LOS ANGELES — Fitch Ratings placed $354 million in Idaho Housing Finance Association single-family mortgage bonds on negative rating watch.
The two bond series issued under a 2006 master indenture were placed on negative watch after the series asset parity ratios fell below minimum indenture requirements, Fitch analysts said in an Oct. 22 report.
The bonds placed on negative watch are: $344.9 million IHFA single-family mortgage class I bonds currently rated AAA; and $9.3 million IHFA single-family mortgage class II bonds currently rated AA.
IHFA's management assured Fitch that it will address the issue in coming months, analysts said.
"Historically, IHFA has experienced similar asset parity issues in other indentures and has resolved the issue by restoring the bonds to the minimum asset parity requirements," Fitch analyst said.
The master indenture pledges revenues, investment earnings, reserves, and other trust funds to secure the bonds. The class I and II bonds have asset parity maintenance requirements directing revenues to be used to call bonds of those classes prior to paying debt service of the next junior class.
The rating watch will be resolved once a plan has been implemented to restore parity levels to the minimum indenture requirements, Fitch analysts said.
Should IHFA fail to take those steps, Fitch analysts said they would downgrade the bond ratings to reflect the current asset parity levels.
"Additionally, as the percentage of class I and II bonds continues to grow relative to total bonds outstanding, the debt subordination structure provides less security moving forward, which could result in a downgrade of the class I and II bonds," Fitch said.
