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Rating Action:

Moody's assigns Aaa.mx (sf) to Infonavit/Banamex Mexican RMBS CDVITOT 14U

 The document has been translated in other languages

08 Jul 2014

Approximately MXP3,122 million of debt affected

Mexico, July 08, 2014 -- Moody's de México, S.A. de C.V., has assigned a rating of Aaa.mx (sf) to the Series A CDVITOT 14U certificates, in addition to a rating of Aa2.mx (sf) to the subordinated certificates, backed by mortgage loans originated by Instituto del Fondo Nacional de la Vivienda para los Trabajadores (Infonavit) and Grupo Financiero Banamex. However, these securities have not yet been placed in the market. If any of the assumptions or factors Moody's considered when initially assigning the ratings were to change before the transaction's closing, the ratings could change.

Issuer: Nacional Financiera S.N.C., Institución de Banca de Desarrollo, acting solely in its capacity as trustee

Series A Certificates CDVITOT 14U for up to UDI558,452,300 rated Aaa.mx (sf) (Mexican National Scale) and A3 (sf) (Global Scale, Local Currency).

Subordinated Certificates CDVITOT 142U for up to UDI24,247,200, rated Aa2.mx (sf) (Mexican National Scale) and Baa3 (sf) (Global Scale, Local Currency).

Constancia Preferente Infonavit for up to UDI25,913,100 rated Aa2.mx (sf) (Mexican National Scale) and Baa3 (sf) (Global Scale, Local Currency).

RATINGS RATIONALE

The Series A Certificates CDVITOT 14U and subordinated certificates are backed by low-income housing mortgage loans originated by Infonavit and Banamex, which have assigned the loans to the trust, established under the laws of Mexico. The certificates will be issued by Nacional Financiera S.N.C., Institución de Banca de Desarrollo, acting solely in its capacity as trustee. Interest and principal to the certificate holders will be payable with cash flow from the mortgage loans.

In addition, this is the second transaction in which Infonavit and Banamex assign loans originated under the Infonavit Total Banamex program, whereby Infonavit and Banamex each funds a certain percentage of the loan balance at origination. As a result, each of the two entities owned a proportional percentage of the rights on the mortgage loans before assigning them to the securitization trust. Infonavit originates and services the loans for the Infonavit Total Banamex program.

The ratings are based on the following factors:

-- the credit quality of the pool, which contains minimum-wage-denominated, variable-rate, first-lien mortgage loans secured by primarily low-income housing in Mexico

-- credit enhancement of 16.5% for the Series A in the form of subordination (7.5%) and over-collateralization (9%); the Series A targeted credit enhancement is 35.5%

-- credit enhancement of 9% for the subordinated certificates in the form of over-collateralization

-- the strong mortgage origination standards of Infonavit and its ability as servicer, as reflected by Moody's SQ1- servicer quality assessment of Infonavit

-- Mexico's well-established laws governing mortgage securitization

The portfolio Moody's reviewed contained 10,623 mortgage loans with an aggregate outstanding balance of MXN3,431 million as of the cut-off date of 13 June 2014. As of that date, the key average statistics were the following: an original loan-to-value (LTV) of 82.9%, a current LTV of 65.1%, a debt-to-income of 22.7%, seasoning of 50 months, a coupon of 9.5% and a monthly borrower salary of 8.4VSM (veces salario mínimo). Furthermore, none of the loans were co-financed, and all were current.

The certificates are denominated in UDIs and have a fixed interest rate. At closing, Series A constituted 83.5% of the issuance balance, the subordinated certificates, 7.5%, and the residual certificate (constancia subordinada), the remaining 9%. Unlike the Infonavit CEDEVIS transactions, which use all collections to "full-turbo" the Class A certificates after covering trust expenses and interest payments, this transaction permits principal payments to the subordinated certificates as long as certain over-collateralization and the Series A target credit enhancement requirements are met. In certain situations, payments could also leak to the residual holder, which is not the case for the CEDEVIS structures.

Furthermore, the Series A is promised the payment of timely interest and principal by the legal final maturity date. The subordinated certificates are promised ultimate principal but could be locked out of interest during certain periods, in which case the trust will capitalize any interest payment shortfalls and add them to the subordinated certificates' balance.

Moody's considered the characteristics and historical performance of the collateral backing this transaction, as well as reported performance data on more than 27 Infonavit securitizations, the oldest being from 2005. Moody's assessed the collateral characteristics, evaluating key credit metrics such as original and actual LTV, payment-to-income, seasoning, current delinquency status, payment history, and geographic concentrations, and used this information to estimate the pool's future performance over the life of the transaction. In estimating the transaction's performance, Moody's also took into account the performance of similar mortgages securitized not just by this issuer but also by other issuers 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. The agency's assessment of Infonavit as primary servicer of Mexican low-income mortgage loans is SQ1- (SQ1 minus). Administradora de Activos Financieros S.A. (Acfin) will be the master servicer, responsible for validating the cash flows reported from collections and for preparing collateral performance reports. Moody's current assessment of Acfin as master servicer of residential mortgage loans in Mexico is SQ2- (SQ2 minus).

The period of time covered in the financial information used to determine the ratings is between 31 July 2005 and 13 June 2014. (source: for the CDVITOT 14U, information provided by the originator; for historical information on other deals that Moody's considered in its analysis came from periodic collections and remittance reports from servicers, trustees and common representative agents.)

After assessing the credit quality of the mortgage loan pool, Moody's determined a portfolio expected loss of 8.2% and MILAN credit enhancement (Milan CE) of 25.6%.

The portfolio's expected loss of 8.2% is based on Moody's assessment of the lifetime loss expectation, which takes into account (1) the average lifetime loss expectation of previous Infonavit-originated securitizations and (2) the current macroeconomic environment in Mexico.

The MILAN CE of 25.6% is based on Moody's assessment of the historic collateral performance and key pool characteristics, on a loan-by-loan basis.

Factors that would lead to an upgrade or downgrade of the rating:

The performance of this MBS transaction will depend on the unemployment rate. An economic slowdown with high levels of unemployment could pressure Infonavit's ability to collect payments on the loans, adversely affecting performance. The primary source of assumption uncertainty is the unemployment rate. If a private-sector borrower loses his job, Infonavit will not be able to automatically deduct the mortgage payment from the borrower's payroll. In addition, a borrower's available income to repay the mortgage loan could decline substantially because of a weak macroeconomic environment.

Because the certificates are denominated in UDIs, and the collateral in VSM, the transaction is subject to the risk that the UDI will increase at a higher rate than the minimum wage will. In recent years, VSM and UDI have risen in tandem.

The V Score for this transaction indicates Medium/High uncertainty about critical assumptions, in line with 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: If the portfolio expected loss were 23.2%, and the MILAN CE increased to 39.4%, the deal would still be rated A3 (sf) / Aaa.mx (sf). If the MILAN CE were to remain at 39.4% and the portfolio expected loss increased to 27.2%, the rating would change to Baa1 (sf) / Aa1.mx (sf) (global scale/national scale), assuming all other factors remain equal. 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 factors.

The ratings address the expected loss posed to investors by the legal final maturity. The structure allows for timely payment of interest and ultimate payment of principal with respect to the senior certificates by their legal final maturity.

Stress Scenarios:

Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moody's weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.

RATING METHODOLOGY

The principal methodology used in this rating was "Moody's Approach to Rating RMBS Using the MILAN Framework," published in November 2013. Please see the Credit Policy page on www.moodys.com.mx for a copy of this methodology.

Other methodologies and factors that may have been considered for the ratings can also be found at www.moodys.com.mx in the Rating Methodologies sub-directory under the Research & Ratings tab.

More information on Moody's analysis of this transaction is available on www.moodys.com.mx.

Moody's National Scale Credit Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody's global scale credit ratings in that they are not globally comparable with the full universe of Moody's rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a ".nn" country modifier signifying the relevant country, as in ".mx" for Mexico. For further information on Moody's approach to national scale credit ratings, please refer to Moody's Credit rating Methodology published in October 2012 entitled "Mapping Moody's National Scale Credit Ratings to Global Scale Credit Ratings".

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

Moody's received and took into account a third-party assessment on the due diligence performed regarding the underlying assets or financial instruments in this transaction and the assessment had a neutral impact on the rating.

In issuing and monitoring this rating, Moody's de México S.A. de C.V. considered the existence and extent of arrangements and mechanism, if any, to align the incentives of the originator, servicer, administrator and guarantor of the securities with those of its potential acquirers.

Credit ratings incorporate Moody's macroeconomic outlook and its implications on key variables that may include but not be limited to interest rates, inflation, economic growth, unemployment, performance of counterparties, credit availability, sector level changes in competitive conditions, supply/demand and margins, and issuer specific changes in capital structure, competitive positioning, governance, risk profile, and liquidity. Unexpected changes in such variables may lead to changes in the credit rating level, potentially by several notches. Further information on the sensitivity of the rating to specific assumptions is included in this disclosure.

In issuing this credit opinion, Moody's de México S.A. de C.V. did not rely on ratings issued by any other credit rating agency over this issuer/security or any underlying securities.

Further information on the representations and warranties and enforcement mechanisms available to investors are available on http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF372933

The analysis relies on an assessment of collateral characteristics to determine the collateral loss distribution, that is, the function that correlates to an assumption about the likelihood of occurrence to each level of possible losses in the collateral. As a second step, Moody's evaluates each possible collateral loss scenario using a model that replicates the relevant structural features to derive payments and therefore the ultimate potential losses for each rated instrument. The loss a rated instrument incurs in each collateral loss scenario, weighted by assumptions about the likelihood of events in that scenario occurring, results in the expected loss of the rated instrument.

Moody's describes the stress scenarios it has considered for this rating action in the section "Ratings Rationale" of this press release.

Information sources used to prepare the rating are the following: parties involved in the ratings, and public information.

The rating has been disclosed to the rated entity prior to public dissemination.

A general listing of the sources of information used in the rating process, and the structure and voting process for the rating committees responsible for the assignment and monitoring of ratings can be found in the Disclosure tab in www.moodys.com.mx.

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 provider and in relation to each particular rating action for securities 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 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.mx.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

In compliance with regulatory requirements, Moody's de México has been informed that during the two-month period prior to the date hereof, Fitch Ratings has assigned a rating of AAA(mex)vra on the same issuer/securities referred to in this press release.

This Rating is subject to upgrade or downgrade based on future changes in the financial condition of the Issuer/Security, and said modifications will be made without Moody's de México S.A. de C.V accepting any liability as a result.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com.mx for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com.mx for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com.mx for further information.

Please see www.moodys.com.mx for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

The ratings issued by Moody's de Mexico are opinions regarding the credit quality of securities and/or their issuers and not a recommendation to invest in any such security and/or issuer.

Please see the ratings tab on the issuer/entity page on www.moodys.com.mx for additional regulatory disclosures for each credit rating.

Gustavo Salaiz
Associate Analyst
Structured Finance Group
Moody's de Mexico S.A. de C.V
Ave. Paseo de las Palmas
No. 405 - 502
Col. Lomas de Chapultepec
Mexico, DF 11000
Mexico
JOURNALISTS: 001-888-779-5833
SUBSCRIBERS:52-55-1253-5700

Martin Fernandez Romero
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: (800) 666 -3506
SUBSCRIBERS: (5411) 5129 2600

Releasing Office:
Moody's de Mexico S.A. de C.V
Ave. Paseo de las Palmas
No. 405 - 502
Col. Lomas de Chapultepec
Mexico, DF 11000
Mexico
JOURNALISTS: 001-888-779-5833
SUBSCRIBERS:52-55-1253-5700

Moody's assigns Aaa.mx (sf) to Infonavit/Banamex Mexican RMBS CDVITOT 14U
No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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