Moody’s Investors Service (“Moody’s”) assigns a rating of Aaa to the proposed $48,715,000 of Mississippi Home Corporation (the “Corporation”) Single Family Mortgage Revenue Bonds, Series 2020B (Non-AMT). Moody’s maintains the rating on the outstanding program bonds. The outlook is stable.
RATINGS RATIONALE
The Aaa rating reflects the high quality of the collateral which is comprised of 100% mortgage backed securities (MBS), the high overcollateralization of the program at 114%, as well as the strong profitability of 20.94% in 2019, based on audited financials after Moody’s adjustments.
We regard the coronavirus (COVID-19) outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. The coronavirus crisis is not a key driver for this rating action. We do not see any material immediate credit risks for the Corporation. However, the situation surrounding Coronavirus is rapidly evolving and the longer-term impact will depend on both the severity and duration of the crisis. If our view of the credit quality of the Corporation changes, we will update the rating and/or outlook at that time.
RATING OUTLOOK
The outlook is stable based on the stable outlook of the US government as well as the overcollateralization level of the program and strong profitability.
FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATING
– N/A
FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATING
– Deterioration of the financial performance of the program.
– Downgrade of the U.S. Government
LEGAL SECURITY
The bonds are special obligations of the Corporation, payable from and secured by all revenues and assets of the program.
USE OF PROCEEDS
The bonds are being issued to fund first lien, single family mortgage loans as well as roughly $3 million in second lien loans that will be used to fund down payment assistance. The second lien loans are not anticipated to fund the repayment of the bonds as they are forgivable after ten years as long as certain criteria is met. Any principal that might be paid on the second lien loans in the first ten years will however be used to pay down bond principal.
The mortgage loans to be originated will be wrapped in a guarantee by Ginnie Mae (GNMA) and Fannie Mae (FNMA) or Freddie Mac (FHLMC). The guarantee provides that monthly payments will be made to the trustee, regardless of the performance of the underlying mortgages.
The Corporation is expected to contribute funds in approximately $751,696 to pay for costs of issuance.
PROFILE
There are currently fifteen series of mortgage revenue bonds under the Single Family Mortgage Revenue Bonds 2009 General Resolution. The bonds under the indenture are equally and ratably secured on a parity basis with the Corporation’s Prior Single Family Mortgage Revenue Bonds and with any additional Single Family Mortgage Revenue Bonds hereafter issued pursuant to the Trust Indenture. The collateral for all bonds under the General Resolution is 100% MBS. Currently are no indenture funds held in Guaranteed Investment Contracts (GIC) under the General Resolution.
METHODOLOGY
The principal methodology used in this rating was US Housing Finance Agency Single-Family Housing Methodology published in October 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1154478. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.