Mortgage Bonds Take a Hit

Moody’s Investors Service downgraded the senior and mezzanine structured-finance ratings on a 1999 series of single-family mortgage bonds issued by the Idaho Housing and Finance Association to A1 from Aaa and Aa2. The outlook is negative.

The rating action affects around $950,000 of senior bonds and $125,000 of mezzanine bonds outstanding as of Jan. 1, 2012, according to the report issued Tuesday.

Moody’s analysts said part of the reason the bonds received as high of a rating as they did is because the housing association plans to use general fund money to call all three tranches of the bonds on July 1, the next debt service payment date.

If the IHFA does not act on its plans to recall the bonds, the ratings could drop several notches, according to the rating report.

Management focus on addressing financial challenges facing its single-family program also has contributed positively to the rating action, Moody’s analysts said.

They also cited weak financial performance as demonstrated by a deteriorated program asset-to-debt ratio, negative profitability, and potential high level of loan losses driven by the small size of the portfolio and the economic pressures the state is experiencing.

The downgrade does not affect $140,000 of outstanding subordinate bonds issued under the indenture.

Those bonds will continue to carry an A1 rating with a negative outlook. The IFHA’s mission is to provide affordable housing.

It has a total of $1.3 billion in outstanding bonds.

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Idaho
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