Fitch Ratings has revised the long-term rating assigned to the Massachusetts Housing Finance Agency’s (MassHousing) $1 million housing bonds.
The 2003 series F variable rate bonds have been revised to ‘AA-‘ from ‘AAA’ and the agency confirms the ‘F1+’ short-term rating. The revision of the long-term rating and confirmation of the short-term rating are based on the removal of the credit and liquidity facility provided by Fannie Mae and Freddie Mac and its replacement with the issuer’s own self liquidity support, according to a statement.
Fitch also affirms the ‘AA-‘ rating on the $1.5 billion of housing bonds outstanding under the parity resolution as of Dec. 31, 2010. The rating outlook is stable for the 2003 series F bonds and all outstanding MassHousing housing bonds under the general resolution.
The stable outlook reflects the substantial asset parity for the bonds and the historically strong operating performance of MassHousing. The 2003 series F bonds are expected to be remarketed this week.
The ‘AA-‘ rating reflects the sound credit quality of the loan portfolio and the overcollateralization (OC) of the bonds currently at 113 percent asset parity as of June 30, 2009, 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 MassHousing’s strong programmatic oversight capabilities.
The ‘F1+’ short-term rating reflects the availability of highly liquid cash funds to cover the maximum potential demands on the variable-rate demand bonds by a minimum of 1.25 times. MassHousing has more than $1.2 million of cash deposited in the Housing Revenue Bond Purchase Account held specifically for the self liquidity support of the 2003 series F bonds.
The portfolio consists of approximately 371 mortgages on residential developments that were previously financed or anticipated to be financed under the resolution. The aggregate outstanding mortgage balance is approximately $1.5 billion. MassHousing reports that approximately $36 million (representing 0.03 percent of the outstanding mortgage balance) in loans are currently in construction.
Of the 61 percent of the portfolio (by outstanding loan balance) that does not contain insured or guaranteed developments, approximately 87 percent receive federal subsidy payments or receive commonwealth subsidy payments. The remaining 39 percent of the portfolio included the following insured properties: 59 FHA-insured risk-sharing properties, with an aggregate outstanding balance of $441 million; 12 properties, aggregating $58 million, insured by FHA under its regular insurance program; and one development with a balance of $12 million, secured by a Fannie Mae mortgage-backed security (MBS) development.
The portfolio has performed very well since inception and represents some of MassHousing’s best performing loans, according to a statement. Currently, MassHousing reports there are two developments (of the 371), with total outstanding loan balance of $3.5 million, that are experiencing mortgage payment, escrow, or replacement reserve delinquencies.
