Moody's Investors Service has placed the California Housing Finance Agency's home mortgage revenue bonds' A3 unenhanced rating on watch for possible downgrade, which could affect $6.2 billion of outstanding debt.
Moody's said it started the review of the bonds because of the potential credit deterioration of Genworth Mortgage Insurance Corp., which provides critical support for the CalHFA debt.
Genworth's reinsurance covers up to 75% of losses on the mortgage revenue bonds, analysts said. The insurer's rating of Baa2 is on watch for possible downgrade.
The rating agency said in another report that it is also putting the A2 unenhanced rating of CalHFA on watch for a possible downgrade.
CalHFA has $997 million of multifamily housing revenue bonds and $126 million of housing program bonds outstanding that share its rating.
The housing agency's ability to meet liquidity demands, particularly those related to interest-rate swaps, could be hard-pressed if its rating is cut two notches, Moody's said.