NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned an 'AA+' rating to Florida Housing Finance Corporation's (FHFC) $100 million homeowner mortgage revenue bonds, 2008 series 3. The bonds are expected to be sold through negotiation this week and are expected to close on or about Sept. 30, 2008. Fitch has also affirmed the 'AA+' rating on all series of the outstanding $1.66 billion homeowner mortgage revenue bonds, prior to consideration of any bond insurance.The current offering is the 37th sale of bonds issued under a flexible master trust indenture adopted by FHFC in 1995. The net proceeds from the 2008 series 3 bonds will be used to continue FHFC's single-family first-time homebuyer program by purchasing Ginnie Mae, Freddie Mac, and Fannie Mae mortgage-backed securities (MBS). The long-term rating reflects: the current portfolio, which, as of June 30, 2008, consisted of approximately 89% MBS and 11% single-family whole loan mortgages; the expected purchase of additional MBS; strong asset-to-debt ratio indicating sufficient program reserves and liquidity levels; deep levels of mortgage insurance available to protect against potential losses on the decreasing portion of whole loans; and management's capable program oversight abilities. The current direction of the program with the additional purchase of MBS is seen as a positive credit factor. Ginnie Mae certificates are guaranteed by the U.S. government. Fitch's 'AAA' ratings (affirmed on Sept. 2, 2008) of Fannie Mae's and Freddie Mac's long-term Issuer Default Rating (IDR) and senior debt rating reflect the high probability of external support becoming available and the companies' importance to the U.S. housing market. The potential for explicit support has been recently expressed by the U.S. Treasury through its plan to maintain the confidence and stability of the financial markets and, in particular the liquidity of Government Sponsored Enterprise (GSE) debt. For more information on the IDR rating of Fannie Mae and Freddie Mac, see Fitch press releases dated Sept. 2, 2008 and July 17, 2008.
Credit concerns center on FHFC's flexibility to originate whole loans under the indenture as well as on the potential for losses from the remaining whole loan portfolio. However, mitigating this concern, no new whole loans have been originated in the program since prior to 2002 and the existing whole loan portfolio is primarily insured or guaranteed and becoming a smaller percentage of the overall indenture. FHFC maintains the ability to remove funds from the program if the asset parity requirement of 102% is met.
The master trust indenture adopted by FHFC in 1995 establishes the bonds' security lien, new issuance requirements, flow of funds, and minimal loan requirements. Specific program restrictions are incorporated into supplemental indentures at the time of each bond sale. As of June 30, 2008, $160 million in whole loans and $1.5 billion in MBS were outstanding, compared with $177 million and $891 million, respectively, as of July 31, 2007, reflecting the growing percentage of MBS in the portfolio. Approximately one-half (47%) of the outstanding whole loan balance by loan amount (which excludes MBS) is Federal Housing Administration (FHA)-insured, 20% is privately insured, 11% is guaranteed by the U.S. Department of Veterans Affairs (VA), 6% is guaranteed by the U.S. Department of Agriculture, through its Rural Housing Service's (RHS) Guaranteed Loan program, and the remaining 15% is uninsured.
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