Moody's Investors Service said it upgraded the long-term underlying rating on California Housing Finance Agency's home mortgage revenue bonds (HMRB — $2.335 billion outstanding at 6/30/14) to A3 from Baa2.
The outlook on the rating is revised to stable from positive. In addition, Moody's affirmed the Aaa/VMIG 1 enhanced ratings on the HMRB's variable rate demand bonds.
The upgrade is based on the significant improvement in the program's financial performance as demonstrated by an adjusted program asset-to-debt ratio (PADR) of 1.12, a notable decrease in the overall delinquencies for the underlying single family loans, and the ability of the cash flows to completely sustain all stress runs.
This program, while not a general obligation of CalHFA, represents the largest standalone program of CalHFA. However, the program has experienced significant runoff since 2008, and there is no expectation of additional issuance under this program.
The A3 rating reflects the program's solid financial performance demonstrated by increased balance sheet strength and profitability, satisfactory loan performance with relatively low single family mortgage loan delinquencies and foreclosures, and improved cash flow projections under all stress runs. The seasoning of the loans further supports the rating and provides cushion in the event of a potential downturn.
