Standard & Poor’s Ratings Servicesplaced certain public finance debtissues that have mortgage guaran- tees from the Federal Housing Administration (FHA) on CreditWatch with negative implications following the downgrade of the United States of America to ‘AA+’ from ‘AAA’.
FHA guarantees cover nearly all the losses from loans that have defaulted, with FHA assuming the risk of recouping its expenses through the sale of the foreclosed property. The issuer, through the loan servicer, receives the claim from FHA for the
outstanding balance of the loan and other expenses from FHA, but has no claim to the sale proceeds. Therefore in the foreclosure process on an FHA loan, the issuer’s entire exposure is exclusively to FHA.
Bond programs include a varying per- centage of FHA loans within their port- folios. Standard & Poor’s plans to assess the effect of FHA insurance on each single-family and multifamily whole loan indenture with FHA-guar- anteed loans. We will take any rating action that we consider appropriate based on Standard & Poor’s criteria. CW
Standard & Poor’s CreditWeek | August 17, 2011 36
Ratings On Certain Public Finance Debt Issues With FHA Mortgage Guarantees Are Placed On CreditWatch Negative
Valerie White New York (1) 212-438-2078
Lawrence Witte San Francisco (1) 415-371-5037
For more articles on this topic search RatingsDirect with keyword: