Fitch Affirms Higher Education Loan Authority of the State of Missouri, Ser 2009-1; Outlook Stable

NEW YORK--()--Fitch Ratings has affirmed the following:

Higher Education Loan Authority of the State of Missouri, Series 2009-1 (MOHELA 2009-1):

--Class A-2 at 'AAAsf'; Outlook Stable.

KEY RATING DRIVERS

U.S. Sovereign Risk: The trust collateral consists of Federal Family Education Loan Program (FFELP) loans, with guarantees provided by the transaction's eligible guarantors and reinsurance provided by the U.S. Department of Education (ED) for at least 97% of principal and accrued interest. The U.S. sovereign rating is currently 'AAA'/Stable Outlook.

Collateral Performance: Fitch assumes a base case default rate of 17.25% and a 52% default rate under the 'AAA' credit stress scenario. The claim reject rate is assumed to be 0.50% in the base case and 3% in the 'AAA' case. Fitch applies the standard default timing curve, as well as the trailing twelve month constant default rate (CDR) and prepayment levels as assumptions for FFELP loans in its cash flow analysis. The trailing twelve month average levels of deferment, forbearance and IBR are 5.61%, 4.66%, and 6.50%, respectively, which are used as the starting point in cash flow modelling. Subsequent declines or increases are modelled as per criteria. The borrower benefit is assumed to be approximately 0.06%, based on information provided by the sponsor.

Basis and Interest Rate Risk: Fitch applies its standard basis and interest rate stresses to this trust as per the agency's criteria.

Payment Structure: Credit Enhancement (CE) is provided by excess spread and overcollateralization. As of the July 2016 distribution report, total parity is 115.07% (13.10% CE). Liquidity support is provided by a reserve account currently sized at the floor of $290,060, which is 0.15% of the initial pool balance. No excess cash can be released to the issuer; barring the accumulation of carryover administration and servicing fees, any excess cash is used to pay down the outstanding notes.

Maturity Risk: Fitch's SLABS cash flow model indicates that the notes are paid in full on or prior to the legal final maturity dates under the commensurate rating scenario.

Operational Capabilities: Day-to-day servicing is provided by the Higher Education Loan Authority of the State of Missouri (MOHELA), with Pennsylvania Higher Education Assistance Agency (PHEAA) as the backup servicer. Fitch believes both to be acceptable servicers of FFELP student loans.

CRITERIA VARIATION

Under Fitch's criteria 'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria', dated July 26, 2016, Fitch does not address the process by which it gives certain credit to short-term assets in its cash flow analysis, and it is therefore considered a criteria variation.

RATING SENSITIVITIES

Since the FFELP student loan ABS relies on the U.S. government to reimburse defaults, 'AAAsf' FFELP ABS ratings will likely move in tandem with the 'AAA' U.S. sovereign rating. Aside from the U.S. sovereign rating, defaults, basis risk, and loan extension risk account for the majority of the risk embedded in FFELP student loan transactions. Additional defaults, basis shock beyond Fitch's published stresses, lower than expected payment speed, and other factors could result in future downgrades. Likewise, a buildup of CE driven by positive excess spread given favorable basis factor conditions could lead to future upgrades.

THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10

Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 18 Jul 2016)

https://www.fitchratings.com/site/re/884963

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 17 May 2016)

https://www.fitchratings.com/site/re/879815

Criteria for Servicing Continuity Risk in Structured Finance (pub. 17 Dec 2015)

https://www.fitchratings.com/site/re/875586

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)

https://www.fitchratings.com/site/re/883130

Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria (pub. 26 Jul 2016)

https://www.fitchratings.com/site/re/881705

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1010646

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1010646

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
Jeffrey Prackup
Director
+1-212-908-0839
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Secondary Analyst
Robert Lopez
Associate Analyst
+1-646-582-4969
or
Committee Chairperson
Tracy Wan
Senior Director
+1-212-908-9171
or
Media Relations:
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Jeffrey Prackup
Director
+1-212-908-0839
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Secondary Analyst
Robert Lopez
Associate Analyst
+1-646-582-4969
or
Committee Chairperson
Tracy Wan
Senior Director
+1-212-908-9171
or
Media Relations:
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com