Moody's downgraded $5 million of Nevada Housing Division Multi-Unit Housing Revenue bonds to Aa2 from Aaa as part of larger review of U.S. stand-along housing bond programs secured by credit enhanced mortgages.

The downgrade came as a result of a publication of a methodology change on Dec. 13, 2012.

The bond program demonstrated insufficiency -- either a shortfall in revenues at any debt service payment date or an asset-to-debt ratio below 100% at any time during the life of the program-under a 0% reinvestment rate assumption, according to the report.

Analysts said the rating on the bonds reflects the probability of rising interest rates in the future which would improve the future financial performance of the program and offset any insufficiencies.

The strengths are the high credit quality of the credit enhanced mortgage. Challenges are that cash flows demonstrate projected insufficiencies assuming a 0% reinvestment rate.

The bond program performance is dependent upon interest rates. Performance relies on the proper administration and adherence to mandatory provisions of the trust indenture and financing agreement by all parties.

Little to no additional security is available from outside the trust estate.

The rating could go up if cash flow projections demonstrate improved performance or sufficiency. It could go down if there is a lower probability that cash flow or asset-to-debt ratio insufficiencies will be mitigated through improved bond program performance.

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