2008-07-16 04:30:07 -

- Fitch Ratings has assigned an 'AA+' rating to Florida Housing Finance Corporation's (FHFC) $66 million homeowner mortgage revenue bonds, 2008 series 2. The bonds are expected to be sold through negotiation this week and are expected to close on or about July 29, 2008. Fitch has also affirmed the 'AA+' rating on all series of the outstanding $1.6 billion

homeowner mortgage revenue bonds as of April 30, 2008, prior to consideration of any bond insurance.

The current offering is the 36th sale of bonds issued under a flexible master trust indenture adopted by FHFC in 1995. The net proceeds from the 2008 series 2 bonds will be used to continue FHFC's single-family first-time homebuyer program by purchasing Ginnie Mae, Freddie Mac, and Fannie Mae mortgage-backed securities (MBS). The long-term rating reflects: the current portfolio, which, as of April 30, 2008, consisted of approximately 89% MBS and 11% single-family whole loan mortgages; the expected purchase of additional MBS; strong asset-to-debt ratio indicating sufficient program reserves and liquidity levels; deep levels of mortgage insurance available to protect against potential losses on the decreasing portion of whole loans; and management's capable program oversight abilities. The current direction of the program with the additional purchase of MBS is seen as a positive credit factor. Credit concerns center on FHFC's flexibility to originate whole loans under the indenture. However, no new whole loans have been originated in the program since prior to 2002. FHFC maintains the ability to remove funds from the program if the asset parity requirement of 102% is met.

The master trust indenture adopted by FHFC in 1995 establishes the bonds' security lien, new issuance requirements, flow of funds, and minimal loan requirements. Specific program restrictions are incorporated into supplemental indentures at the time of each bond sale. As of April 30, 2008, $168 million in whole loans and $1.3 billion in MBS were outstanding, compared with $185 million and $721 million, respectively, as of April 30, 2007, reflecting the growing percentage of MBS in the portfolio. Approximately one-half (48%) of the outstanding whole loan balance by loan amount (which excludes MBS) is Federal Housing Administration (FHA)-insured, 19% is privately insured, 11% is guaranteed by the U.S. Department of Veterans Affairs (VA), 7% is guaranteed by the U.S. Department of Agriculture, through its Rural Housing Service's (RHS) Guaranteed Loan program, and the remaining 15% is uninsured.

In addition to the primary mortgage insurance from various providers, almost all whole loans are covered by mortgage pool insurance under separate policies with varying levels of coverage and constraints. Delinquencies in the existing whole loan portfolio were down slightly from the prior quarter. As of April 30, 2008, 6.3% of the whole loans in the homeowner mortgage revenue bond program were 60 days or more delinquent or in foreclosure, less than recent delinquencies of 8.2% for fixed-rate FHA loans in the state, and a decrease from the Dec. 31, 2007 level of 6.7%.

All prior bonds that were used to purchase whole loans required, by each series-specific supplemental indenture, the funding of a mortgage reserve (2%) and debt service reserve (3%) fund. The 2008 series 2 bonds do not require funding either reserve fund due to the full and timely guarantee of Ginnie Mae, Freddie Mac and Fannie Mae securities. Reserves for several bond series have been funded in the form of non-callable surety bonds provided by the respective bond insurer. As of April 30, 2008, the balances in the mortgage and debt service reserve funds were $3.3 million and $4.5 million, respectively, including the stated amounts of surety policies.

The most recent consolidated cash flow demonstrates that the program's asset-to-debt parity ratio is maintained above approximately 105%. Under certain prepayment and loan origination stress scenarios, the cash flows exhibit a decline in the parity ratio to 104.5% in the near term, but then increase from that point forward.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

Fitch Ratings
Kasia Reed, +1-212-908-0389
Charles Giordano, +1-212-908-0607 (New York)
Media Relations:
Christopher Kimble, +1-212-908-0226 (New York)