NEW YORK--()--Fitch Ratings affirms the following ratings assigned to the $278.1 million outstanding Utah Housing Corporation's (UHC, or the corporation) single-family mortgage bonds (2009 Indenture) as follows:
--$241 million 2009 C, 2010 A, 2010 B and 2011 A bonds (Class I) at
--$22.6 million 2009 C, 2010 A, 2010 B and 2011 A bonds (Class II) at 'AA';
--$14.2 million 2009 C, 2010 A, 2010 B and 2011 A bonds (Class III) at 'AA-';
In addition, Fitch affirms the 'AA-' rating on all of the UHC general (GO) obligation bonds which are currently outstanding. As of June 30, 2012, UHC had $113.5 million in Class III bonds which are backed by its GO pledge issued under various indentures.
The Rating Outlook for the bonds is Stable.
KEY RATING DRIVERS:
STRONG MORTGAGE INSURANCE: Currently 99% of the loan portfolio consists of FHA-insured loans, limiting potential loss exposure; however, there is limited financial performance information for this relatively new indenture and the underlying loan portfolio primarily consists of unseasoned loans.
The remaining 1% of the loans is VA guaranteed.
SOUND ASSET PARITY: Asset parity maintenance requirements provide added credit enhancement to the Class I and II bonds as the bonds have minimum asset requirements of 111.5% and 102%, respectively.
POTENTIAL GENERAL FUND RELIANCE: Cash flow stresses indicate reliance on the general fund to pay debt service on the Class III bonds, which is in addition to other Class III bonds outstanding in other indentures. Additionally, upon maturity of the Class III bonds in 2025, exposure of the Class II bonds to unanticipated program losses that surpass available excess funds may put pressure on UHC's credit profile.
FIXED-RATE BONDS: the bonds in this indenture are all fixed rate and there is no variable-rate risk in this bond program.
The bonds are secured by all assets and revenue under the trust indenture, investment earnings and reserve funds. While payments of interest and principal at maturity for the Class III subordinate bonds are secured by a GO pledge of the issuer's general revenues or assets, the subordinate bonds are also secured by the assets and revenues of the trust estate on a subordinate basis to Class I and II bondholders.
The 'AAA' and 'AA' ratings on the Class I and II bonds reflect the credit quality of the trust estate's collateral, the adequacy of projected revenues to pay debt service, and the credit enhancement provided by debt subordination underlying the Class I and II bonds. In addition, the Class I and II bonds have minimum asset requirements of 111.5% and 102% (net of loan loss assumptions) respectively, directing revenues to be used to call bonds of that class prior to paying debt service of the next junior class.
While the Class III bonds are secured by the assets and revenues of the trust indenture, the rating reflects the 'AA-' rating assigned to the creditworthiness of the corporation's GO pledge. The GO rating is based on favorable overall financial and portfolio performances, a moderate debt-to-equity ratio when compared with other state housing finance agencies, and management's expertise in carrying out the corporation's public purpose mandate while protecting its long-term credit quality.
The corporation's fiscal 2012 combined funds debt-to-equity and adjusted debt-to-equity ratios decreased from fiscal 2011 amounts. The adjusted ratio decreased to 5.8x in fiscal 2012 from 7.6x in fiscal 2011; the median 2011 average for state housing finance agencies as a group was 5.1x. UHC's financial performance improved in 2011 and 2012 from 2010 and 2009 when net operating revenues as a percentage of total revenues on a combined fund basis was 5.4% and 6.3%, up from 0.6% and 2.8%, respectively. Net interest spread remained sound as well at 8.3% in fiscal 2012 and 13.1% in fiscal 2011. UHC has GO bonds outstanding in the amount of $105 million as of July 2012. UHC currently reports that it has net assets available for its GO obligations in the amount of approximately $62.5 million.
There are 1,857 loans originated as of Sept. 30, 2012 under this indenture totaling $261.3 million in outstanding mortgages. Currently 99% of the loan portfolio consists of FHA-insured loans and the remaining 1% of the loans is VA guaranteed. The FHA insures loans for the full principal amount outstanding, delinquent interest payments, and certain property foreclosure and disposition costs.
The delinquency rates for UHC loans have historically been below state and national figures. As of Sept. 30, 2012, UHC's 2009 Indenture had loans delinquent by two or more payments at 4.52%. This is below the 6.22% of FHA fixed-rate loans in the state and 6.18% of FHA fixed-rate loans in the U.S. with two or more delinquent payments at Sept. 30, 2012. The programs in foreclosure ratio of 1.45% also compared favorably to loans in foreclosure in both the state at 1.98% and in the U.S. at 4.08%.
Additional information is available at www.fitchratings.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Revenue-Supported Rating Criteria', June 12, 2012;
--'State Housing Finance Agencies General Obligation Rating Criteria', March 28, 2012;
--'State Housing Finance Agencies - Single-Family Mortgage Program Rating Criteria', Aug. 6, 2012.
Applicable Criteria and Related Research:
State Housing Finance Agencies: Single-Family Mortgage Program Rating Criteria
State Housing Finance Agencies General Obligation Rating Criteria
Revenue-Supported Rating Criteria