Bangkok--10 Aug--Standard & Poor's
Standard & Poor's Ratings Services said today it placed certain public finance debt issues that have mortgage guarantees from the Federal Housing Administration (FHA) on CreditWatch with negative implications following the downgrade of the United States of America to 'AA+' from 'AAA' (see "United States of America Long-Term Rating Lowered To 'AA+' On Political Risks And Rising Debt Burden; Outlook Negative," published Aug. 5, 2011, on RatingsDirect on the Global Credit Portal).
FHA guarantees cover nearly all the losses from loans that have defaulted, with FHA assuming the risk of recouping its expenses through the sale of the foreclosed property. The issuer, through the loan servicer, receives the claim from FHA for the outstanding balance of the loan and other expenses from FHA, but has no claim to the sale proceeds. Therefore in the foreclosure process on an FHA loan the issuer's entire exposure is exclusively to FHA.
Bond programs include a varying percentage of FHA loans within their portfolios. Standard & Poor's plans to assess the impact of FHA insurance on each single-family and multifamily whole loan indenture with FHA-guaranteed loans. We will take any rating action that we consider appropriate based upon Standard & Poor's criteria.
The list of affected ratings is posted at http://www.standardandpoors.com/ratings/govs-uspf/en/us. Click "Rating Actions On Municipal Housing-Related Issues" and select the tabs FHA Single Family Whole Loan and FHA Multi Family Whole Loan.
RELATED CRITERIA AND RESEARCH
USPF Criteria: FHA Insured Mortgages, June 18, 2007
Media Contact:
Ola Fadahunsi, New York (1) 212-438-5095,
[email protected]
Analyst Contacts:
Valerie White, New York (1) 212-438-2078
Lawrence Witte, San Francisco (1) 415-371-5037