Fitch Affirms TFOVIE 12U Rating at 'A-sf'; Outlook Stable

MONTERREY, Mexico--()--Fitch Ratings has affirmed the 'A-sf' local currency (LC) long-term and 'AAA(mex)vra' national scale long-term ratings assigned to TFOVIE 12U notes. The Rating Outlook is Stable. The transaction is a securitization of a closed pool of mortgage loans denominated in Veces Salario Minimo and originated by Fondo de Vivienda del Instituto de Seguridad y Servicios Sociales de los Trabajadores del Estado (Fovissste) in Mexico.

KEY RATING DRIVERS

The affirmations reflect the transaction's good performance characterized by robust credit protection, adequate asset quality metrics of the underlying securitized mortgage loan portfolio, consistent excess spread, available liquidity and servicing capabilities according to expectations, among other factors.

Credit protection consists of 44.5% overcollateralization (OC) (excluding +90 days delinquent loans). When considering the current cash reserve level, total credit enhancement equals 55.3%. Fitch acknowledges that part of the current cash and cash equivalents balance in the transaction would be released to the equity holder when the transaction hits specified performance triggers in the foreseeable future.

Delinquencies remain low, and the portfolio's loan-to-value (LTV) ratio continues to decrease. As of June 2014, the ratios of +90 days delinquent loans (over the original balance) and +180 days delinquent loans were 4.09% and 2.62%, respectively. Current weighted average LTV is 49.4% which favorably compares to 66.6% at closing date. Moreover, 18.8% of the outstanding collateral pertains to the top three Dependencias (e.g. employers) which favorably compares with other recent RMBS sponsored by Fovissste. Current seasoning is 76 months.

The financial structure of TFOVIE 12U features a single waterfall for collections and payments. Unlike other traditional TFOVIS RMBS, TFOVIE 12U notes have a scheduled target amortization scheme. During the 12 months through June 2014, the net principal payments coverage ratio (on each quarterly payment date) averaged 1.4x. Fitch expects this indicator to be stable in the foreseeable future. TFOVIE 12U's outstanding balance is equivalent to approximately 64.4% of the initial issuance amount.

As of June 2014, excess spread is 1.9%. Currently, residual cash is being directed to a cash reserve account since no cash flows have been released to holders of the residual notes (equity). However, the reserve has a minimum required amount equivalent to the sum of the next two scheduled interest and principal payments that will be held by the trust in case part of such cash reserve is released to the residual holders.

RATING SENSITIVITIES

The Rating Outlook is Stable. A downgrade to the notes' ratings could be triggered by negative trends in OC formation related to sharp increases in delinquencies and/or amortization below the target schedule. In addition, unexpected operational risk at Fovissste (the primary servicer) that leads to cash flows disruptions to the issuing trust could also trigger negative rating actions on both (international and national scale) ratings. The LC long-term rating is sensitive to rating actions on Mexico's sovereign ratings.

Sources of information used to assess these ratings include monthly collection and distribution reports available for the public domain, among other factors.

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

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (May 20, 2014);

--'Rating Criteria for RMBS in Latin America' (Feb. 13, 2014);

--'Criteria for Rating Securitizations in Emerging Markets' (June 18, 2014).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748821

Rating Criteria for RMBS in Latin America

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732815

Criteria for Rating Securitizations in Emerging Markets

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749927

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=841430

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
Rene Ibarra
Senior Director
+52-81-8399-9130
Fitch Mexico S.A. de C.V.
Prolongacion Alfonso Reyes 2612
Col. Del Paseo Residencial
Monterrey, Nuevo Leon
Mexico
or
Secondary Analyst
Andres de la Cuesta
Associate Director
+1-312-606-2330
or
Committee Chairperson
Greg Kabance
Managing Director
+1-312-368-2052
or
Elizabeth Fogerty, New York, Tel: +1 212-908 0526
elizabeth.fogerty@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst
Rene Ibarra
Senior Director
+52-81-8399-9130
Fitch Mexico S.A. de C.V.
Prolongacion Alfonso Reyes 2612
Col. Del Paseo Residencial
Monterrey, Nuevo Leon
Mexico
or
Secondary Analyst
Andres de la Cuesta
Associate Director
+1-312-606-2330
or
Committee Chairperson
Greg Kabance
Managing Director
+1-312-368-2052
or
Elizabeth Fogerty, New York, Tel: +1 212-908 0526
elizabeth.fogerty@fitchratings.com