The Rating Outlook is Stable.
The bonds are limited obligations of the issuer secured by the revenues and assets pledged under the master indenture that primarily consist of
KEY RATING DRIVERS
GNMA/FNMA GUARANTEE: The 'AAA' rating reflects the guarantee of full and timely payments of principal and interest on the MBS regardless of actual performance of the underlying loans.
PASS-THROUGH STRUCTURE: The bonds are set up in a pass-through structure, whereby scheduled principal payments, principal repayments, and interest payments on the MBS are directly passed through to the bondholders on a monthly basis.
CASH FLOW SUFFICIENCY: The rating reflects the fact that stressed cash flow runs demonstrate the ability to meet full and timely debt service payments through maturity of the bonds. The rating also reflects the availability of excess funds to remain in the expense fund through maturity of the bonds to satisfy all fees.
U.S. SOVEREIGN LINK: As the ratings of FNMA/GNMA are currently linked to the U.S. sovereign rating, any rating action on the U.S. sovereign rating will directly affect the rating on the bonds.
FNMA DELINKED: Should Fitch's view of the strength of government support for FNMA be reduced or downgraded, the FNMA's rating may be delinked from the U.S. sovereign rating and may result in negative pressure on the bonds.
BANKRUPTCY REMOTE: Fitch considers IHCDA to be bankruptcy remote based on its public purposes, predominantly limited recourse debt and its inability under current law to commence a voluntary proceeding under Chapter 9 without legislative or executive action. A change in this status could lead to a change to the rating and constrain it to that of Fitch's assessment of the authority's general obligation creditworthiness.
As part of its analysis, Fitch reviews the cash flows to ensure the MBS payments to be passed through directly to the bondholders are sufficient to make timely debt service payments. The cash flows, which were run at various prepayments speeds, factor in all fees and expenses to be incurred under the indenture, and address the risk of higher coupon MBS prepaying at a faster rate than lower coupon MBS. Under all prepayment speed scenarios, the cash flows demonstrate that the assets in the indenture are sufficient to make debt service payments throughout the term of the bonds. The supplemental indenture specifies that funds must remain in the indenture in an amount sufficient to satisfy all fees.
Fitch reviews the legal documents to ensure that, on a monthly basis, bond debt service payments are not scheduled earlier than the latest distribution date for the MBS securing the bonds. In this case, the latest distribution date is the 25th day of the month (or, if not a business day, the next following business day) and debt service payments are on the business day following MBS distribution. Fitch also verifies in the indenture that principal and interest payments on the bonds are made prior to payment of trustee, and issuer fees.
FNMA's rating and Rating Outlook are currently linked to the U.S. Sovereign rating, which reflects the U.S. government's direct financial support of FNMA. Fitch's view of this support was strengthened by the most recent U.S. Treasury's Senior Preferred Stock Purchase Agreement. However, should Fitch's view of this strength of support be reduced or downgraded, the rating of FNMA could be delinked from the U.S. sovereign which may negatively affect the FNMA rating.
Fitch assigns a rating based on preliminary cash flow assumptions. Once the bonds have priced, Fitch will verify that the final versions of the transaction documents and cash flow projections do not materially differ from the draft documents.
Additional information is available at www.fitchratings.com'.
--'Revenue-Supported Rating Criteria' (
--'US Government Debt and Rating Outlook' (
Revenue-Supported Rating Criteria
US Government Debt and Rating Outlook
Charles Giordano, +1 212-908-0607
Maura McGuigan, +1 212-908-0591
Source: Fitch Ratings
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