Bangkok--22 Dec--Standard & Poor's
Standard & Poor's Ratings Services raised its rating on Wyoming Community Development Authority (WCDA)'s housing revenue bonds, series 2001A, 2002A, and 2003B to 'AAA/A-1+' from 'AA+/A-1+', reflecting a substitution of the enhancement. We expect that on Dec. 21, 2009 (the substitution date), the existing enhancements will be terminated and replaced under the U.S. Treasury's Temporary Credit and Liquidity Program (TCLP). Under TCLP, one master irrevocable standby temporary credit and liquidity facility (C & L facility), issued by Fannie Mae and Freddie Mac (collectively, the GSEs) in favor of the trustee, will support the three series of bonds. Standard & Poor's also assigned its 'AA+' underlying rating (SPURs) to the three series of upgraded bonds, and affirmed its 'AA+' rating on all other bonds outstanding under the indenture. The outlook on the long-term component of the ratings is stable.
After the substitution date, the GSEs will provide both credit and liquidity support for both tenders and scheduled bond payments. The new support is expected to expire on Dec. 21, 2012, and as currently written, does not allow for extension. The bonds will be remarketed in a variable-rate weekly mode. If a bondholder elects to tender its bonds, it must provide seven days' notice of such intent.
Credit loan loss coverage is provided through the evaporation of assets in cash flow scenarios, overcollateralization, and pool insurance policies from Radian Guaranty Inc. (BB-/Watch Negative). Liquidity in excess of 2% of the loans is provided by reserve fund assets and advance claims components of the pool policies. The resolution's increasing financial health has helped it achieve a strong equity position and has given the authority increased flexibility in managing its reserve levels during the long term.
Cash flow projections were modeled on a 30-day payment lag and under various prepayment scenarios and show the sufficiency of assets and revenues to pay full and timely debt service, plus program fees. Combined cash flows, with a cash flow basis of July 1, 2009, are extremely strong with an asset-to-liability parity ratio of 160.68% ($69 million in excess assets). The overcollateralization serves as an excess reserve beyond our loss coverage requirements, which are completely covered through an assumed loss of mortgages in the cash flows.
As of Sept. 30, 2009, there were 1,195 loans outstanding under the program, of which almost 72% carry Federal Housing Administration (FHA) insurance or have Veterans Administration (VA) or rural development (RD) guarantees.
RELATED RESEARCH
USPF Criteria: "Single-Family Whole Loan Programs," June 14, 2007
USPF Criteria: "New Discounts Reflect Changes To Mortgage Insurer Ratings In the Municipal Housing Sector," Oct. 29, 2009
USPF Criteria: "Assumptions: Update to Cash Flow Analysis for Public Finance Housing Bonds," March 3, 2009
USPF Criteria: "S&P Cuts Minimum Reinvestment Rates For U.S. Structured And Muni Housing Bonds," Oct. 31, 2008
Criteria: "Revised U.S. RMBS Interest Rate Assumptions For October 2009," Aug. 6, 2009
Criteria: Methodology And Assumptions: Approach To Evaluating Letter Of Credit-Supported Debt, July 6, 2009
Complete ratings information is available to RatingsDirect on the Global Credit Portal subscribers at www.globalcreditportal.com and RatingsDirect subscribers at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.
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