIGHLY SEASONED LOANS: All of the loans in the whole loan portfolio have passed the peak foreclosure phase, and additionally the whole loans are seasoned by more than 10 years.

POTENTIAL CHANGE OF PORTFOLIO: FHFC has the ability to add to the whole loan portion of the portfolio, which would increase the credit risk within the single-family program. The FHFC has not added any whole loans since 2002.

RATING SENSITIVITIES

MBS TO BONDS RATIO: If the amount of MBS in the indenture exceeds the amount of bonds outstanding based on the release of future audited financial statements, Fitch may take positive rating action.

CREDIT PROFILE

The single-family program exhibits sufficient over collateralization. This over-collateralization is evidenced by the current Fitch adjusted asset parity level of over 106%. The most current consolidated cash flows run in August 2013, illustrate a minimum asset parity ratio of 110% under all prepayment stress scenarios prior to the application of Fitch loan loss assumptions.

In addition to MBS and whole loans, the program has multiple reserve accounts invested primarily in the Florida state treasury fund. The FHFC maintains the ability to remove funds from the program if the asset parity requirement of 102% is met.

Mortgage-backed securities in the form of Ginnie Mae, Fannie Mae, and Freddie Mac securities are all backed by the U.S. government and these MBS loans make up 86% of the asset portfolio that supports this rating. The current U.S. government rating is 'AAA' with a Stable Outlook.

Credit concerns are related to FHFC's ability to add whole loans to the portfolio and the potential for losses on the current whole loan portfolio. These concerns are mitigated by the fact that the last whole loan origination was in 2002, and therefore almost all whole loans have passed the peak foreclosure phase. Additionally, a majority of the whole loans are insured. The whole loans are becoming a greater percentage of the total assets in the Indenture as the MBS are prepaying faster than the whole loans.

Additional information is available at 'www.fitchratings.com'

Applicable Criteria and Related Research:

--'Revenue-Supported Rating Criteria' (June 2013);

--'Single-Family Mortgage Program Rating Criteria' (July 2013).

Applicable Criteria and Related Research:

Revenue-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=709499

State Housing Finance Agencies: Single-Family Mortgage Program Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=712476

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=825273

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Contact:
Fitch Ratings
Primary Analyst
Charles Giordano, +1 212-908-0607
Senior Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Ryan Pami, +1 212-908-0803
Analyst
or
Committee Chairperson
Maura McGuigan, +1 212-908-0591
Senior Director
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

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