Moody’s Investors Service has extended the review period for a possible downgrade of $871 million of outstanding bonds sold by the Idaho Housing and Finance Association while the issuer works on a plan to shore up its balance sheet.
The Moody’s report said IFHA is assessing the cost and benefit of calling some of its variable-rate debt and the merits of making a capital contribution from its general fund to trust indentures.
“We are looking at a number of different options, running cash flows and looking at various financial plans regarding variable debt, but we have not decided on a plan,” said John Sagar, the housing agency’s chief financial officer. “It is too early in the process to describe in any detail what options are being considered.”
Though the agency plans to meet with Moody’s analysts in two weeks, they do not expect to have a plan finalized before a board meeting on Dec. 9, Sagar said. However, the plan will be approved and in place by the next debt service payment in January, he said.
Even though the details of the plan have not been fleshed out, according to the Moody’s report, analysts believe that if implemented, the plan could change the housing agency’s risk profile.
“We didn’t feel it was right to take action until we know more about their plans and the details,” said Omar Ouzidane, an assistant vice president with Moody’s public finance group.
In June Moody’s downgraded the agency’s general obligation bonds, Series 1991I bonds, and 2006 indenture bonds. The ratings dropped to Aa1, Aa2 and A1 from Aaa, Aa and Aa3, respectively. Analysts kept the bonds on review for a possible downgrade, Ouzidane said.
The increase in the unemployment rate and the decline in house prices in Idaho have contributed to increased losses on loans that go to foreclosure, according to the rating report.
Idaho’s unemployment rate in September was 9%, down by 0.2% from a year earlier, and just slightly lower than the 9.1% national average, according to the U.S. Labor Department statistics.
Idaho housing prices didn’t experience the kind of declines seen nationally until last year, Ouzidane said, though he didn’t know if the state’s lagging house prices reflect a positive or negative event.
RealtyTrac, a company that tracks foreclosures nationwide, reported in late October that the number of foreclosures in Idaho dropped from 1,860 in August to 1,654 in September. The state had the seventh highest foreclosure rate in the nation in September, with one out of every 391 housing units receiving a foreclosure filing, according to the data.
The state’s housing prices have declined in line with the national average, but the delinquency rates are higher than the Federal Housing Administration’s fixed-rate loan delinquencies, and the delinquency levels of most state housing finance agencies, Ouzidane said.
The IFHA’s portfolio of 9,202 mortgage loans, with an outstanding principal balance of $1.37 billion as of Dec. 31, 2010, is a key source of security for the bonds, according to the Moody’s report.
For this reason, potential losses related to mortgage loans are a key concern because of the relatively high level of mortgage delinquencies and foreclosures, the report stated.
Serious delinquencies, which include loans delinquent 90 days or more and loans in foreclosure, rose from 6.31% on Dec. 31, 2009, to 8.32% as of Dec. 21, 2010. The delinquencies had dropped to 7.9% by the spring, but the levels still remain high compared to national FHA figures on fixed-rate loan delinquencies and most state housing agencies, Moody’s said.
Moody’s analysts said they were also concerned about the cushion the housing agency might have because the housing agency’s insurer experienced downgrades in its own ratings, said senior credit officer William Fitzpatrick.
Only 27% of the IFHA’s bonds are insured by Genworth Mortgage Insurance Corp., with the remainder being insured by a federal government insurer. Moody’s downgraded Genworth to Ba1 from Baa2 in May.
Daily Briefing | Friday, November 4, 2011
Job Losses in the Mortgage Industry Begin to Ebb
Mortgage companies pared their payrolls by just 300 full-time employees in September, compared to 3,400 cuts the prior month, according to new government figures released Friday morning.
HAMP Mods Rise Nicely, Including Principal Reductions
Residential servicers completed nearly 40,150 HAMP modifications in September, a 60% improvement from August, according to figures released by the U.S. Treasury Department.
A Deal May be Afoot to Restore GSE Loan Limits
A decision to restore the $729,750 maximum loan limit on government-backed loans likely will be made by House and Senate leaders — and not the appropriators, according to industry sources following the issue.
Genworth’s Loss Halved
The U.S. mortgage insurance business at Genworth Financial Inc., Richmond, Va., nearly halved its year-over-year loss in the third quarter as new flow delinquencies declined 14% from the previous year and new insurance written was up by 13% in the same timeframe.
Ranieri’s Selene Hires Litton and Other Top Managers
Selene Finance, a specialty servicer/loan modification company controlled by Lewis Ranieri, has hired Larry Litton Jr., and a handful of top managers from Litton Loan Servicing, Houston, according to servicing executives that have done business with the firm.
Redwood Sees Big Earnings Drop but Jumbo Production Spikes
Redwood Trust, the only firm to publicly issue jumbo MBS the past two years, earned just $1 million in the third quarter, but its acquisition of nonconforming product in the secondary market jumped by 166%.
AIG Posts Small Loss
American International Group, New York, reported a net loss of $4.1 million, which includes a $931 million decline in the fair market value of AIG’s holdings in Maiden Lane III and a $43 million decline in the fair market value of its subsidiary SunAmerica’s holdings in Maiden Lane II.
LPS Wins Court Battle Against FDIC in WaMu Appraisal Case
U.S. District Court for the Central District of California Thursday dismissed a civil claim filed against Lender Processing Services by the Federal Deposit Insurance Corp., which accused the mortgage vendor of gross negligence in appraisals conducted for the now defunct Washington Mutual, Seattle.
Another Protest to Draw Attention to Foreclosure Impact
The outcry against the financial sector has taken yet another turn, this time with a petition calling on the Minneapolis School Board to move its payroll and other accounts from Wells Fargo to a local community bank as a way to highlight the connection between foreclosures and local school systems.
Fincen Plan Requires GSEs to Develop Anti-Money Laundering Procedures
A proposal from the Financial Crimes Enforcement Network would require Fannie Mae and Freddie Mac to develop their own anti-money laundering programs as part of an ongoing effort to combat mortgage fraud.