Fitch Rates Maryland CDA's $60MM Residential Rev Bonds 'AA'.

Business Editors

NEW YORK--(BUSINESS WIRE)--Aug. 10, 2001

Fitch assigns a rating of `AA' to Maryland Community Development Administration's (CDA) $60 million residential revenue bonds, 2001 series G and H.

Fitch also affirms the `AA' rating on the $875.7 million outstanding residential revenue bonds and the `AA/F1+' rating on the $59.2 million outstanding residential revenue bonds, 2001 series C and D. The bonds are expected to sell during the week of Aug. 20 through negotiation by a syndicate led by UBS Paine Webber Inc. CDA is a division of the state's Department of Housing and Community Development (DHCD).

The current offering is the fifteenth sale of bonds to be issued under a flexible general bond resolution that was adopted in 1997. A portion of the 2001 series G and H bond proceeds will be used to refund outstanding revenue bonds issued under CDA's 1980 general certificate resolution. Subsequent to refunding bonds from the older program, lendable funds will be transferred to the 1997 resolution. The transferred funds, together with the remainder of the net bond proceeds from this issue, will be used to continue CDA's single family, first-time homebuyer's program. The bonds' rating reflects the current and expected portfolio composition, the inclusion of only fully-insured or guaranteed loans, and adequate reserve levels and liquidity, as well as the administration's successful management track record and established program oversight abilities.

The general resolution provides overall bond security provisions and permits a variety of loan types, including multifamily, home improvement, refinancings, etc., to be financed from bond proceeds. Specific loan requirements are incorporated into series resolutions at the time of each bond sale. Proceeds from the current series will be used to fund single family mortgages insured by the Federal Housing Administration (FHA) or guaranteed by the U.S. Department of Veterans Affairs (VA) or the U.S. Department of Agriculture through its Rural Development Guaranteed Rural Housing Loan Program (RD).

As of June 30, 2001, the administration had purchased 6,846 loans under the 1997 program (including 1,153 participation loans funded from both the 1997 and 1980 bond programs) with an aggregate principal balance of $605.9 million. FHA insures the vast majority of the outstanding loans (95%); the remaining loans are guaranteed by VA (3%) and RD (2%). CDA expects to utilize this resolution as its primary vehicle for issuing additional single family mortgage revenue bonds in the future.

Loan delinquencies in the 1997 resolution are moderate - 3.1% were 60 or more days delinquent or in foreclosure as of June 30, 2001. Under CDA's 1980 bond program, nearly 17,100 loans (including the participation loans) aggregating $907 million were outstanding as of March 31, 2001. Delinquencies and foreclosures in the older portfolio totaled 4.9%, about the same as fixed rate FHA loans in the state. Combined delinquency and foreclosure rates for all loan types in the state have increased since 1992.

Last year, the U.S. Department of Housing and Urban Development (HUD) issued two separate 90-day moratoria on foreclosures of FHA-insured properties located within specified zip codes in and adjacent to Baltimore City. The moratoria, which ended July 5, 2000 and Oct. 12, 2000, respectively, precluded mortgagees from initiating new foreclosures or proceeding with foreclosures already in progress during the applicable 90-day period. CDA has estimated that 25 mortgage loans with an outstanding principal balance of $1.8 million were located in the affected area and were 90 days or more delinquent during the period of the first moratorium and nine loans with a balance of $575,000 were potentially impacted by the second moratorium.

Subsequent to the respective expirations, DHCD instructed servicers to resume foreclosure procedures in the affected areas. In the administration's experience, HUD has not curtailed the interest accrued during the moratoria as long as the servicer followed certain procedures. In light of CDA's apparent limited exposure to the expired moratoria, at this time, they are not expected to have a material impact on the administration's financial operations. However, CDA has been advised that HUD is considering instituting a third moratorium for the Baltimore area, though HUD has not yet issued a formal notice.