New York-based credit ratings agency Fitch Ratings affirmed Friday its “AAA” rating on the Puerto Rico Housing Finance Authority’s $191 million mortgage subsidy program single family mortgage revenue bonds.
To reach its decision, Fitch evaluated three bond portfolios: the $100.3 million 2002 portfolio IX; the $72.1 million 2006 portfolio X; and the $18.7 million 2008 portfolio XI. Fitch assigned a Stable Outlook.
In its rationale, Fitch said it affirmed the HFA’s long-term “AAA” rating because each each portfolio consists of Ginnie Mae-backed mortgage certificates that guarantee timely payment of principal and interest.
“The GNMA mortgage backed securities are collateralized at a level that exceeds the bonds outstanding,” said Fitch, adding that its affirmation also reflects that the current contribution accounts within each portfolio are sufficiently funded.
“The Authority set aside these funds for costs of issuance and for a rate subsidy sized to bond maturity, thereby ensuring that there would be no non-asset bonds. Funds cannot be removed from the indentures without a cash flow verification report,” the ratings agency noted.
Fitch’s affirmation further takes into account the strong reserve levels and established program oversight abilities established by the HFA, a subsidiary of the Government Development Bank.
Meanwhile, the agency’s stable ratings outlook “reflects the HFA’s commitment to maintaining the credit quality of the mortgage subsidy programs, highlighted by the upfront deposits at issuance to maintain subsidy payments for the term of the mortgages and the existing structure whereby delinquent mortgages do not affect the cash flow of the portfolios as principal and interest payments are guaranteed by GNMA regardless of the underlying loan performance.”