Outlook is Negative; Approximately
$182 million in debt affected
IOWA FINANCE AUTHORITY
State Housing Finance Agencies
IA
Moody's Rating
|
ISSUE
|
RATING
|
|
Single Family Mortgage Revenue
Bonds, 2012 Series 1 (Taxable) (MBS - Pass-Through Program)
|
Aaa
|
|
Sale Amount
|
$18,800,000
|
|
Expected Sale Date
|
12/03/12
|
|
Rating Description
|
Mortgage: Single-Family: GNMA/FNMA/FHLMC
|
|
|
|
Single Family Mortgage Revenue
Bonds, 2013 Series 1 (Non-AMT) (MBS - Pass-Through Program)
|
Aaa
|
|
Sale Amount
|
$25,000,000
|
|
Expected Sale Date
|
12/03/12
|
|
Rating Description
|
Mortgage: Single-Family: GNMA/FNMA/FHLMC
|
|
|
Moody's Outlook NEG
Opinion
NEW YORK, November 28, 2012 --Moody's Investors Service
has assigned Aaa rating to the Iowa Finance Authority ("IFA") Single Family
Mortgage Revenue Bonds, 2013 Series 1 (tax-exempt) and 2012 Series 1 (taxable).
In addition, we are affirming the Aaa ratings to all outstanding bonds
of the Mortgage Revenue Bond Resolution. The outlook on the ratings is
negative.
The 2013 Series 1 and 2012 Series 1 Bonds are issued
under the Single Family Mortgage Revenue Bonds Resolution (the "Resolution")
adopted November 20, 2009 in connection with the New Issue Bond Program
(NIBP), established jointly by Fannie Mae and Freddie Mac (the GSEs),
the Federal Housing Finance Agency and the US Treasury.
RATINGS
RATIONALE
The Aaa rating on the Bonds reflects the high quality
collateral comprised of GNMA and Fannie Mae Mortgage-Backed Securities
(MBS), as well as the programs 1.015x program asset-to-debt ratio (as
of 9/30/2012). Bond proceeds are used to purchase MBS which represents
pools of loans originated under the bond program. The MBS are guaranteed
as to full and timely payment of principal and interest by Ginnie Mae
or Fannie Mae regardless of the performance of the underlying pool of
mortgage loans.
USE OF PROCEEDS: The 2013 Series 1 tax-exempt bond
proceeds are expected to be used to finance MBS backed by pools of qualifying
mortgages made to finance the purchase of single family residences in
the State of Iowa (MBS). The 2012 Series 1 taxable bonds proceeds are
being issued to refund approximately $18,420,000 of the Authority's Single
Family Mortgage Revenue Bonds, 2009 Series 2 (Mortgage Backed Securities
Program).
LEGAL SECURITY: The Bonds will be limited obligations
of IFA payable solely from available moneys, assets or revenues of the
Authority pledged under the Resolution which will consist primarily of
bond proceeds, program obligations (primarily MBS), investment obligations
and revenues.
INTEREST RATE DERIVATIVES: Not permitted under NIBP
STRENGTHS
-Loan
portfolio is comprised of MBS. The MBS guarantor, GNMA and Fannie Mae,
guarantees full and timely payment of principal and interest regardless
of performance of the underlying mortgages
-Cash flow projections
demonstrate sufficient revenues to meet debt service requirements and
maintain over-collateralization for the program under all stress scenarios
CHALLENGES
-Ability
to continue originating mortgages in the uncertain market as well as to
generate investment returns in the ultra low interest rate environment
LOAN
PORTFOLIO CHARACTERISTICS: Bond proceeds are used to finance mortgages
which are then converted to MBS. As of 9/30/2012, the loan portfolio consisted
of 86.2% GNMA and 13.8% Fannie Mae MBS. MBS provides the highest quality
collateral for the Bonds since they are guaranteed as to the full and
timely payments of principal and interest by GNMA and Fannie Mae, regardless
of the performance of the underlying mortgage loans. As a result, Moody's
believes the IFA's SFMRB loan portfolio will be protected from cash flow
disruptions and significant losses associating with loan defaults.
CASH
FLOW PROJECTIONS: FULL AND TIMELY PAYMENT DEMONSTRATED UNDER ALL STRESS
SCENARIOS
Moody's has reviewed both series stand-alone and consolidated
cash flow projections for the program. The projections incorporate stress
tests for various prepayment speeds and origination scenarios. Preliminary
cash flow projections show that there are ample funds to meet all debt
service obligations under all stress scenarios, including no prepayment,
rapid prepayment, PAC bond and non-origination runs when the aforementioned
contributed funds relating to the negative arbitrage for the current bond
issue are incorporated.
OUTLOOK
The negative outlook reflects
the current rating outlook on the US government.
What could
change the rating - UP
-None
What could change
the rating - DOWN
-Erosion of program asset-to-parity ratio
-Downgrade
of US government rating
KEY INDICATORS OF THE PROGRAM (as
of September 30, 2012 unless otherwise noted):
Program Asset
to Debt Ratio: 1.015x
Bonds Outstanding: $182,760,000
MBS
Outstanding: $180,910,774
Portfolio Composition: 86.2% GNMA
and 13.8% Fannie Mae MBS
Type of Obligation: Revenue and
limited obligation of IFA
Cash Flow Structure: Open loop
CONTACT:
Cindy
Harris
Deputy Director and Chief Finance Officer
Iowa
Finance Authority
515-725-4976 (phone)
The
principal methodology used in this rating was Strength in Structure: Moody's
Approach to Rating Single-Family Housing Bonds Secured by Mortgage-Backed
Securities published in October 1998. Please see the Credit Policy page
on www.moodys.com for a copy of this methodology.
REGULATORY
DISCLOSURES
The Global Scale Credit Ratings on this press
release that are issued by one of Moody's affiliates outside the EU are
endorsed by Moody's Investors Service Ltd., One Canada Square, Canary
Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the
Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information
on the EU endorsement status and on the Moody's office that has issued
a particular Credit Rating is available on www.moodys.com.
For
ratings issued on a program, series or category/class of debt, this announcement
provides relevant regulatory disclosures in relation to each rating of
a subsequently issued bond or note of the same series or category/class
of debt or pursuant to a program for which the ratings are derived exclusively
from existing ratings in accordance with Moody's rating practices. For
ratings issued on a support provider, this announcement provides relevant
regulatory disclosures in relation to the rating action on the support
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that derive their credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides relevant regulatory
disclosures in relation to the provisional rating assigned, and in relation
to a definitive rating that may be assigned subsequent to the final issuance
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Analysts
Ferdinand
S. Perrault
Lead Analyst
Public Finance Group
Moody's Investors Service
David
A. Parsons
Additional Contact
Public Finance Group
Moody's Investors Service
Florence
Zeman
Additional Contact
Public Finance Group
Moody's Investors Service
Contacts
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Moody's assigns Aaa rating to the Iowa Finance Authority Single Family Mortgage Revenue Bonds 2013 Series 1 (Tax-exempt) and 2012 Series 1 (Taxable) (Mortgage-Backed Securities Program)
