Fitch rates Vermont Housing Finance Agency’s $30 million 2010A & 2009A-1 Bonds ‘AAA’

first_imgFitch Ratings has assigned ‘AAA’ ratings to the $30,000,000 Vermont Housing Finance Agency (VHFA) mortgage revenue bonds (Mortgage Backed Securities Program) as follows:–$12,000,000 series 2010A;–$18,000,000 subseries 2009A-1.The Rating Outlook for the bonds is Stable.RATING RATIONALE:–The $18 million 2009A-1 subseries is the first release from the $102 million 2009 A escrow bonds from the December 1, 2009 indenture. The bond proceeds were initially held in an escrow account and secured solely by amounts on deposit in the escrow account and investment earnings from the account;–The $12 million 2010A bonds will be the second offering issued under the December 1, 2009 indenture. The 2010A mortgage revenue bonds are being issued under a mortgage backed securities program that pledges revenues and federal agency certificates as security for the bonds.KEY RATING DRIVERS:Removal of funds from the program below minimum 100% asset parity.SECURITY:Proceeds will be used for the financing of single family mortgage loans in the State of Vermont through the purchase of GNMA Certificates, Fannie Mae Certificates, and Freddie Mac Certificates (collectively Federal Agency Certificates), as well as to make deposits in various funds and accounts. The Trust Indenture pledges revenues of the Indenture, Federal Agency Certificates deposited in the Indenture, and funds and accounts created in the Indenture to secure the bonds (other than the escrow fund where deposits are secured solely for the payment of bonds related to the proceeds in the escrow account).CREDIT SUMMARY:The ‘AAA’ rating reflects the legal document provisions for the single family mortgage program upon the purchase of Federal Agency Certificates. The Trust Indenture requires that, once funds are released from escrow, mortgage loans be pooled and financed through the purchase of guaranteed mortgage pass-through Federal Agency Certificates, which are fully guaranteed for timely payment regardless of the actual performance of underlying loans. GNMA mortgage-backed securities are guaranteed by the U.S. government; Fitch rates Fannie Mae and Freddie Mac mortgage-backed securities ‘AAA’ (see Oct. 9, 2009 press release). The rating also reflects the Trust Indenture requirement that the program’s minimum asset parity be maintained at 100% (net of cash flow stress test scenarios). In addition, the rating accounts for VHFA’s successful history of administering its single family programs. Fitch reviewed the bond documents, stressed cash flow runs, and other pertinent documentation.The 2009 Trust Indenture was created, in part, so that VHFA could take advantage of the New Issue Bond Program (NIBP) established by the United States Treasury with the assistance of Fannie Mae and Freddie Mac. Under the terms of the program, Treasury purchased up to 60% of the Program Bonds sold by state and local housing finance agencies with the remaining 40% to be sold to private investors as Market Bonds. The interest rate for bonds sold to Treasury will be based on the investment earnings of the escrow fund for the pre-conversion period, and for the remainder of the period, will be based on the 10-year Constant Maturity Treasury (CMT) plus a defined spread based on rating category of bond program.Because Treasury’s authority to complete these transactions under the Housing Economic Recovery Act of 2008 was due to expire on Dec. 31, 2009, all NIBP related transactions were to be completed prior to year end. However, the expiration date was extended for one more year and the program now allows issuers to close prior to the Dec. 31, 2011 deadline. The funds remain in escrow until they are converted to long-term bonds, in conjunction with the sale of Market Bonds, over the course of 2010 and 2011. The funds may be held in escrow up until Dec. 31, 2011 and can be drawn upon and converted to long-term bonds during 2010 and 2011.Additional information is available at ‘www.fitchratings.com(link is external)’Applicable criteria and related research:–‘State Housing Finance Agencies – Single Family Mortgage Program Rating Guidelines (Nov. 26, 2008);–‘Revenue-Supported Rating Criteria’ (Aug. 16, 2010).Applicable Criteria and Related Research:State Housing Finance Agencies – Single-Family Mortgage Program Rating Guidelineshttp://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=4(link is external)…Revenue-Supported Rating Criteriahttp://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=5(link is external)…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. Source: NEW YORK–(BUSINESS WIRE)–Fitch Ratings. 10.1.2010last_img

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