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24 Mar 2020
New York, March 24, 2020 -- Moody's Investors Service has assigned the rating of Aa2 to the proposed $85,300,000 of New York State Housing Finance Agency's (the "Agency" or "NYS HFA") Affordable Housing Revenue Bonds, 2020 Series C. Moody's also maintains a Aa2 rating on all outstanding parity debt issued under the Agency's General Resolution adopted on August 2007 (the "Resolution"). The outlook is stable.
This rating action does not apply to bonds issued as part of the New Issue Bond Program ("NIBP") under the 2009 Supplemental Series Indenture, which are also rated Aa2.
The Aa2 rating primarily reflects the credit quality of the credit support providers for the multifamily mortgage loans pledged to the bondholders under the program's Resolution and Supplemental Resolutions together with the additional funds provided by the Agency and pledged to the bondholders. The rating also reflects the active role of management, the program's track record and management's flexibility to release assets under certain conditions as well as choose credit support providers of varying credit quality.
The stable outlook is based on our expectation that the overall credit quality of the credit support providers will not vary significantly and that, going forward, management will continue to pledge mortgage loans under the Resolution with credit support providers of similar credit quality.
FACTORS THAT COULD LEAD TO AN UPGRADE
- A change in practice that would result in an increase in the overall credit quality of the credit support providers and/or a significant increase in excess assets over liabilities and the
commitment to maintain it.
FACTORS THAT COULD LEAD TO A DOWNGRADE
- A rating downgrade of the State of New York Mortgage Agency ("SONYMA") Mortgage Insurance Fund's ("MIF") Project Pool Insurance Account (Aa1 stable), or rating downgrades of other credit support providers with a material amount of exposure.
- A substantial weakening in the financial position of the program.
The Bonds are special revenue obligations of the Agency, payable solely from and secured by the assets pledged under the Resolution securing the bonds. This includes revenues, funds and accounts, and program assets that mainly consist of mortgage loans and any payments received under credit enhancement facilities. The Resolution provides security for all parity obligations issued under it. The Agency retains a level of flexibility in financing loans with credit enhancement of varying types and credit quality.
The Resolution and Supplemental Resolutions provide that bonds may be purchased in lieu of redemption by or at the direction of the Agency. In addition, certain bonds, upon default of the related Freddie Mac or Fannie Mae credit enhanced loan, may be subject to mandatory tender for purchase to become "Freddie Mac Pledged Bonds" or "Fannie Mae Pledged Bonds." The rating on the bonds does not apply to any such purchased or tendered bonds while the bonds remain in such status.
USE OF PROCEEDS
Proceeds from the 2020 Series C Bonds are anticipated to be used to purchase an existing multifamily mortgage loan previously made by the Agency to finance the acquisition and the rehabilitation of the Ocean Bay Apartments project, a multifamily housing development for persons of low or moderate income. The project, the rehabilitation of which is now complete, contains a total of 1,395 units located in the City of New York, Queens County. The 2020 Series C Bonds proceeds are also anticipated to be used to make a deposit to the Debt Service Reserve Fund.
It's anticipated that the mortgage loan will be insured under the FHA Risk Sharing Program pursuant to Section 542(c ) of the National Housing Act. This will be the Agency's first participation in this program under the Resolution. Under the Risk-Sharing Program, FHA provides insurance on 100% of the principal balance of the mortgage loan at the date of default, plus interest from default until claim payment, providing security for a bond redemption upon default.
The Agency was created as a public benefit corporation in 1960 to finance low and moderate income housing. The Affordable Housing Revenue Bonds Resolution, adopted on August 22, 2007, is the Agency's active parity resolution with over $3.57 billion of mortgage loans backing about $3.83 billion of bonds outstanding, as October 31, 2019. The Resolution permits the issuance of additional bonds secured equally and ratably by the pledged assets. The Agency anticipates that it will issue additional bonds under the Resolution in the future, primarily for the purpose of financing rental housing developments for persons of low and moderate income in the State of New York, in furtherance of the Agency's mission. The Resolution also permits the issuance of subordinate obligations, but none have been issued to date.
The principal methodology used in this rating was U.S. Housing Finance Agency Multifamily Methodology published in November 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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 certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain 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 of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
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