articles Ratings /ratings/en/research/articles/220928-japan-housing-finance-agency-s-series-t-1-to-t-5-structured-note-aaa-sf-ratings-affirmed-12507710 content esgSubNav
In This List
NEWS

Japan Housing Finance Agency's Series T-1 To T-5 Structured Note 'AAA (sf)' Ratings Affirmed

COMMENTS

Japan Private-Sector RMBS Performance Watch: In Stability?

COMMENTS

U.S. Credit Card Quality Index: Monthly Performance--October 2022

COMMENTS

Canadian Credit Card Quality Index: Monthly Performance--October 2022

COMMENTS

Russia-Ukraine Military Conflict: Key Takeaways From Our Articles


Japan Housing Finance Agency's Series T-1 To T-5 Structured Note 'AAA (sf)' Ratings Affirmed

Overview

  • The JHF series T-1 to T-5 fixed-rate residential mortgage-secured pass-through notes are securitizations that JHF issued. A pool of residential mortgage loans ultimately backs the notes issued under each transaction.
  • We assume a foreclosure frequency for the mortgage loans currently outstanding of about 2% under our base-case scenarios.
  • We are affirming our 'AAA (sf)' ratings on the five series of notes above following our review.
  • Because of the structural features of these transactions, we believe the ratings on the notes depend to an extent on the credit quality of JHF.

TOKYO (S&P Global Ratings) Sept. 28, 2022--S&P Global Ratings today said it has affirmed its 'AAA (sf)' ratings on Japan Housing Finance Agency's (JHF) series T-1 to T-5 fixed-rate residential mortgage-secured pass-through notes (see list below).

Our affirmations reflect the following:

  • We assume a foreclosure frequency for the residential mortgage loans currently outstanding of about 2% under our base-case scenarios and about 12%-14% under stress scenarios consistent with our 'AAA' ratings. These rates, which reflect our view of the credit quality of the underlying assets, are prior to applying adjustments for the transactions' convertible pro rata pay structure.
  • We also assume a loss severity rate of about 5%-7% for defaulted loans under our 'AAA' stress scenarios.
  • We apply a floor for the projected losses (net loss rate after accounting for recoveries from defaulted loans) of 4.0% at the 'AAA' rating level and 0.35% in our base-case scenarios.
  • We also consider default scenarios with a duration of 120 and 60 months in addition to the scenarios described in our Japanese RMBS criteria. This is because the number of months remaining on the loans backing the transactions is declining.
  • For these transactions, we consider a scenario in which the prepayment rate of the overall mortgage loan pool is 12.0% per year after transaction closing. This is because the mortgage loans backing this transaction consist of seasoned loans that have been outstanding for a significant period.
  • No losses have occurred in the underlying pools because JHF has thus far withdrawn from them any loans with impending losses, such as defaulted loans or loans in delinquency for four months. These withdrawals have almost the same effect as prepayments.
  • Current credit enhancement available for each rated series of notes is sufficient to cover that transaction's various risks, such as credit risk under a stress scenario consistent with our rating on the transaction.

These transactions are structured note issuances that JHF issued. A pool of residential mortgage loans that Government Housing Loan Corp., the predecessor of JHF, directly extended ultimately secures the notes issued under each transaction. JHF entrusted the loan pool underlying each transaction with a trust as collateral. Because of the structural features of these transactions, we believe the ratings on the notes depend to an extent on JHF's credit quality. In addition, JHF provides regular updates to loan-by-loan data during the surveillance process.

S&P Global Ratings published a request for comment (RFC) on its proposal to expand the scope of its global RMBS criteria to include Japan (see "Request For Comment: Global Methodology And Assumptions: Assessing Pools Of Residential Loans (Japan)," published July 29, 2022). Because the proposed criteria have not been published yet, we did not apply the proposed criteria to our analysis of the transaction this time.

Related Criteria

Related Research

Ratings Affirmed

Japan Housing Finance Agency
¥50.0 billion JHF Series T-1 fixed-rate residential mortgage secured pass-through notes due May 2032
  • AAA (sf); ¥50.0 bil.; closing date June 29, 2018
¥50.0 billion JHF Series T-2 fixed-rate residential mortgage secured pass-through notes due May 2032
  • AAA (sf); ¥50.0 bil.; closing date Aug. 31, 2018
¥100.0 billion JHF Series T-3 fixed-rate residential mortgage secured pass-through notes due January 2033
  • AAA (sf); ¥100.0 bil.; closing date Nov. 30, 2018
¥50.0 billion JHF Series T-4 fixed-rate residential mortgage secured pass-through notes due April 2033
  • AAA (sf); ¥50.0 bil.; closing date Nov. 29, 2019
¥50.0 billion JHF Series T-5 fixed-rate residential mortgage secured pass-through notes due July 2033
  • AAA (sf); ¥50.0 bil.; closing date Dec. 26, 2019
Primary Credit Analyst:Shota Tatewaki, Tokyo + 81 3 4550 8276;
shota.tatewaki@spglobal.com
Secondary Contact:Yuji Hashimoto, Tokyo + 81 3 4550 8275;
yuji.hashimoto@spglobal.com

No content (including ratings, credit-related analyses and data, valuations, model, software, or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced, or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees, or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness, or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.

Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment, and experience of the user, its management, employees, advisors, and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.

To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.

S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.

S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.spglobal.com/ratings (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.spglobal.com/usratingsfees.


Register with S&P Global Ratings

Register now to access exclusive content, events, tools, and more.

Go Back