TEXT-Fitch may still cut 2 MF Florida Housing Guarantee Fund-backed projects

Aug 28 - Fitch Ratings maintains the Rating Watch Negative on two multifamily project bonds supported by Florida Housing Finance Corporation's affordable housing guarantee fund as follows: --Florida Housing Finance Corp. (FL) (Woods of Vero Beach Apartments Project) housing rev bonds series 1999N-1 'A-'; --Florida Housing Finance Corp. (FL) (Wentworth II Apartments Project) housing rev bonds series 1999A. 'A-'. The bond series were placed on Rating Watch Negative in August 2011 because an initial review of the trust assets demonstrated insufficient asset parity (asset/debt) ratios for the current rating level. Subsequent to that review, the developments were approved to receive the second round of funding under the State Apartment Incentive Loan Funding for Extremely Low-Income (SAIL ELI) program. The new funding will be used to redeem a portion of the bonds. The Rating Watch Negative is being maintained because the bond redemptions are scheduled for dates between Oct. 1 and Nov. 1, 2012 and, therefore, the loan and bond amounts are expected to be amended over the next several months. Fitch will review the updated cash flows for each transaction during the process of the loan modification. Once the mortgage note has been amended and a portion of the bonds redeemed, the asset parity ratio will change and Fitch will review each transaction at that time to determine whether each of the bonds, post-restructuring, has an asset parity level commensurate with its rating level. Part of Fitch's surveillance review for single-asset multifamily bond issuances with a mortgage guarantee involves an asset parity test to confirm that available assets would exceed bond liabilities in the case of a mortgage default. The asset parity is calculated by dividing the dollar amount of total program pledged assets (which includes the guaranteed mortgage and amounts on deposit in reserves) by the total amount of bonds outstanding. A typical single-asset multifamily transaction with a mortgage guarantee maintains an asset parity ratio of no less than 101% throughout the term of the bonds. For more information regarding Fitch's rating analysis for single-asset multifamily transactions backed by a mortgage guarantee, please see the press release 'Fitch Affirms 51 MF Project Bonds Supported by FL Hsg Guarantee Fund at 'A-'; Outlook Stable' dated July 11, 2012 available at www.fitchratings.com.