(The following statement was released by the rating agency)
Nov 20 -
-- JHF's series 67 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 preliminary '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 .
Standard & Poor's Ratings Services today said that it has assigned its preliminary 'AAA (sf)' rating to Japan Housing Finance Agency's (JHF; AA-/Negative/A-1+) JPY143.4 billion series 67 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.
We base the preliminary rating on information as of Nov. 20, 2012. Subsequent information may result in the assignment of a final rating that differs from the preliminary rating. We will assign a final rating after JHF finalizes the amount and exact terms of the notes and we complete a full rating analysis, including a satisfactory review of the final pool, cash flow modeling, final structure, transaction documents, and legal and tax opinions.
Standard & Poor's preliminary 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 December 2047.
This transaction is a structured note issuance that JHF originated. We expect the notes to be backed by JPY182.2 billion in beneficiary certificates issued from a trust created with Sumitomo Mitsui Trust Bank Ltd. JHF will entrust 6,973 residential mortgage loan contracts worth about JPY182.2 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 (52.0%), new home purchase loans (32.3%), loans to purchase existing homes (9.0%), and refinancing mortgage loans (6.7%).
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.
RELATED CRITERIA AND RESEARCH
"Performance Watch: JHF And GHLC Residential Mortgage-Secured Pass-Through Notes," Sept. 10, 2012
"Recoveries From Defaulted Japan Housing Finance Agency Loans Are 60% To 70%," Aug. 27, 2012
"Counterparty Risk Framework Methodology And Assumptions," May 31, 2012
"Japan Housing Finance Agency Structured Notes: Structure And Issuance Data Updated For 2012," April 30, 2012
"Japan RMBS: Post-Disaster Outlook Is Stable For Most RMBS Deals In Fiscal 2012," April 9, 2012
"Japanese Structured Finance Scenario And Sensitivity Analysis: The Effects Of
Major Macroeconomic Factors," April 6, 2012
"S&P Clarifies Potential Impact On Ratings On JHF's Structured Notes From Its
Proposed Imputed Promises Criteria," March 7, 2012
"Request For Comment: Methodology For Rating Debt Issues Based On Imputed
Promises," Feb. 10, 2012
"Principles Of Credit Ratings," Feb. 16, 2011
"Rating Methodology For Residential Mortgage-Backed Securities In Japan," Aug. 19, 2007
PRELIMINARY RATING ASSIGNED
Japan Housing Finance Agency
JPY143.4 billion JHF series 67 fixed-rate residential mortgage-secured pass-through notes due December 2047
Preliminary rating Amount Coupon type Overcollateralization ratio
AAA (sf) JPY143.4 bil. Fixed rate 21.3%
The transaction's closing date will be Nov. 30, 2012.
The overcollateralization ratio is defined as: 1-(A+B)/(C-D-E)
A: the rated obligations and equally ranked obligations
B: prior obligations to the rated obligations
C: underlying assets (including cash)
D: liquidity reserves
E: obligations, except for senior, mezzanine, or subordinate obligations (seller's interest, etc.)
In the case of a master trust structure, the series base value should be applied.