Fitch Ratings has assigned a 'AA+' rating to the following
Additionally, Fitch has affirmed the 'AA+' rating on approximately
The Rating Outlook is Stable.
The 'AA+' rating reflects the continued strengthening of the program's asset quality, as indicated in the growing percentage of the mortgage-backed securities (MBS) portion of the portfolio; the program's continued financial strength demonstrated by the FY 2022 results and cash flow asset parity levels; and the low percentage (3%) of variable rate debt exposure. VHFA expects to finance single-family new issuance through the purchase of MBS going forward, which will lead to a continued increase in the portfolio's MBS composition.
RATING ACTIONS
Entity / Debt
Rating
Prior
LT
AA+
Affirmed
AA+
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VIEW ADDITIONAL RATING DETAILS
SECURITY
The bonds are general obligations of VHFA and are secured by: single-family whole loans; multifamily loans; MBS guaranteed by
KEY RATING DRIVERS
Asset Quality 'Strong': The rating reflects the continued strengthening of the asset quality of the loan portfolio, with the significant increase in the MBS portion of the portfolio to 72% as of
For the MBS portion of the portfolio,
With the increase in the MBS portion of the portfolio, the single-family whole loan portfolio has correspondingly decreased and comprised 20% of the portfolio as of
Both the single-family whole loans and multifamily loans have exhibited strong performance, despite pandemic-related challenges, mitigating the potential for losses to the program. As of
There are currently no loans in forbearance and no multifamily delinquent loans. Actual loan losses for this program have been minimal over time, approximately
Cash Flow Asset Parity 'Strong': The rating also reflects the program's continued high levels of cash flow asset parity. After incorporating Fitch stress assumptions, which include interest rate stresses, prepayment stresses, increased fees upon liquidity renewal, and loan loss assumptions, the program maintains a cash flow asset parity position above 130% for the life of the bonds. This level of overcollateralization is sufficient to support the 'AA+' rating on the program given the current composition of the portfolio. The stressed overcollateralization calculation excludes approximately
Financial Resources and Program Structure 'Strong': The program remains financially strong as illustrated in recent financial performance. As of FY 2022, the program's financial asset parity decreased marginally to 130% from 134% in FY 2021, still above the five-year average asset parity of 125%. The overall decline in net assets in FY 2022 reflected a
Asymmetric Risk 'Neutral': The multiple purpose bond program is neutral to any asymmetric risks that would constrain the rating.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Weakening asset quality, with significant increases to the uninsured multifamily or whole loan portion of the portfolio, which could cause higher delinquencies and loan losses to the program;
Negative financial performance or loan performance that leads to declines in program retained earnings;
Withdrawal of program funds resulting in a stressed cash flow asset parity ratio that falls below 102%.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
A transition to a primarily MBS portfolio, further strengthening the program asset quality such that the MBS can solely support the debt and/or the overcollateralization provided by the MBS and other '
Best/Worst Case Rating Scenario
International scale credit ratings of Sovereigns, Public Finance and Infrastructure issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of three notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
PROFILE
VHFA works to: ensure that all
As of the same date, the
The 2023 Series A and B bond proceeds will be used: (i) to finance single family loans through the purchase of MBS; and (ii) to fund the revenue fund and cost of issuance amounts. The 2023 series A and B bonds are on parity with the outstanding multiple purpose bonds.
VHFA is designating the 2023 Series A as Social Bonds based on the intended use of proceeds to finance the purchase or improvement of single-family housing located in the state.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
The focus on customer welfare includes fair lending practices, homebuyer education and counselling, and loss mitigation strategies that, when combined, strengthen the program loan performance, which has a positive impact on the credit profile, and is relevant to the rating in conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.
Additional information is available on www.fitchratings.com
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