Fitch Rates Maryland CDA's Housing Revenue Bonds 2014 Series D 'AA+'; Outlook Stable

NEW YORK--()--Fitch Ratings assigns a long-term rating to the following Maryland Community Development Administration (Maryland CDA or MCDA) housing revenue bonds:

--$10.1 million housing revenue bonds, 2014 series D 'AA+'.

In addition, Fitch affirms approximately $262.4 million of Maryland CDA housing revenue bonds at 'AA+' (see full list below) out of the approximately $269 million (at June 30, 2014) of total parity debt outstanding under the Nov. 1, 1996 general bond resolution. The difference between the outstanding bond amount and the total debt outstanding under the resolution reflects the fact that Fitch did not start rating the indenture until 2004.

The Rating Outlook is Stable.

SECURITY

The trust indenture pledges all the mortgages in the loan portfolio consisting of multifamily, single-family and group homes as well as the funds pledged under the legal provisions of the resolution.

KEY RATING DRIVERS

PORTFOLIO LARGELY GUARANTEED OR PARTIALLY INSURED: As of June 30, 2014, approximately 96% of the multi-family portfolio is fully or partially guaranteed by the following entities: Ginnie Mae, Fannie Mae and Freddie Mac, or FHA Risk-Share.

SUFFICIENT OVER-COLLATERALIZATION: On a cash flow basis, the assets under the resolution show a minimum asset parity ratio of 108.4%, although Maryland CDA has the right to withdraw excess assets. However, by practice, Maryland CDA continues to leave sufficient over-collateralization in the indenture.

CAPABLE MANAGEMENT OVERSIGHT: Maryland CDA has demonstrated strong programmatic oversight capabilities and has had a long successful history of administering multifamily programs.

INDENTURE CONSIDERATIONS: The rating is constrained to its current level because the issuer has the ability to withdraw excess assets and to include various types of loans other than first lien mortgages.

RATING SENSITIVITIES

REMOVAL OF ASSETS: Credit risks to the housing revenue bond portfolio are remote given its federally insured portfolio and strong over-collateralization. This over-collateralization mitigates risks from its loan portfolio. However, removal of assets may present negative rating pressure.

CREDIT PROFILE

The 2014 series D bonds are the 51st series of bonds to be sold under a general bond resolution adopted on Nov. 1, 1996 and are on parity with all bonds issued previously under the indenture. The $10.1 million 2014 series D bonds will be used to finance, in part, two developments known as Fairbrooke Senior Apartments and Park View at Ellicott City, both with credit enhancement under the FHA Risk-Sharing program providing a 75/25 split on the risk of the projects.

The portfolio consists mainly of 52 multifamily residential developments which, as of June 30, 2014, had an aggregate outstanding mortgage balance of $256.5 million. Additionally, the portfolio consists of single-family residences and group homes which account for $8.2 million (3% of the portfolio) in loans. As of June 30, 2014, 96% of the portfolio was guaranteed by a governmental entity such as: Ginnie Mae (57%), Fannie Mae (4%), Freddie Mac (1%), and insured under the FHA Risk-Sharing insurance program (34%).

Going forward, management expects all new projects will incorporate a 75/25 split under the FHA risk-share program. In addition, the Maryland Housing Fund (MHF) insures 2% of the loan portfolio while 0.7% remains uninsured. In addition to the 2% covered by MHF, the MHF is backing the risk-share amount that is not covered by HUD's risk-share program, totaling approximately $40 million at Sept. 30, 2014.

Slightly less than 43% of the multifamily units in the portfolio receive rental assistance payments under Section 8 of the U.S. Housing Act of 1937, U.S. Department of Agriculture subsidy or interest-rate subsidies under Section 236 of the National Housing Act. The remaining 57% of the units do not receive rental or interest-rate subsidies.

Credit concerns are related to the bond resolution allowing various types of loans including uninsured and second lien mortgages. These concerns are mitigated by the current loan portfolio being 96% guaranteed or insured by a U.S. government entity, management demonstrating strong programmatic oversight, and the consistent financial performance of the portfolio.

Fitch has affirmed the following ratings:

--MCDA Housing Revenue Bonds, 2005 Series A at 'AA+';

--MCDA Housing Revenue Bonds, 2006 Series C, & D at 'AA+';

--MCDA Housing Revenue Bonds, 2007 Series A, B, & C at 'AA+';

--MCDA Housing Revenue Bonds, 2008 Series A, B, C, & D at 'AA+';

--MCDA Housing Revenue Bonds, 2009 Series A at 'AA+';

--MCDA Housing Revenue Bonds, 2012 Series A, B, & D at 'AA+;

--MCDA Housing Revenue Bonds, 2013 Series A, B, C, D, E and F at 'AA+

--MCDA Housing Revenue Bonds, 2014 Series A, B & C at 'AA+'.

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

Applicable Criteria and Related Research:

--'Rating Criteria for Pooled Multifamily Housing Bonds' (Dec. 12, 2013);

--'Revenue-Supported Rating Criteria' (June 16, 2014).

Applicable Criteria and Related Research:

Revenue-Supported Rating Criteria

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

Rating Criteria for Pooled Multifamily Housing Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=725076

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=935135

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Contacts

Fitch Ratings
Primary Analyst
Charles Giordano, 1-212-908-0607
Senior Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Ryan J. Pami, 1-212-908-0803
Analyst
or
Committee Chairperson
Joseph Staffa, 1-212-908-0829
Senior Director
or
Media Relations, New York
Elizabeth Fogerty, 1-212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Charles Giordano, 1-212-908-0607
Senior Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Ryan J. Pami, 1-212-908-0803
Analyst
or
Committee Chairperson
Joseph Staffa, 1-212-908-0829
Senior Director
or
Media Relations, New York
Elizabeth Fogerty, 1-212-908-0526
elizabeth.fogerty@fitchratings.com