- We reviewed all sector ratings within scope following the release of our "Mortgage Revenue Bond Program" criteria, published Oct. 10, 2022.
- Overall, the extent and magnitude of rating actions aligned with our expectations, although the direction of rating actions was more uniformly positive than expected.
- Rating changes were limited to one notch.
- Application of the criteria resulted in minimal rating actions in the sector, and we expect continued rating stability under the new framework.
Last fall, S&P Global Ratings published its "Mortgage Revenue Bond Programs" (MRBP) criteria, superseding its "Single-Family Whole Loan Programs" and "Single-Family Second Mortgage Loans" criteria and partially superseding its "Methodology for Rating U.S. Public Finance Rental Housing Bonds, U.S. Federally Enhanced Housing Bonds Rating Methodology", and "Global Framework For Assessing Operation Risk In Structured Finance Transactions" criteria. At the same time, we published a list of 25 ratings placed under criteria observation (UCO; see "Certain U.S. Public Finance Mortgage Revenue Bond Program Ratings Placed Under Criteria Observation," published Oct. 10, 2022). In the second quarter of 2023, we completed our review of these ratings, in addition to the remainder of ratings within scope.
At the time of initial publication, we expected a one-notch rating impact in either direction for less than 10% of our rated universe. In addition, several ratings were designated as UCO to account for additional information needed to perform our hedging risk analysis, although no rating change was necessarily expected.
Criteria Application Results
As of April 10, 2023, the size of our rated universe is unchanged at 74 ratings outstanding. We withdrew the rating on one program following the full redemption of bonds outstanding and closure of the indenture, and added one program, previously linked to the housing finance agency's general obligation (GO) pledge, which was not included in our initial count. Our rating actions across the portfolio were as follows:
- 86.4% affirmed;
- 9.5% raised by one notch; and
- 4.1% with outlook revised and affirmed.
From the 25 ratings designated as UCO, six one-notch upgrades resulted from the implementation of the criteria, based primarily on an ability to cover S&P Global Ratings' assumed losses at a higher rating level and the absence of other constraining factors. See table 1, below, for additional details on these upgrades. These programs spanned a diversity of asset types, with two single-family whole loan-based programs, one composed of multifamily whole loan assets, and three hybrid programs with multiple asset types. Half these ratings were associated with resolutions from which bonds are actively issued, while the other half were considered inactive, or in "runoff."
Within the 19 affirmations designated UCO, there were two outlook revisions resulting from implementation of the criteria. The outlook on the Michigan State Housing Development Authority's single-family mortgage revenue bond resolution was revised to stable from negative, and the Virginia Housing Development Authority's rental housing bond resolution had its outlook revised to stable from positive.
Criteria Application On The Remainder Of The MRBPs
As of April 10, 2023, six months from the criteria publication date, we have completed reviews on the entire universe of MRBP ratings in addition to those marked as UCO. With the exception of one rating, all were affirmed. Massachusetts Housing Finance Agency's housing bond resolution, not designated as UCO, was upgraded due to a strengthening in program performance. Similarly, the outlook on Virginia's homeownership bond resolution was revised to stable from positive, while the rating was affirmed.
We discontinued our rating on California Housing Finance Agency's home Mortgage Revenue Bond program following confirmation that all bonds were defeased and the program closed. We also added the Iowa Finance Authority's multifamily mortgage bond program--secured by the GO pledge of the authority--to the MRBP rated issuers.
On April 27, 2023, Nebraska's single-family housing revenue bond indenture was upgraded one notch to 'AAA', following the receipt of detailed loan information and cash flows reflecting our assumptions for stressed interest and reinvestment rates. While we acknowledge the potential for future rating changes based on fluctuation in program credit quality, or the availability of more detailed loan information for some programs, we nevertheless expect credit stability will remain high, with any future rating changes likely limited to one notch.
|Programs With Ratings Placed Under Criteria Observation|
|Asset types||Active/inactive||As of Oct. 10, 2022||As of April 10, 2023||Change|
|Colorado Housing and Finance Authority multifamily/project bonds Class I||Hybrid||Active||AAA/Stable||AAA/Stable||-|
|Colorado Housing and Finance Authority multifamily/project bonds Class II||Hybrid||Active||AA+/Stable||AA+/Stable||-|
|Colorado Housing and Finance Authority single-family mortgage bonds Class I||Hybrid||Active||AAA/Stable||AAA/Stable||-|
|Colorado Housing and Finance Authority single-family mortgage bonds Class II||Hybrid||Active||AA+/Stable||AA+/Stable||-|
|Colorado Housing and Finance Authority single-family mortgage bonds Class III||Hybrid||Active||AA/Stable||AA/Stable||-|
|Connecticut Housing Finance Authority housing mortgage finance program bonds||Hybrid||Active||AAA/Stable||AAA/Stable||-|
|Georgia Housing and Finance Authority single-family mortgage bonds||SFWHLLN||Active||AAA/Stable||AAA/Stable||-|
|Illinois Housing Development Authority home mortgage revenue bonds||Hybrid||Inactive||AA/Stable||AA+/Stable||1 notch upgrade|
|Maine State Housing Authority mortgage purchase bonds||Hybrid||Active||AA+/Stable||AA+/Stable||-|
|Michigan State Housing Development Authority rental housing revenue bonds||MFWHLLN||Active||AA/Stable||AA+/Stable||1 notch upgrade|
|Michigan State Housing Development Authority single-family mortgage revenue bonds||SFWHLLN||Active||AA+/Negative||AA+/Stable||Outlook revision|
|Minnesota Housing Finance Agency residential housing finance bonds||Hybrid||Active||AA+/Stable||AA+/Stable||-|
|New Jersey Housing and Mortgage Finance Agency multifamily housing revenue bonds (1995 resolution)||MFWHLLN||Inactive||AA/Stable||AA/Stable||-|
|New Jersey Housing and Mortgage Finance Agency multifamily revenue bonds (2004 resolution)||MFWHLLN||Active||AA-/Stable||AA-/Stable||-|
|New Jersey Housing and Mortgage Finance Agency single-family housing revenue bonds||SFWHLLN||Active||AA/Stable||AA/Stable||-|
|Tennessee Housing Development Agency residential finance program bonds||SFWHLLN||Active||AA+/Stable||AA+/Stable||-|
|Texas Department of Housing and Community Affairs single-family mortgage revenue bonds||SFMBS||Active||AA+/Stable||AA+/Stable||-|
|Texas Department of Housing and Community Affairs junior-lien single-family mortgage revenue bonds||SFMBS||Active||AA+/Stable||AA+/Stable||-|
|Utah Housing Corp. single-family mortgage bonds, Class III||SFWHLLN||Inactive||AA-/Stable||AA/Stable||1 notch upgrade|
|Utah Housing Corp. single-family mortgage bonds (New Issue Bond Program), Class I||SFWHLLN||Inactive||AAA/Stable||AAA/Stable||-|
|Utah Housing Corp. single-family mortgage bonds (New Issue Bond Program), Class III||SFWHLLN||Inactive||AA/Stable||AA+/Stable||1 notch upgrade|
|Virginia Housing Development Authority rental Housing bonds||MFWHLLN||Active||AA+/Positive||AA+/Stable||Outlook revision|
|Wisconsin Housing and Economic Development Authority home ownership revenue bonds (1987 resolution)||Hybrid||Active||AA/Stable||AA+/Stable||1 notch upgrade|
|Wisconsin Housing and Economic Development Authority home ownership revenue bonds (1988 resolution)||Hybrid||Active||AA+/Stable||AA+/Stable||-|
|Wisconsin Housing and Economic Development Authority housing revenue bonds||Hybrid||Active||AA/Stable||AA+/Stable||1 notch upgrade|
|SFWHLLN--Single-family whole loan. MFWHLLN--Multifamily whole loan. SFMBS--Single-family mortgage-backed securities.|
This report does not constitute a rating action.
|Primary Credit Analyst:||Daniel P Pulter, Englewood + 1 (303) 721 4646;|
|Secondary Contact:||Marian Zucker, New York + 1 (212) 438 2150;|
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