S&P Upgrades Hawaii Hsg Fin & Dev Corp. Mtg Rev Bnds.
At the same time, the rating on the corporation's $351 million outstanding mortgage purchase bonds has been raised to double-'A' from single-'A'.
The upgrade reflects HFDC's increasing asset strength and cash flow performance, along with sufficient coverage for loan losses and a good investment portfolio. The rating is limited by the whole loan portfolio's exposure to the state's concentrated economic base, which is dominated by a slowly recovering tourism industry.
Series 1997A and B bonds proceeds will be utilized to purchase new FNMA Mortgage Backed Securities (MBSs), as well as refund HFDC's series 1985A, 1986A, and 1986B bonds. Whole loans and associated pool policies securing the 1985A, 1986A, and 1986B bonds will transfer to help secure the series 1997A and B bonds.
Approximately 70% of mortgage loans are guaranteed by FNMA mortgage-backed securities. The remaining 30% of mortgage assets are single-family whole loans with primary insurance from the Federal Housing Administration (FHA) and various private mortgage insurers. Standard & Poor's anticipates a continued strengthening of the asset base, as HFDC plans to purchase FNMA MBSs under the resolution. Upon full origination of the 1997A and B acquisition fund, FNMA MBSs will represent approximately 78% of the mortgage portfolio.
Loss coverage on the whole loans is provided by pool insurance policies, a cash reserve, and excess assets over liabilities. As of July 1, 1997, excess assets exceed liabilities by approximately 4.1%, or $16 million dollars, and consolidated cash flows also reflect excesses of at least $1.5 million-$3 million annually. An additional reserve equal to approximately $1.27 million is reserved for all FHA insured loans. Delinquencies on the whole loan portfolio are approximately twice the Mortgage Bankers Association statistics for Hawaii. Although delinquencies are consistent with the historical performance of the whole loan portfolio, actual losses have been minimal. Additionally, strong loan loss coverage protection mitigates any longer-term concerns, particularly as the whole loans continue to season.
HFDC anticipates investing all funds associated with new bond issues in collateralized repurchase agreements with providers whose ratings will not adversely affect the rating on the bonds. The resolutions investments are currently a mix of repurchase agreements and MBSs. The ratings of the repurchase agreement providers range from single-'A' to triple-'A', with a good portion in agreements with Societe Generale (double-'A'-minus counterparty credit rating). While a portion of the investment's ratings are below double-'A', the rating takes into account the magnitude and duration of the investments, in conjunction with HFDC's management of the resolution and improved asset quality. The resolution's liquidity reserves are funded at 10% of bonds for the debt service reserve fund and 1% of mortgages for the mortgage reserve fund. These reserves enable HFDC to cover bond debt service payments during the period between mortgage loan delinquency and foreclosure.
The outlook reflects expected strong asset performance, bolstered by increased use of FNMA MBS and high quality investments, Standard & Poor's said. -- CreditWire
CONTACT: Pamela Berkowitz, San Francisco (1) 415-765-5012
Peter Block, New York (1) 212-208-1869
Thomas J Sheridan, New York (1) 212-208-1118
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|Date:||Jul 11, 1997|
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