TEXT-S&P Assigns 'AAA (sf)' Rating To JHF's Series 68 Notes

Wed Dec 26, 2012 8:35pm EST

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(The following was released by the rating agency)

OVERVIEW

-- JHF's series 68 fixed-rate residential mortgage-secured pass-through notes are a structured note issuance that JHF originated. A pool of residential mortgage loans ultimately backs the notes.

-- We have assigned our 'AAA (sf)' rating to the notes, based on our view of the transaction's legal structure, credit support, and pool characteristics, among other factors.

-- Due to the structural features of this transaction, the rating on the notes depends to an extent on the credit quality of JHF.

TOKYO (Standard & Poor's) Dec. 27, 2012 --Standard & Poor's Ratings Services today said that it has assigned its 'AAA (sf)' rating to Japan Housing Finance Agency's (JHF; AA-/Negative/A-1+) JPY138.1 billion series 68 fixed-rate residential mortgage-secured pass-through notes.

A pool of residential mortgage loans that JHF purchased from private financial institutions ultimately secures the notes. Standard & Poor's rating reflects its opinion on the likelihood of the timely payment of interest, or interest distribution in the case of beneficiary certificates, allowing for a three-month grace period, and the ultimate repayment of principal by the transaction's legal final maturity date in January 2048.

This transaction is a structured note issuance that JHF originated. We expect the notes to be backed by JPY175.8 billion in beneficiary certificates issued from a trust created with Sumitomo Mitsui Trust Bank Ltd. JHF entrusted 6,803 residential mortgage loan contracts worth about JPY175.8 billion with the trust, along with security rights for each mortgage.

The loan pool comprises loans that JHF purchased from private financial institutions. The breakdown of purchased loans is as follows: house construction loans (48.8%), new home purchase loans (33.8%), loans to purchase existing homes (10.7%), and refinancing mortgage loans (6.8%). JHF will also act as servicer for the transaction, Sumitomo Mitsui Trust Bank as backup servicer, and Sumitomo Mitsui Banking Corp. as beneficiary representative. Due to the structural features of this transaction, the rating on the notes depends to an extent on the credit quality of JHF.

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