S&P Affirms Calif Housing Loan Ins Fund 'A+' Rtg.Business Editors NEW YORK--(BUSINESS WIRE)--Standard & Poor's Jan. 11, 2000-- Standard & Poor's today affirmed its single-'A'-plus financial strength and counterparty credit ratings on the California Housing Loan Insurance Fund (CaHLIF) based on the following. Major Rating Factors: Integrated unit of California Housing Finance Agency (CHFA CHFA College of Humanities and Fine Arts CHFA Connecticut Housing Finance Authority CHFA California Housing Finance Agency CHFA Canadian Health Food Association CHFA Colorado Housing Finance Authority ): CaHLIF operates integrally with CHFA, providing mortgage insurance on about 20% of the loans CHFA purchases. CaHLIF reports administratively to CHFA, is located in the same building and on the same floor as CHFA, enjoys a net worth maintenance agreement from CHFA that has been in existence since CaHLIF was started, and benefits from CHFA's reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. of any claims paid by Hannover Ruckversicherungs AG (Hannover Reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. ), CaHLIF's long-time reinsurer re·in·sure tr.v. re·in·sured, re·in·sur·ing, re·in·sures To insure again, especially by transferring all or part of the risk in a contract to a new contract with another insurance company. . Capital: CaHLIF maintains triple-'A' capital under a very severe version of Standard & Poor's risk-based stress test for mortgage insurers. Financial flexibility: CHFA has board authorization to provide more than $60 million of funding to CaHLIF to support its operations. This compares with $2.5 million a year in written premium currently written by the CaHLIF. Reinsurance: Hannover Reinsurance (double-'A'-plus financial strength rating) reinsures 50% of all risk on a quota share For This article is about quota shares (shares of the quota). For other usages of quota, see, see . A quota share is a specified number or percentage of the allotment as a whole (quota), that is prescribed to each individual entity (see Non-tariff barriers to trade). basis, with a 135% loss ratio cap. Although CHFA ultimately pays, Hannover Reinsurance is obligated ob·li·gate tr.v. ob·li·gat·ed, ob·li·gat·ing, ob·li·gates 1. To bind, compel, or constrain by a social, legal, or moral tie. See Synonyms at force. 2. To cause to be grateful or indebted; oblige. in the unlikely event of CHFA's being unable to pay. Scope of operations: CaHLIF is very small. Risk in force is $161 million as of Sept. 30 1999. In contrast, Triad Guaranty As a verb, to agree to be responsible for the payment of another's debt or the performance of another's duty, liability, or obligation if that person does not perform as he or she is legally obligated to do; to assume the responsibility of a guarantor; to warrant. Insurance Co., the smallest commercial mortgage insurer with about 2% of the market, had $3.0 billion of risk in force as of the same date. Mission conflict: CaHLIF's public purpose mission (underwrite To insure; to sell an issue of stocks and bonds or to guarantee the purchase of unsold stocks and bonds after a public issue. The word underwrite has two meanings. mortgages that the commercial industry does not underwrite in the hope that it will be convinced to take on the risk) can conflict with sound underwriting principles. Operating results: Because of its small size and mission, CaHLIF has operated with results that have consistently fallen short of those posted by the commercial industry. However, in the last several years, results have improved as the California economy has improved and have been stellar for the nine-months ended Sept. 30, 1999, almost as good as the commercial industry's. Future results should not compare favorably with those of the industry because of CaHLIF's public purpose nature and limited scope of operations. Geographical concentration: Not only is CaHLIF exclusively in California, it also concentrates its business in certain areas of the state, mainly the high-cost areas where the Federal Housing Administration Federal Housing Administration (FHA) Federally sponsored agency chartered in 1934 whose stock is currently owned by savings institutions across the United States. The agency buys residential mortgages that meet certain requirements, sells these mortgages in packages, and insures is relatively inactive. It also has a concentration with one lender, North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. Mortgage, in risk that is placed with entities other than CHFA. California Housing Loan Insurance Fund is a Security Circle insurer, which means that it voluntarily underwent Standard & Poor's most comprehensive analysis and was assigned a rating in the top four categories for financial security. OUTLOOK: STABLE Like the commercial industry, CaHLIF is probably at its high water mark. However, it has operated satisfactorily, if with modest scale, in California during some very tough markets such as most of the 1990s. Standard & Poor's believes CaHLIF will operate satisfactorily within the mission constraints imposed on it. Scope of operations will increase, but will remain very modest. Operations and capital will continue to be strongly supported by CHFA, Standard & Poor's said. ---CreditWire |
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