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State of New York Mortgage Agency -- Moody's assigns Aa1/VMIG 1 ratings to SONYMA's Homeowner Mort. Rev. Bonds, Series 249; outlook stable

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Rating Action: Moody's assigns Aa1/VMIG 1 ratings to SONYMA's Homeowner Mort. Rev. Bonds, Series 249; outlook stableGlobal Credit Research - 29 Aug 2022New York, August 29, 2022 -- Moody's Investors Service (Moody's) has assigned an Aa1/VMIG 1 ratings to the proposed State of New York Mortgage Agency's (the "Agency") $18,310,000 Homeowner Mortgage Revenue Bonds (Social Bonds), Variable Rate Bonds, Series 249 (AMT) (the "Bonds"). The outlook is stable.The Bonds will be issued under the Agency's Homeowner Mortgage Revenue Bonds (HMRB) General Resolution (the "Resolution"), adopted on September 10, 1987, as amended, restated and supplemented. Moody's also maintains an Aa1 rating on all parity debt issued and outstanding under the Resolution, including the Series 246, Series 247 and Series 248 rated on August 4, whose amounts have been revised as follows:Homeowner Mortgage Revenue Bonds (Social Bonds) Series 246 (Non-AMT) to $77,030,000 from $107,415,000.Homeowner Mortgage Revenue Bonds (Social Bonds) Series 247 (Non-AMT) to $79,035,000 from $48,500,000.Homeowner Mortgage Revenue Bonds (Social Bonds) Series 248 (AMT) to $17,290,000 from $35,600,000.RATINGS RATIONALEThe Aa1 rating reflects the Resolution's strong balance sheet, evidenced by a healthy program asset-to-debt ratio and adequate single digit margins, though below the sector's median. The rating is also supported by cash flow projections that show full and timely payment of debt service, and a long standing history of successful oversight practices that support credit stability going forward.The loan portfolio's performance and composition remains sound. COVID-19 pandemic driven increase in forbearance and delinquency rates has been trending down. Additionally, the Agency losses from the increase were limited, helped by mortgage insurance and pool insurance coverage.The VMIG 1 short term rating is based on Moody's Aa1 long-term rating on the parity bonds under the HMRB program as well as the counterparty risk assessment of the standby bond purchase agreement provided by TD Bank, N.A. (the "Bank") and the Bank's obligation under the standby bond purchase agreement (SBPA) to purchase the VRDOs upon optional or mandatory tender in the event of a failed remarketing or certain other events.RATING OUTLOOKThe outlook is stable based on ongoing transition out of COVID-19 related forbearance and our expectation that the Agency will continue to maintain strong balance sheet and liquidity position of the Resolution. FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGSFor the short term rating: N/AFor the long term rating: A significant and sustained increase in the Resolution's financial metrics, including asset-to-debt ratio and margins, coupled with maintenance of sound loan portfolio performance.FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGSFor the short term rating: Downgrade of the long term rating of the HMRB program or downgrade of the SBPA counterparty's risk assessment.For the long term rating: A substantial weakening in the financial position of the Resolution, demonstrated by a drop in asset-to-debt ratio or erosion of margins; orA significant deterioration in the credit quality of credit support providers with a material amount of exposure, such as the Agency's Mortgage Insurance Fund Project Pool Insurance Account (Aa1 stable)LEGAL SECURITYThe Bonds are obligations of the Agency secured and payable from unused bonds proceeds, mortgage loan payments and prepayments, and other moneys pledged under the Resolution, including the Debt Service Reserve Fund and the Loan Loss Fund equal to 3% and 1% of the combined outstanding mortgage loans and acquisition fund, respectively. As of April 30, 2022, the respective amortized values of these reserves were approximately $83 million and $27 million. The Agency has no taxing power.Variable Rate:The Bonds will bear interest at the weekly rate mode and interest shall be paid on the first day of each April and October. The Agency may elect to change the interest rate mode from the current rate mode to a different period, on either series of bonds, in which interest is determined on a daily, monthly, quarterly, semiannual or flexible, fixed or index rate basis. Upon any such mode change, the applicable bonds are subject to mandatory tender.The VMIG 1 rating reflects the SBPA and expires upon the earliest of to occur of (i) the mandatory tender date resulting from the expiration of the SBPA, (ii) conversion of the Bonds to an uncovered mode, or (iii) earlier termination of the SBPA.The SBPA provides for purchase by the liquidity provider of bonds that are tendered by bondholders and cannot be remarketed. Under certain circumstances the liquidity provider can terminate its respective SBPA or suspend its obligations without notice and will therefore not be obligated to provide funds. These circumstances include any of the following: (1) any principal of or interest on any bond (including bonds purchased by the liquidity provider) is not paid when due; (2) certain acts of bankruptcy or insolvency by or involving the Agency; (3) provisions relating to the payment of principal or interest under the SBPA, bond resolutions, series certificate, the bonds, or the authorizing statute are declared invalid by a court or other competent authority, or (4) the rating on the Bonds falls below Baa3. Other events of termination become effective only after the Liquidity Provider provides sufficient notice to allow for a mandatory tender of applicable bonds before any termination date of the SBPA.USE OF PROCEEDSThe proceeds of the Bonds will be used to purchase mortgage loans, finance second lien down-payment assistance loans that funds mortgage loans generally to first time home buyers, refund certain outstanding bonds under the Resolution, and pay costs of issuance.PROFILEThe Homeowner Mortgage Revenue Bonds Resolution was established in 1987 in furtherance of the Agency's core mission of providing and promoting affordable housing for low-to moderate income persons in the State of New York. The Agency accomplishes this mission by issuing tax exempt and taxable bonds to provide low-interest fixed rate mortgages, closing cost and down payment assistance to eligible home buyers, including first-time home buyers.METHODOLOGYThe principal methodology used in the long-term rating was US Housing Finance Agency Single-Family Housing Methodology published in October 2019 and available at https://ratings.moodys.com/api/rmc-documents/62560. The principal methodology used in the short-term rating was Variable Rate Instruments Supported by Conditional Liquidity Facilities published in March 2017 and available at https://ratings.moodys.com/api/rmc-documents/68283. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of these methodologies.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the issuer/deal page for the respective issuer on https://ratings.moodys.com.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. 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Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on https://ratings.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on https://ratings.moodys.com.Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating. 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