Mexico, April 01, 2011 -- Moody's de México S.A. de C.V. (Moody's)
has affirmed the ratings to the publicly-traded Macrocrédito
Infonavit HITOTAL 10U Trust Notes and the private Subordinated Trust Certificates
in this Mexican RMBS transaction. Moody's notes that as of today,
the total amount of securities contemplated by this transaction have not
been placed in the market. If any assumptions or factors considered
by Moody's in affirming the ratings change before closing, Moody's
could change the ratings assigned to the certificates.
Issuer: the Bank of New York Mellon, S.A.,
Institución de Banca Múltiple (Bank of New York),
acting solely in its role as trustee of the second-level Issue
Trust (Trust #763).
HITOTAL 10U Trust Notes rated Aaa.mx (sf) (Mexican National Scale)
and Baa1 (sf) (Global Scale, Local Currency)
Issuer: Nacional Financiera, S.N.C.,
Institución de Banca de Desarrollo (Nafin), acting solely
as the trustee of the first-level Capital Center Trust (Trust #80625).
Subordinated Trust Certificates rated Aa2.mx (sf) (Mexican National
Scale) and Baa3 (sf) (Global Scale, Local Currency).
This rating affirmation follows Infonavit's intention to do a first re-opening
and issue additional certificates under the HiTo Macrocredito Infonavit
HITOTAL 10U Trust Notes and the private Subordinated Trust Certificates
for an approximate amount of UDIS 695.11 million for the Class
A certificates and UDIS 60.07 million for the Class B certificates.
After the re-opening, the outstanding balance of Class A
and Class B certificates will total approximately UDIS 1,019.6
million and UDIS 87.8 million, respectively. According
to the terms of the t terms of the issuance, Infonavit can have
multiple reopening during the first years of the transaction (the revolving
period) for a maximum amount of up to MXP$30,000,000,000
or an equivalent amount in UDIS.
Interest and principal due on the securities will be payable with cash
flow from mortgage loans secured by housing in the low, medium and
high-income sectors, originated and serviced by Infonavit
under its program Infonavit Total, and assigned to the transaction's
Capital Center Trust, established under the laws of Mexico.
HiTo acts as the structuring agent for the transaction and also performs
the role of master servicer.
Investors of the HITOTAL 10U Trust Notes and the Subordinated Trust Certificates
are promised the ultimate payment of interest and principal by the securities'
legal final maturity. However, investors are scheduled to
receive interest and principal payments on each payment date per the transaction's
priority of payments waterfall. The Subordinated Trust Certificates
may be locked-out of interest and principal payments in certain
periods. On each payment date, the amount of any interest
payment shortfalls on the Subordinated Trust Certificates will be capitalized
and added to its outstanding balance. As a result of this feature
and the ultimate interest promise, the non-payment of interest
on the Subordinated Trust Certificates on any payment date prior to their
maturity date will not constitute a payment default.
The rating affirmation is based upon the following factors:
- The credit quality of the total pool securitized taking into
consideration the reopening. The pool analyzed has a cut-off
date of February 28, 2011 and is comprised of 12,378 loans
with an approximate loan balance of UDI 1,277.5 million,
a weighted average debt-to-income ratio of 22.5%.
The weighted average current loan-to-value of the pool is
90.3% , the original LTV is 91.5%,
and the weighted average seasoning is 5 months (although on average,
the borrowers have been employed in the formal economy for approximately
29 bimonthly periods). As of the same date all the loans were current.
-- The HITOTAL Trust Notes' credit enhancement of 20.2%
in the form of loan overcollateralization (13.3%) and subordination
(6.9%). In addition, the Notes also benefit
from a liquid reserve account initially equal to 4.0% of
their outstanding balance.
-- The Subordinated Trust Certificates' credit enhancement
of 13.3% in the form of loan overcollateralization.
The certificates also benefit from any monies remaining in the reserve
account once the HITOTAL Trust Notes have been paid in full.
-- The availability of excess spread, which is expected
to offset losses on the underlying collateral and to amortize the rated
securities as per the transaction's priority of payments waterfall.
-- The HiTotal Trust Notes' and the Subordinated Trust Certificates'
fixed interest rates of 5.00% and 6.45%,
respectively, and their 30-year legal final maturity.
-- The transaction's priority of payments waterfall,
which in the event of deteriorating pool performance, directs 100%
of collections remaining after certain expenses to "full turbo" the HITOTAL
Moody's considered the characteristics and historical performance of the
aggregate collateral backing this transaction after the addition,
as well as reported performance data from more than fifteen Infonavit
securitizations, the oldest being from 2004. Moody's assessed
the collateral characteristics, considering key credit metrics such
as original and actual loan-to-value, payment-to-income,
seasoning, the number of months the borrower has been employed in
the formal economy, 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 this issuer as well as other players
in the Mexican market.
Moody's also analyzed Infonavit's origination, collections,
customer service and reporting practices as well as its quality and stability
as a servicer. Infonavit is rated SQ1- (SQ1 minus) as primary
servicer of Mexican low-income mortgage loans.
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 and defaults are timed along a default
curve. The assumed severity of loss on defaulted loans 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 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.
To evaluate whether the ratings should be affirmed after re-opening,
Moody's is assuming a cumulative gross default and a severity of
loss of 26.6% and 64.1%, respectively,
calculated as a percentage of the initial pool balance in the most likely
model scenario. Expected net losses for the new pool after the
addition in the most likely model stress scenario is 17.1%.
Cumulative prepayments over the life of this transaction is assumed to
equal 12.5% of the initial pool balance, with prepayments
timed along a prepayment curve.
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 an independent third-party legal opinion, the
transaction has been structured as a valid sale of the securitized assets
to the issuing trust.
Future performance of this RMBS transaction is linked to the unemployment
rate. Future performance can be affected negatively under an economic
slowdown scenario with high levels of unemployment that could pressure
Infonavit's ability to collect payments under the loans. The primary
source of assumption uncertainty is the unemployment level. If
a borrower loses his job in the private sector, Infonavit will not
have the ability to automatically deduct the mortgage payment from the
borrower's payroll. At the same time, the borrowers' available
income to repay the mortgage loan could be substantially reduced as a
result of a weak macroeconomic environment.
Moody's Investors Service did not receive or take into account one or
more third party due diligence reports on the underlying assets or financial
instruments in this transaction. The V Score for this transaction
indicates High uncertainty about critical assumptions, higher than
the Medium/High score for the Infonavit/Fovissste RMBS sector.
V Scores are a relative assessment of the quality of available credit
information and of the degree of dependence on various assumptions used
in determining the rating. High variability in key assumptions
could expose a rating to more likelihood of rating changes. The
factors contributing to the weak V Score are limited performance history
of the emerging market asset class, the limited experience of key
transaction parties and the level of legal and regulatory uncertainty.
V Scores are intended to rank transactions by the potential for significant
rating changes owing to uncertainty around the assumptions due to data
quality, historical performance, the level of disclosure,
transaction complexity, the modeling and the transaction governance
that underlie the ratings.
Moody's parameter sensitivities provide a quantitative/model-indicated
calculation of the number of rating notches that a Moody's-rated
structured finance security may vary if certain input parameters used
in the initial rating process differed. Qualitative factors are
also taken into consideration in the ratings process, so the actual
ratings that would be assigned in each case could vary from the information
presented in the parameter sensitivity analysis. The results generated
by rating models are one of many inputs to the rating process.
Ratings are determined collectively through the exercise of judgment by
rating committees, which evaluate many quantitative and qualitative
Moody's key ratings-model assumption for this transaction is the
stressed cumulative gross default percentage. In the parameter
sensitivity analysis, if the assumed cumulative gross default of
26.6% used in determining the initial rating were changed
to 54.4% or 63.7%, the model-indicated
ratings for the HITOTAL 10U Notes would change from Baa1 (sf)/Aaa.mx
(sf) to Baa3 (sf)/Aa3.mx (sf) and Ba3 (sf)/A3.mx (sf) respectively.
Accordingly, the model-indicated ratings for the Subordinated
Trust Certificates would change from Baa3 (sf)/Aa2.mx (sf) to ratings
lower than Caa3 (sf)/Caa3.mx (sf) in both scenarios. It
should be noted that the cumulative gross default assumption is already
a stressed assumption and is higher than Moody's expected case.
For more information regarding the structure and Moody's detailed
analysis on this transaction please refer to the New Issue Report titled
"Infonavit --HITOTAL 10U Trust Notes" published on March
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service
Senior Vice President
Structured Finance Group
Moody's Investors Service
Moody's de Mexico S.A. de C.V
Moody's affirms ratings of Aaa.mx (sf) and Aa2.mx (sf) of Infonavit Total HITOTAL 10U Trust Notes, a Mexican RMBS transaction
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