Fitch Upgrades 27 MF Project Bonds Supported by FL Hsg Guarantee Fund to 'A+'; Outlook Stable

NEW YORK--()--Fitch Ratings has upgraded 27 multi-family (MF) project bonds supported by Florida Housing Finance Corporation's affordable housing guarantee fund (the fund; GF) to 'A+' from 'A-'. The Rating Outlook is Stable.

A full list of bonds is included at the end of this press release.

SECURITY

Each multifamily housing bond is secured by an individual project mortgage. The mortgages are all insured by the GF and upon the event of a mortgage default and subsequent timely filing of an insurance claim with the GF, the claim payment is provided to the trustee. A portion of the mortgages are additionally insured under the U.S. Department of Housing and Urban Development (HUD) Risk Sharing program whereby HUD and the GF are each responsible for half of the final claim amount.

The bonds are also secured by the individual trust indentures' available assets, including funds in the debt service reserve and bond funds, which, when combined with the mortgage proceeds, provide adequate amounts to redeem the respective bonds in full and pay accrued interest under all scenarios in a mortgage default.

KEY RATING DRIVERS

GUARANTEE FUND RATING: The bonds' ratings and outlook primarily reflect the rating of the Guarantee Fund (currently rated 'A+', Stable Outlook by Fitch) given that the GF insures the project mortgage amounts. (For more information on the GF rating, see Fitch's press release dated May 22, 2014 available at www.fitchratings.com).

SECURITY PROVISIONS: The bonds' ratings also take into account that: (1) the trust indentures for each bond series provide detailed instructions for the timely filing of insurance claims; and (2) that the insurance policies are still in force for each mortgage.

SUFFICIENT LIQUIDITY: Fitch verifies that there is sufficient liquidity to cover missed mortgage payments by reviewing the debt service reserve funds for each bond series. The debt service reserve funds are invested in guaranteed investment contracts (GICs), money market funds, or surety policies and all are currently fully funded.

ASSET PARITY RATIO: A review of the respective asset/liability parity ratios for each transaction demonstrated sufficient overcollateralization to fully redeem bonds in the event of a mortgage default.

RATING SENSITIVITIES

GUARANTEE FUND DOWNGRADE: A downgrade of the GF rating would cause a corresponding downgrade of all the bonds' ratings.

DEBT SERVICE RESERVE DEPLETION: If a debt service reserve fund were tapped and not replenished for a particular bond series, there could be a negative rating action on that individual bond rating.

FUTURE TRANSACTION MODIFICATION: Any modifications to a transaction that would render available assets insufficient to cover the bond amount in a default scenario could negatively impact that rating.

RATING CRITERIA

The main driver for the rating of a single-asset multifamily transaction with a mortgage guarantee is the rating of the mortgage insurance provider. For more information about how Fitch assesses the creditworthiness of the GF, see 'Fitch Upgrades Florida Housing Finance Corp's Guarantee Fund to 'A+'; Outlook Stable,' dated May 22, 2014, available at www.fitchratings.com. The other primary components of the analysis are: a structural review of the insurance provisions at the time of origination; a review of the cash flows to determine the sufficiency of liquidity to pay debt service throughout the term of the bonds; and an asset parity review to confirm that available assets would exceed bond liabilities at all times over the life of the bonds in the case of a default.

At the time of origination, Fitch reviews the structural provisions in the bond documents regarding timely filing of insurance claims and the length of time to receipt of claims. There is a lag between the time a borrower fails to make a monthly mortgage payment and the time that insurance proceeds are obtained. Fitch reviews the cash flows to ensure that in a mortgage default scenario, the timing of the claims payment follows the indenture provisions and sufficient funds are available to cover missed mortgage payments as well as accrued interest expenses, or in the case of a HUD Risk-Sharing deal, the differential between the mortgage and debenture interest rates. From a surveillance perspective, Fitch verifies that the insurance policies are still in force for each series of bonds and in doing so relies upon representation from the fund. Fitch also reviews the management team's experience and any past history with submitting claim payments.

Fitch's liquidity analysis includes a review of the cash flows at the time of origination to ensure that the combination of mortgage payments and investment income is sufficient to make full and timely debt service payments throughout the term of the bonds. Transactions are typically structured with a minimum of a six-month debt service reserve fund that is available to be tapped to pay debt service due to a delinquent mortgage payment or during the claim payment process. As part of the liquidity analysis, Fitch reviews the sufficiency of debt service reserve funding and the credit quality of the providers. (For more information on the minimum provider rating guidelines, see the report, 'Counterparty Criteria for Structured Finance and Covered Bonds' dated May 14, 2014, available at www.fitchratings.com)

Finally, given that only the mortgage payment (not bond payment) is insured, Fitch reviews the transaction's asset parity to ensure that there is sufficient coverage (from the trust indenture assets combined with the mortgage proceeds) to redeem bonds and cover any payments resulting from timing lags in the claim payment process. The asset parity ratio is calculated by dividing the dollar amount of total program pledged assets (which includes the multifamily mortgage and amounts on deposit in reserves) by the total amount of bonds outstanding. The debt service reserve funds are an important component of the asset parity review given that these funds can be used to redeem bonds if mortgage proceeds are not sufficient to make full payment on the bonds. If there is a loan modification or structural change from the original transaction during the term of the bonds, Fitch reviews revised cash flows and/or trust statements to determine whether there will be sufficient asset parity post-restructuring and may take rating action if there is an insufficiency.

CREDIT PROFILE

Fitch rates 27 of the 37 outstanding bonds with multifamily project mortgages guaranteed by the GF. In addition to the GF insurance, a portion of the mortgages are also guaranteed under HUD's Risk Sharing program. Of the 27 Fitch-rated deals, 16 are HUD Risk Sharing transactions. According to the HUD Risk Sharing agreement, HUD assumes 50% of the GF's post-construction mortgage obligation. However, since the Guarantee Fund has to ensure that a claim payment is submitted for reimbursement to HUD upon a mortgage default, Fitch views the credit risk as that of the GF and does not make a rating distinction between the Risk Sharing and Non-Risk Sharing transactions. The Guarantee Fund has an experienced management team in place and the claim payments related to the eight projects that have defaulted during the history of the GF were all submitted in a timely manner so as to provide full payment to bondholders.

As part of the surveillance review, Fitch confirmed that the insurance policies are in place on all 27 series of bonds. Given the importance of the debt service reserve funds from a liquidity and asset parity perspective, as part of the surveillance process, Fitch confirmed that the debt service reserve funds supporting the 27 bonds listed below are currently fully funded and are invested with providers and surety policies sufficient to support the rating.

Also, as part of the surveillance review, Fitch assesses the asset parity to determine whether, in a default scenario, each transaction has sufficient assets to cover payment on the respective bonds. The asset parity ratio is calculated by dividing the dollar amount of total program pledged assets (which includes the guaranteed mortgage and amounts on deposit in the debt service reserve fund) by the total amount of bonds outstanding. For each series of bonds, Fitch verified that the mortgage amount covered by the guarantee combined with debt service reserve funds is sufficient to cover full payment on the respective bonds as well as any payments resulting from timing lags in the claim payment process. For the 27 bond ratings being affirmed, the mortgage amount and debt service reserve funds provide coverage of 102% or greater over the bond amount.

Fitch has upgraded the rating to 'A+' from 'A-' on the following series of bonds:

--$12,875,000 Broward County Housing Finance Authority (FL) (Harbour Cove Apartments) multi-family hsg rev bonds ser 2003;

--$10,580,000 Broward County Housing Finance Authority (FL) (Pembroke Villas Project) multifamily hsg rev bonds ser 2001A;

--$9,335,000 Broward County Housing Finance Authority (FL) (Venice Homes Apartment Project) multi-family hsg rev bonds ser 2001A&B;

--$8,685,000 Florida Housing Finance Corp. (FL) (Andrews Place Apartments) multi-family hsg rev bonds ser 2003M;

--$12,795,000 Florida Housing Finance Corp. (FL) (Bristol Bay Apartments) multifamily mtge rev bonds ser 2003T;

--$11,700,000 Florida Housing Finance Corp. (FL) (Clipper Bay Apartments) multifamily mtge rev bonds ser 2004D;

--$9,605,000 Florida Housing Finance Corp. (FL) (Garfield Place Apartments) multifamily mtge rev bonds ser 2004A;

--$10,695,000 Florida Housing Finance Corp. (FL) (Peacock Run Apartments) multifamily mortgage revenue bonds series 2002 H-1 & H-2;

--$16,790,000 Florida Housing Finance Corp. (FL) (Tuscan Isle Project) multifamily mtge rev bonds ser 2002O-1&O-2;

--$14,665,000 Florida Housing Finance Corp. (FL) (Venetian Isles Project) hsg rev bonds ser 2002D-1&D-2;

--$4,170,000 Florida Housing Finance Corp. (FL) (The Villas at Lake Smart) multifamily mortgage revenue bonds series 2002 P-1;

--$7,545,000 Florida Housing Finance Corp. (FL) (Westwood Apartments) housing revenue bonds series 2001 A-1 & A-2;

--$6,055,000 Florida Housing Finance Corp. (FL) (Woods of Vero Beach Apartments Project) hsg rev bonds ser 1999N-1;

--$5,760,000 Lee County Housing Finance Authority (FL) (Andros Isle Apartments Project) multifamily housing revenue bonds series 2001 A & B;

--$12,125,000 Miami-Dade County Housing Finance Authority (FL) (Alhambra Cove Apartments) multifamily mtge rev bonds ser 2003-4A;

--$6,235,000 Miami-Dade County Housing Finance Authority (FL) (Captiva Club Apartments) multifamily hsg rev bonds ser 2002-2A;

--$8,155,000 Miami-Dade County Housing Finance Authority (FL) (Country Club Villas Apartments Project) multifamily mtge rev bonds ser 1999A;

--$11,255,000 Miami-Dade County Housing Finance Authority (FL) (Golden Lakes Apartments Project) multi-family mtge rev bonds ser 1997 cls A&B;

--$15,490,000 Miami-Dade County Housing Finance Authority (FL) (Marbrisa Apartments Project) multifamily mtge rev bonds ser 2000-2A&2B;

--$7,395,000 Miami-Dade County Housing Finance Authority (FL) (Villa Esperanza Apartments Project) multifamily mtge rev bonds ser 1998;

--$8,815,000 Palm Beach County Housing Finance Authority (FL) (Colony Park Apartments Project) multifamily hsg rev bonds ser 2001A;

--$18,445,000 Palm Beach County Housing Finance Authority (FL) (Malibu Bay Apartments) multifamily mtge rev bonds ser 2003A&B;

--$7,615,000 Palm Beach County Housing Finance Authority (FL) (Westlake Apartments Proj, Phase II) multifamily hsg rev bonds ser 2002;

--$7,720,000 Pasco County Housing Finance Authority (FL) (Pasco Woods Apartments Project) multifamily hsg rev bonds ser 1999A;

--$9,030,000 Polk County Housing Finance Authority (FL) (Wilmington Apartments Project) multifamily hsg rev bonds ser 2002A;

--$9,310,000 St. Johns County Housing Finance Authority (FL) (Whispering Woods Apartments) multifamily mtge rev bonds ser 2002;

--$8,700,000 Volusia County Housing Finance Authority (FL) (Carolina Club Apartments) multifamily mtge rev bonds ser 2001A&B.

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

Applicable Criteria and Related Research:

'Revenue-Supported Rating Criteria' - June 16, 2014

'Counterparty Criteria for Structured Finance and Covered Bonds' - May 14, 2014

Applicable Criteria and Related Research:

Revenue-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750012

Counterparty Criteria for Structured Finance and Covered Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=838778

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Primary Analyst
Kasia Reed
Analytical Consultant
+1-212-908-0500
Fitch Ratings, Inc.
33 Whitehall St
New York, NY 10004
or
Secondary Analyst
Ryan Pami
Analyst
+1-212-908-0803
or
Committee Chairperson
Maura McGuigan
Senior Director
+1-212-908-0591
or
Media Relations
Elizabeth Fogerty, New York, +1 212-908 0526
elizabeth.fogerty@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst
Kasia Reed
Analytical Consultant
+1-212-908-0500
Fitch Ratings, Inc.
33 Whitehall St
New York, NY 10004
or
Secondary Analyst
Ryan Pami
Analyst
+1-212-908-0803
or
Committee Chairperson
Maura McGuigan
Senior Director
+1-212-908-0591
or
Media Relations
Elizabeth Fogerty, New York, +1 212-908 0526
elizabeth.fogerty@fitchratings.com