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Announcement:

Moody's comments on Aa2 rating of New Jersey Housing & Mortgage Finance Agency Housing Revenue Bonds

Global Credit Research - 15 Jan 2014

Rating outlook is negative

New York, January 15, 2014 -- Moody's Investors Service, ("Moody's") maintains a Aa2 rating with a negative outlook on $806,155,000 of outstanding New Jersey Housing and Mortgage Finance Agency (the "Agency" or NJH&MFA") Single Family Housing Revenue Bonds ("HRB").

The Aa2 negative rating reflects the weak performance of the approximately 7,019 single family whole loans supporting the bonds as demonstrated by the high foreclosure rate which reached 13.93% as of September 30, 2013. This mitigated by the strong financial position of the program as demonstrated by a program asset-to-debt ratio ("PADR") of 1.17x as of December 31, 2012, the transfer of the portfolio to an in-state mortgage servicer which management believes will improve portfolio performance and plans to begin an aggressive loan modification program.

STRENGTHS

PADR of 1.17x as of December 31, 2012.

60% of the loans are government insured which limits the program's exposure to loan losses due to deep insurance levels.

WEAKNESSES

Very High Foreclosures of 13.93% as of September 30, 2013.

Financial losses in fiscal 2012 and expected 2013 losses.

High Variable Rate Debt totaling 51% of outstanding debt of which 90% is swapped.

OUTLOOK

The outlook for the New Jersey Housing and Mortgage Finance Agency Single Family Housing Revenue Bond Resolution is negative which reflects the high foreclosure levels, financial losses in 2012 and the rising percentage of unhedged variable rate debt.

WHAT COULD MAKE THE RATING GO UP

Unlikely over the near team until seriously delinquent loans dramatically improve and the state economy shows improvement in real estate prices and unemployment.

WHAT COULD MAKE THE RATING GO DOWN

Sustained level of high delinquencies and foreclosures over the next 12-18 months.

Decline in PADR or deterioration in assets caused by delinquencies, higher than expected foreclosure costs or rejected PMI insurance claims.

Significant investment losses or actions by management or the state government that negatively impact the financial strength of the Housing Revenue Bond Program.

RATING METHODOLOGY

The principal methodology used in this rating was U.S. Housing Finance Agency Single Family Programs published in February 2013. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

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

Please see Moody's Ratings Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the time horizon in which a credit rating action may be after a review or outlook action took place.

Please see ratings tab on the issuer page on www.moodys.com for the last rating action and the history of the rating. 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/disclosures for further information.

Please see the ratings disclosure page on www.moodys.com/disclosures for disclosures on significant Moody's shareholders and on certain relationships between Moody's, its shareholders and/or rated issuers.

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 the rating.

Richard Kubanik
Analyst
Public Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Florence E Zeman
Associate Managing Director
Public Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's comments on Aa2 rating of New Jersey Housing & Mortgage Finance Agency Housing Revenue Bonds
No Related Data.

 

© 2014 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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