Approximately MXP4,488 million of debt affected
Mexico, February 24, 2011 -- Moody's de México, S.A. de C.V.
(Moody's) notes that as of today, the securities contemplated by
this transaction have not been placed in the market. If any assumptions
or factors considered by Moody's in assigning the ratings change before
closing, Moody's could change the ratings assigned to the certificates.
Issuer: Nacional Financiera S.N.C., Institución
de Banca de Desarrollo, acting solely in its role as trustee.
Class A certificates CEDEVIS 11U for UDI 895,892,000 rated
Aaa.mx (sf) (Mexican National Scale) and Baa1 (sf) (Global Scale,
Class B certificates (Constancia Preferente) for UDI 92,935,000
rated Aa2.mx (sf) (Mexican National Scale) and Baa3 (sf) (Global
Scale, Local Currency).
Moody's has assigned a rating of Aaa.mx (Mexican National Scale)
and Baa1 (Global Scale, Local Currency) to the Class A certificates
CEDEVIS 11U 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.
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 27.7% for Class
A certificates in the form of subordination (7.5%) and overcollateralization
-- The legal final of the certificates 10,245 days
after the closing date on March 4, 2011.
-- 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
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 25,879 mortgage loans with an aggregate
outstanding balance of MXN6,049 million as of December 31,
2011 (cut-off date). As of the cut-off date,
the weighted average original loan-to-value (LTV) was 89.0%,
the weighted average debt-to-income of the pool was 24%
and the weighted average current LTV was 83.7%. As
of the same date there were no co-financed loans and all the loans
The certificates are denominated in UDIs and have a fixed interest rate.
At closing, Class A certificates represented 72.3%
of the issuance balance, Class B certificates represented 7.5%
of the issuance balance and the residual accounted for the remaining 20.2%.
On each payment date, cash collected from interest and principal
payments will be used to pay interest on Class A certificates and then
to pay interest on the Class B certificates. After making interest
payments, cash will be used to amortize Class A. No cash
will be used to amortize Class B certificates before Class A certificates
are fully repaid.
Moody's considered the characteristics and historical performance of the
collateral backing this transaction as well as reported performance data
from more than sixteen 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, 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 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 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.
For this transaction, we are assuming a cumulative gross default
and a severity of loss of 27.9% and 64.4%,
respectively, calculated as a percentage of the initial pool balance
in the most likely model scenario. Expected net loss for this pool
in the most likely model scenario is 18%. Cumulative prepayment
over the life of this transaction is assumed at 9.6% and
is 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 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 a weak macroeconomic
Moody's Investors Service received and took into account one or more third
party due diligence reports on the underlying assets or financial instruments
in this transaction and the due diligence reports had a positive impact
on the rating.
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 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
27.9% used in determining the initial rating were changed
to 47.7% or 54.5%, the model-indicated
rating for Class A notes would change from Baa1 (sf)/Aaa.mx (sf)
to Baa3 (sf)/Aa3.mx (sf) and Ba3 (sf)/A3.mx (sf) respectively.
It should be noted that the cumulative gross default assumption is already
a stressed assumption and is higher than Moody's expected case.
Further information on Moody's analysis of this transaction is available
Information sources used to prepare the credit rating are the following:
public information, parties involved in the ratings, and confidential
and proprietary Moody's Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit 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 ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service 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
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
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 assigns a Aaa.mx (sf) rating to Infonavit's Certificados Bursátiles CEDEVIS 11U in Mexico
Ave. Paseo de las Palmas
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