NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned an 'AA' rating to the following Vermont Housing Finance Agency (VHFA) bonds:
--$10.63 million VHFA multiple purpose bonds 2015 series F;
--$15.365 million VHFA multiple purpose bonds 2015 series G.
Additionally, Fitch has affirmed the ratings on approximately $209 million in parity debt (see full list at the end of this release).
The Rating Outlook on all bonds is Stable.
SECURITY
The bonds are general obligations of the agency and are secured by single-family mortgages, portions of multi-family loans, mortgage-backed securities (MBS), and certain cash and investments held under the resolution. The multiple purpose bond program rating does not rely on the general obligation pledge to maintain the 'AA' rating currently assigned to the bonds.
KEY RATING DRIVERS
STRONG PROGRAM OVERCOLLATERALIZATION: As of FY 2014, the program had 127.6% asset parity level which is sufficient to support the 'AA' rating. Additionally, Fitch-stressed cash flows illustrate adequate asset parity for the rating.
MODERATELY SOUND PORTFOLIO PERFORMANCE: The portfolio's performance is currently adequate for single family loans and strong for multifamily loans; mitigating the potential for losses to the program. Additionally, actual loan losses for this program have been minimal (approximately 1% of bonds outstanding) since program inception in 2007.
INDENTURE PROVISIONS: The supplemental indentures allow for program funds to be withdrawn down to 102% asset parity. Additionally, the master indenture allows for a variety of loan types which could lead to changes in program asset composition.
RATING SENSITIVITIES
WITHDRAWAL OF ASSETS: Withdrawing of program funds to the legal requirement of 102% would put negative pressure on the rating and may result in a negative rating action.
CHANGES IN PORTFOLIO COMPOSITION: Any changes to the portfolio composition could put pressure (negative or positive) on the rating.
LOAN PERFORMANCE: If loan performance deteriorates beyond current Fitch stressed loss assumptions, there may be negative pressure on the rating.
CREDIT PROFILE
The 2015 series F and G bonds are expected to be used to refund outstanding obligations previously issued under a separate single-family indenture (rated 'A+'; Stable by Fitch) and to finance the purchase of mortgage-backed security certificates. In conjunction with the refunding of previously issued debt obligations, the mortgage loans and certificates securing the refunded bonds will be transferred to this indenture.
As of June 30, 2015, the multiple purpose portfolio consisted of: 61.7% single-family whole loans, 25.7% MBS certificates, and 12.6% multi-family loans. The single-family whole loan portion of the portfolio contains: 46.1% uninsured (with an 80% LTV or less), 38.7% privately insured (primarily by Mortgage Guaranty Insurance Corporation), and 15.2% federally insured (FHA/VA/RD). Approximately 6.1% of the single-family loans are delinquent (60+ days) and actual losses in the program have been minimal since inception in 2007.
The multi-family housing loans, which have an outstanding mortgage balance of $25.1 million, are associated with elderly and family developments diversified throughout the state of Vermont. The loans are made up of 24 separate multi-family developments consisting of 845 units. Seventeen of the twenty-four developments are either partially or fully subsidized under Section 8. Currently, there are no delinquencies in the multi-family portfolio.
In addition to the single-family whole loans, the multi-family loans, and the MBS certificates, the program has approximately $42.7 million in cash and investments which are primarily invested in highly-rated securities. As of FY 2014, the program demonstrated an asset parity position of 127.6%. Under Fitch stress scenarios which include interest rate stresses, bank bond runs, and single-family whole loan loss assumptions, the program demonstrated a minimum of 121.6% asset parity (starting November 2015) for the life of the bonds. This level of overcollateralization is sufficient to support the 'AA' rating on the program given the current composition of the portfolio. Fitch's ongoing credit analysis will be driven by the indenture's actual asset parity position, portfolio composition and performance, financial results, and cash flow strength.
Fitch has also affirmed the following VHFA multiple purpose bonds at 'AA':
--$17.1 million series 2007 A;
--$20.6 million series 2007 C;
--$12.4 million series 2008 C;
--$2.6 million,series 2012 A;
--$31.9 million series 2012 B;
--$11.8 million series 2012 C;
--$5.8 million series 2013 A;
--$8.7 million series 2013 B;
--$14.4 million series 2013 C;
--$25.8 million series 2014 A;
--$20.0 million series 2014 B;
--$0.6 million series 2015 A;
--$20.8 million series 2015 B;
--$4.3 million series 2015 C;
--$8.6 million series 2015 D;
--$3.9 million series 2015 E.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria
Rating Criteria for Pooled Multifamily Housing Bonds (pub. 16 Dec 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=829968
Revenue-Supported Rating Criteria (pub. 16 Jun 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750012
State Housing Financing Agencies: Single Family Housing Criteria (pub. 01 Jul 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867779
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=989280
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=989280
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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.