Mexico City, June 21, 2010 -- Moody's de México S.A. de C.V.
has assigned a rating of Aaa.mx (Mexican National Scale) to the
Class A-1 certificates CEDEVIS 10-3U and to the Class A-2
certificates CEDEVIS 10-4U of Instituto del Fondo Nacional de la
Vivienda para los Trabajadores (Infonavit) to be issued by Nacional Financiera
S.N.C., Institución de Banca de Desarrollo
acting solely in its capacity as trustee; and a rating of Aa2.mx
(Mexican National Scale) to the Class B certificates (Constancia Preferente).
At the same time, Moody's Investors Service has assigned a
rating of Baa1 (Global Scale, Local Currency) to CEDEVIS 10-3U
and CEDEVIS 10-4U certificates, and a rating of Baa3 (Mexican
National Scale) to the Class B certificates.
Interest and principal to certificate holders will be payable with cash
flow from low income housing mortgage loans originated by Infonavit 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, variable-rate,
first-lien, mortgage loans secured by low-income houses
located in Mexico.
-- A credit enhancement of 26.32% for Class
A-1 and Class A-2 certificates in the form of subordination
(7.5%) and overcollateralization (18.82%).
-- The coupon on Class A-1 certificates of 3.90%,
on Class A-2 certificates of 5.05% and on Class B
certificates of 5.81%.
-- The legal final of the certificates on June 21,
-- The strong mortgage origination standards of Infonavit
and its capability in its role as servicer. Infonavit is rated
SQ1- as primary servicer of Mexican low-income mortgage
-- The well-established Mexican laws governing mortgage
SECURITIZED MORTGAGE POOL
The securitized mortgage pool is comprised of minimum wage-denominated,
variable-rate, first-lien, mortgage loans secured
by low-income houses located in Mexico. The portfolio reviewed
by Moody's is comprised of 26,031 mortgage loans with an aggregate
outstanding balance of MXP5,722 million as of June 13, 2010
As of the cut-off date, the weighted average original loan-to-value
(LTV) was 87.0%, the weighted average debt-to-income
of the pool was 22.6% and the weighted average current LTV
was 81.3%. 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-1 and Class A-2 represented 73.68%
of the issuance balance, Class B certificates represented 7.5%
of the issuance balance and the residual accounted for the remaining 18.82%.
On each payment date, cash collected from interest and principal
payments will be used to pay interest, pro-rata, on
Class A-1 and Class A-2 certificates, then to pay
interest on the Class B certificates. After making interest payments,
cash will be used to amortize Class A-1 and Class A-2.
No cash will be used to amortize Class A-2 certificates before
Class A-1 certificates are fully repaid. The Class B certificates
will be amortized after Class A-1 and Class A-2 are paid
Moody's considered the characteristics and historical performance of the
collateral backing this transaction 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,
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 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. In determining
the alignment of interests of the key parties to the transaction,
Moody's considered that Infonavit, the initial holder of the subordinated
Class B certificates and the residual certificates, should at all
times keep an ownership interest on the residual certificates equivalent
to at least 10% of the initial balance of the Class A-1
and Class A-2 certificates.
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 30%); 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 60%) 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.
Future performance of this MBS 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 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 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 the weak
Other methodologies and factors that may have been considered in the process
of rating this transaction can also be found in the Rating Methodologies
subdirectory on Moody's website. Further information on Moody's
analysis of this transaction is available on www.moodys.com.
In addition, Moody's publishes a weekly summary of structure
finance credit, ratings and methodologies available to all registered
users of our website, at www.moodys.com/SFQuick Check.
V-SCORE AND PARAMETER SENSITIVITIES
The V Score for this transaction indicates Medium/High uncertainty about
critical assumptions, in line with the Medium/High score for the
Infonavit 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 input for this transaction is the
stressed cumulative gross default. In the parameter sensitivity
analysis, if the assumed cumulative gross default of 30%
used in determining the initial rating were changed to 59% or 67%,
the model-indicated rating for Class A notes would change from
Baa1/Aaa.mx to Baa3/Aa3.mx and Ba3/A3.mx respectively.
It should be noted that the cumulative gross default assumption is already
a stressed assumption and is higher than Moody's expected case.
The complete rating action is as follows:
Issuer: Nacional Financiera S.N.C., Institución
de Banca de Desarrollo, acting solely in its role as trustee.
Class A-1 certificates CEDEVIS 10-3U for UDI 477,604,900,
rated Aaa.mx (Mexican National Scale) and Baa1 (Global Scale,
Class A-2 certificates CEDEVIS 10-4U for UDI 477,604,900,
rated Aaa.mx (Mexican National Scale) and Baa1 (Global Scale,
Class B certificates (Constancia Preferente) for UDI 97,232,200,
rated Aa2.mx (Mexican National Scale) and Baa3 (Global Scale,
Senior Vice President
Structured Finance Group
Moody's Investors Service
Asst Vice President - Analyst
Structured Finance Group
Moody's de Mexico S.A. de C.V
Moody's assigns a Aaa.mx rating to Infonavit's Certificados Bursátiles CEDEVIS 10-3U and CEDEVIS 10-4U in Mexico