Mexico, December 13, 2010 -- Moody's de México S.A. de C.V. (Moody's)
has assigned definitive ratings to the publicly-traded HiTo Macrocredito
Infonavit HITOTAL 10U Trust Notes and the private Subordinated Trust Certificates
in this Mexican RMBS transaction.
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 for a maximum amount of up to MXP$30,000,000,000
or an equivalent amount in UDIs, rated Aaa.mx (sf) (Mexican
National Scale) and Baa1 (sf) (Global Scale, Local Currency);
the Notes will be issued on a revolving basis for a period of up to three
years, with an initial issuance amount of UDIS 331,914,600
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 for UDIS 28,684,120 (MXP$129,630,250)
rated Aa2.mx (sf) (Mexican National Scale) and Baa3 (sf) (Global
Scale, Local Currency).
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 ratings are based upon the following factors:
-- The credit quality of the pool, which is comprised
of minimum wage-denominated (VSM), fixed-rate,
first-lien, mortgage loans originated and serviced by Infonavit
and secured by housing in the low to higher-income sectors in Mexico
and originated under Infonavit's new HITOTAL underwriting guidelines.
The key differences between Infonavit's HITOTAL mortgage program
and Infonavit's traditional mortgage program (which secure Infonavit's
CEDEVIS RMBS) are that the HITOTAL program: i. does not have
a maximum property value limit, ii. permits higher maximum
loan amounts, and iii. subsequently attracts borrowers with
higher income levels that qualify under higher interest rates.
-- The HITOTAL Trust Notes' credit enhancement of
19.0% in the form of loan overcollateralization (12.0%)
and subordination (7.0%). 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 12.0% 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 Trust Notes.
-- Infonavit's strong mortgage origination standards
and its capability in its role as servicer. Infonavit is rated
SQ1- as primary servicer of Mexican low-income mortgage
-- Nafin's obligation under the transaction documents and
as trustee of the first-level Capital Center Trust to a) independently
calculate, on each payment date, all of the payments to be
made in accordance with the Capital Center Trust's priority of payments
waterfall, and b) to corroborate the waterfall payments calculated
by HiTo and included in HiTo's Payment Report, and to investigate
any differences between HiTo's and Nafin's payment calculations.
-- The well-established Mexican laws governing mortgage
The securitized mortgage pool is comprised of 4,156 mortgage loans
with an aggregate outstanding balance of MXP$1,852 million
as of December 3, 2010 (cut-off date). As of the cut-off
date, the pool had a weighted average coupon of 9.7%,
a weighted average debt-to-income ratio of 22.2%,
a weighted average current loan-to-value (LTV) of 89.5%
and original LTV of 89.7%, and a weighted average
seasoning of 2 months (although on average, the borrowers have been
employed in the formal economy for approximately 30 months). As
of the same date all the loans were current.
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,
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.
For this transaction, we are assuming a cumulative gross default
and a severity of loss of 27.8% and 63.7%,
respectively, calculated as a percentage of the initial pool balance
in the most likely model scenario. Expected net losses for this
pool in the most likely model stress scenario is 17.7%.
Cumulative prepayment over the life of this transaction is assumed to
equal 12.0% 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
28% used in determining the initial rating were changed to 52%
or 61%, 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 B3
(sf)/B3.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.
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.
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/SFQuickCheck
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.
Asst Vice President - 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 ratings of Aaa.mx (sf) to Infonavit Total HITOTAL 10U Trust Notes, a Mexican RMBS transaction
Ave. Paseo de las Palmas
No. 405 - 502
Col. Lomas de Chapultepec
Mexico, DF 11000