Mexico City, December 10, 2009 -- Moody's de México S.A. de C.V.
(Moody's) has assigned a rating of Aaa.mx (Mexican National
Scale) and a rating of Baa1 (Global Scale, Local Currency) to the
Class A certificates TFOVIS 09-3U of Fondo de Vivienda del Instituto
de Seguridad y Servicios Sociales de los Trabajadores (Fovissste) issued
by HSBC México, S.A., Institución
de Banca Múltiple, Grupo Financiero HSBC, División
Fiduciaria acting solely in its capacity as trustee.
Interest and principal to certificate holders will be payable with cash
flow from low income housing mortgage loans originated by Fovissste and
assigned to the trust, established under the laws of Mexico.
The ratings are based upon the following factors:
-- The credit quality of the pool, which is comprised
of minimum wage-denominated, fixed-rate, first-lien,
mortgage loans secured by low-income houses located in Mexico.
-- A credit enhancement of 28.5% for Class
A certificates in the form of overcollateralization.
-- The coupon on Class A certificates of 5.40%.
-- The legal final of the certificates on June 27,
-- The mortgage origination standards of Fovissste and its
capability in its role as servicer.
-- The well-established Mexican laws governing mortgage
SECURITIZED MORTGAGE POOL
The securitized mortgage pool is comprised of minimum wage-denominated,
fixed-rate, first-lien mortgage loans secured by low-income
houses located in Mexico. The portfolio reviewed by Moody's
is comprised of 25,322 mortgage loans with an aggregate outstanding
balance of MXP$6,999 million as of October 31, 2009
As of the cut-off date, the weighted average original loan-to-value
(LTV) was 96.5%, the weighted average debt-to-income
of the pool was 30.0% and the weighted average current LTV
was 76.2%. As of the same date there were no co-financed
loans and all the loans were current.
The certificates are denominated in UDIs and have a fixed interest rate.
At closing, Class A certificates represented 71.5%
of the issuance balance and the residual accounted for the remaining 28.5%.
On each payment date, cash collected from interest and principal
payments will be used to pay interest on Class A certificates.
After making interest payments, cash will be used to amortize Class
FOVISSSTE: SELLER AND SERVICER
Fovissste is a social oriented self-funded decentralized institution
created in 1972 to provide housing financing to public sector employees.
Fovissste's main source of funding comes from the public sector
employers that pay a mandatory contribution equivalent to 5% of
the gross wages of their employees.
Fovissste's loans are repaid through a combination of: (i)
the employer's payment of an amount equivalent to 5% of the
borrower's monthly salary, and (ii) the borrower's monthly
scheduled loan payment that is being deducted from his paycheck.
When a borrower becomes unemployed is entitled to receive up to 12 months
of grace period ("Prórroga") of interest and principal
in his mortgage loan payments. All borrowers with a Fovissste mortgage
loan that leave its job in the public sector are assigned to outsourced
vendors specialized in collection services.
Moody's considered the characteristics and historical performance of the
collateral backing this transaction as well as reported performance data
from two Fovissste transactions closed during 2009. Moody's assessed
the collateral characteristics, considering key credit metrics such
as original and actual loan-to-value, documentation
type, payment-to-income, seasoning, current
delinquency status, payment history, and geographic concentrations,
among other factors, and used this information to estimate the pool's
future performance over the life of the transaction. In determining
potential performance trends for this transaction, Moody's also
took into consideration the performance of similar mortgages securitized
by other players in the Mexican market. Moody's also analyzed Fovissste's
origination, collections, customer service and reporting practices
as well as its quality and stability as a servicer. In determining
the alignment of interests of the key parties to the transaction,
Moody's considered that Fovissste, the initial holder of the residual
certificates, should at all time keep the ownership of the residual
When rating mortgage backed securitizations in Mexico, Moody's prepares
a loan-by-loan cash flow analysis that considers scheduled
interest and principal collections on the mortgages, a distribution
of cumulative gross default scenarios on the mortgage portfolio,
severity and recovery rate assumptions, an assumed cumulative prepayment
percentage, the priority of payments due to investors, and
the particular characteristics of the transaction such as credit enhancement
levels, reserves, and any type of guarantee benefiting the
The main assumptions underlying Moody's expectations of the future performance
of the collateral are the cumulative gross default percentage, the
cumulative prepayment percentage, and the severity of loss given
a loan default. For cumulative gross defaults, Moody's uses
a triangular distribution such that the mortgage cash flows are stressed
using a range of default scenarios. The triangular distribution
is centered on a most likely cumulative gross default scenario (in this
case 28%); defaults are timed along a default curve.
Moody's assumed that the cumulative prepayment percentage over the life
of this transaction equals 15% and that those prepayments are timed
along a prepayment curve. The assumed severity of loss on defaulted
loans (in this case, an average of 85%) considers numerous
variables, including, but not limited to, the balance
of the loan at the time of default, recovery lags, and downward
adjustments to the original property value to stress the value of the
property at the time of liquidation.
For each one of the cumulative gross default scenarios, Moody's
allocates the available cash flows according to the priority of payments
described in the transaction documents. Moody's applies varying
weights, or probabilities of occurrence, to each of the cumulative
gross default scenarios according to the triangular distribution to arrive
at an aggregate weighted average expected loss on the certificates.
Moody's also calculates a weighted average life (WAL) for the certificates,
which together with its weighted average loss and Moody's idealized loss
tables, are utilized to assign a rating to the certificates.
The transaction's performance is heavily dependent on the Mexican economy
and on the stability of inflation and employment. Currently,
Moody's sovereign risk group rates Mexico's foreign currency debt obligations
Baa1 and its local currency debt obligations Baa1. These ratings
indicate that the Mexican economy and inflation could be subject to significant
variation over time. However, the quality of the originator's
underwriting standards, the credit quality of the collateral,
and the credit enhancement, mitigate to some extent the potential
effects of adverse performance in the Mexican economy and housing markets.
According to the legal opinion, the transaction has been structured
as a valid sale of the securitized assets to the issuing trust.
Other methodologies and factors that may have been considered in the process
of rating this transaction can also be found at www.moodys.com
on the Rating Methodology & Performance page.
The complete rating action is as follows:
Issuer: HSBC México, S.A., Institución
de Banca Múltiple, Grupo Financiero HSBC, División
Fiduciaria, acting solely in its role as trustee.
Class A certificates TFOVIS 09-3U for UDI 1,155,195,200,
rated Aaa.mx (Mexican National Scale) and Baa1 (Global Scale,
More details about the transaction will be published in Moody's
upcoming report on this transaction which will be available on Moody's
website, http://www.moodys.com. In addition,
Moody's publishes a weekly summary of structured finance credit,
ratings and methodologies, available to all registered users of
our website, at www.moodys.com/SFQuickCheck.
Senior Vice President
Structured Finance Group
Moody's Investors Service
Moody's Assigns a Aaa.mx Rating to Fovissste's RMBS TFOVIS 09-3U in Mexico
Asst Vice President - Analyst
Structured Finance Group
Moody's de Mexico S.A. de C.V