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Rating Action:

Moody's rates FOVISSSTE Mexican RMBS TFOVICB 15U Certificates Aaa.mx (sf)

 The document has been translated in other languages

20 Apr 2015

Approximately MXN$10.2 billion of debt affected

Mexico, April 20, 2015 -- Moody's de México, S.A. de C.V. assigned ratings of Aaa.mx (sf) (Mexican National Scale) and of A3 (sf) (Global Scale, Local Currency) to TFOVICB 15U certificates in an amount equal to 1,930,169,800 UDIs, or approximately MXN$10,237,118,775.

Issuer: Banco INVEX, S.A., Institución de Banca Múltiple, INVEX Grupo Financiero, acting solely as trustee.

Moody's de México, S.A. de C.V. notes that as of today, the securities contemplated by this transaction have not yet settled. If any assumptions or factors Moody's considered when assigning the ratings change before closing, Moody's could change the ratings it has assigned to the certificates.

RATINGS RATIONALE

The assigned ratings are based on the following:

-- The credit quality of the pool, which comprises minimum wage-denominated (VSM), fixed-rate, first-lien, residential mortgage loans secured by low-income housing in Mexico originated by Fondo de la Vivienda del Instituto de Seguridad y Servicios Sociales de los Trabajadores del Estado (FOVISSSTE; not rated); the mortgage loans are serviced by FOVISSSTE via payroll deductions

-- The certificates' initial credit enhancement of 14% in the form of over-collateralization

-- An irrevocable and unconditional partial credit guarantee (PCG), provided by Sociedad Hipotecaria Federal, S.N.C. (A3/Aaa.mx), which guarantees up to 23.2% of the certificates' unpaid balance

-- The full turbo priority of payments, which captures any excess spread for the benefit of certificate-holders

-- FOVISSSTE's financial stability as servicer, given its status as a government-related institution and its predominance as one of the largest mortgage originators in Mexico

-- The alignment of interests between investors and FOVISSSTE, given its ownership of the residual certificate

-- The well-established Mexican laws governing mortgage securitization

Moody's reviewed a portfolio of 22,224 mortgage loans with an aggregate outstanding balance of MXN$11,903,626,080 as of February 28, 2015, the cut-off date. As of the cut-off date, the pool had the following weighted average characteristics: an original loan-to-value (LTV) of 94.84%, a current LTV of 81.03%, a payment-to-income ratio of 30%, seasoning of 33.5 months, coupon of 5.70% and an average loan amount of MXN 535.6. The borrowers had an average monthly income of 5.13 VSMs.

The certificates are denominated in UDIs and have a fixed interest rate. At closing, the certificates will constitute 86% of the issuance balance, and the residual will account for the remaining 14%. On each monthly payment date, after covering expenses, the trust will use cash collected from interest and principal payments to pay interest on the certificates. After making interest payments, the trust will use any remaining cash to amortize the certificates. The trust will release no cash to the residual certificates or to the guarantor (if the PCG was drawn), before the certificates paid down in full.

FOVISSSTE will service the securitized portfolio. FOVISSSTE is a government-related institution and one of the largest mortgage originators in Mexico. Its role is to provide affordable housing financing to employees of the Mexican Government. Administradora de Activos Financieros S.A. (Acfin) will serve as the master servicer and will be responsible for validating the cash flows reported from collections, as well as for preparing collateral performance reports. Moody's current assessment of Acfin as master servicer of residential mortgage loans in Mexico is SQ2. Moody's views this transaction as depending highly on the credit quality of FOVISSSTE, because replacing FOVISSSTE as servicer would be very difficult given the specialized nature of both the origination and the servicing of payroll loans to employees of the Mexican government.

The period of time covered in the financial information used to determine TFOVICB 15U's rating is between 31 May 2009 and February 28, 2015 (source: for the TFOVICB 15U certificates, information provided by the originator; for historical information on previous deals rated by Moody's, 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 10.7% and MILAN Credit Enhancement (Milan CE) of 32.1%.

The portfolio's expected loss of 10.7% is based on Moody's assessment of the lifetime loss expectation, which takes into account (1) the average lifetime loss expectation of previous FOVISSSTE-originated securitizations and (2) the current macroeconomic environment in Mexico.

The MILAN CE of 32.1% 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 transaction will depend on the unemployment rate, especially for employees who transfer from the public to the private sector, because FOVISSSTE will not be able to deduct the mortgage payment from the borrower's payroll. Also, the borrowers' available income could decline substantially in the event of an economic downturn.

Given that 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. In the recent years the growth rates for both VSM and UDI have been aligned.

If the portfolio expected loss (EL) were increased until 13.6% and the MILAN CE increased to 38.0%, the deal would still be rated as A3 (sf) / Aaa.mx (sf). But if the portfolio EL would increase to 17.6% and the MILAN CE increased to 35.0% the rating would change to Baa1 (sf) / Aa1.mx (sf) 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 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 January 2015. 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.

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

Moody's has reviewed the origination and servicer practices and considers them adequate.

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 ".za" for South Africa. For further information on Moody's approach to national scale credit ratings, please refer to Moody's Credit rating Methodology published in June 2014 entitled "Mapping Moody's National Scale Ratings to Global Scale 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 did not receive or take into account a third-party assessment on the due diligence performed regarding the underlying assets or financial instruments in this transaction.

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_SF401789.

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 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.

Information source used to prepare the rating is the following: parties involved in the ratings.

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 certain 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 certain 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 certain 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 HR and Standard & Poor's have assigned a rating of AAA and mxAAA (sf) 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 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 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.

Joel Sanchez
Asst Vice President - 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 rates FOVISSSTE Mexican RMBS TFOVICB 15U Certificates Aaa.mx (sf)
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.

CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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