Fitch Affirms Vermont HFA's 1990 Single Family Housing Bond Resolution at 'A+'

NEW YORK--()--Fitch Ratings affirms the 'A+' rating assigned to $40.3 million outstanding bonds issued under the Vermont Housing Finance Agency (VHFA) 1990 Single Family Mortgage Program Bond Resolution.

The Rating Outlook is Stable.

SECURITY

The bonds are special obligations of VHFA payable solely from the revenues, loans, additional security reserve deposits, and other funds and property pledged as provided in the resolution.

KEY RATING DRIVERS

STRONG ASSET PARITY: As of June 30, 2015, the program had a sound asset parity ratio of 122%.

SEASONED LOAN PORTFOLIO: The loan portfolio consists of seasoned loans originated between 1990 - 2008, with 52% of the portfolio privately insured, 9% insured by Rural Development, 35% uninsured with loan-to-value ratios of 80% or lower at origination, and 4% securitized mortgage-backed securities, minimizing potential loss exposure.

MANAGEMENT OVERSIGHT: Vermont Housing has a successful history of administering its single family programs; total actual losses on the portfolio are low at $9.8 million over a period of 25 fiscal years, which is far less than 1% of total loans originated.

RATING SENSITIVITIES

SUBSTANTIAL INCREASES IN FORECLOSURES: If mortgage loan foreclosures increase significantly and result in increased losses to the program, this could have an adverse effect on the net assets of the program which could result in negative rating action.

CONCENTRATED MORTGAGE INSURANCE EXPOSURE: The program relies on one private mortgage insurance provider for approximately 51% of the whole loans in the portfolio to pay claims if those loans should default. Fitch does not rate the insurance provider and expresses no opinion as to its credit quality. If this insurer fails to pay claims on foreclosed loans it could negatively affect the program's rating.

REMOVAL OF EXCESS FUNDS: Equity can be withdrawn from the indenture but must maintain an asset parity ratio of 101% before funds can be removed per supplemental indentures. Removal of excess funds may impede the program cash flow's ability to absorb assumed loan losses and maintain asset parity ratios that are appropriate for the rating level.

CREDIT PROFILE

The program currently maintains 44% of its outstanding debt as variable-rate demand bonds which are entirely swapped to a synthetic fixed rate. The percentage of variable-rate debt has increased, as the total amount of outstanding bonds has been reduced for this program. All of the liquidity facilities for the variable-rate demand bonds are with one provider, TD Bank (rated 'AA-/F1+') and expire at various dates starting April 2016 through February 2018. VHFA has been successful in securing extensions to existing liquidity facilities at affordable levels as expiration dates have come due. Fitch views this as a positive credit factor, since the reduced liquidity expense affects the program's overall financial position.

Credit concerns about the concentrated whole loan mortgage portfolio with 52% of the loans having private mortgage insurance are mitigated by the excess assets in the resolution and the seasoning of the loans.

The Vermont Housing Finance Agency has a successful history of administering its single family programs. Actual losses on the portfolio are low at $9.8 million (representing 0.001% of loans originated) over the resolution's 25 year history.

Additional information is available at www.fitchratings.com

Applicable Criteria

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=996956

Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=996956

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

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Contacts

Fitch Ratings
Primary Analyst
Charles Giordano
Senior Director
+1-212-908-0607
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Ryan Pami
Associate Director
+1-212-908-0803
or
Committee Chairperson
Maura McGuigan
Senior Director
+1-212-908-0591
or
Media Relations
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Charles Giordano
Senior Director
+1-212-908-0607
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Ryan Pami
Associate Director
+1-212-908-0803
or
Committee Chairperson
Maura McGuigan
Senior Director
+1-212-908-0591
or
Media Relations
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com