Standard & Poor's Ratings Services removed from CreditWatch with negative implications its BB-plus long-term rating on North Texas Housing Finance Corp.'s single-family mortgage revenue bonds, series 1984, and simultaneously lowered that rating to CCC from BB-plus.

The liabilities consist of capital accumulator bonds, which are primarily secured by a pool of single-family mortgage loans. The outlook is negative.

Standard & Poor's placed this issue on CreditWatch with negative implications earlier this year based on a lack of information sufficient to complete its review despite multiple attempts to obtain the information from various parties. Subsequently, it received such information and were thus able to complete the review.

"This downgrade is necessitated by the issue's low and deteriorating asset-liability parity, which will, in our opinion, impair the payment of principal and interest on the bonds at maturity," said Standard & Poor's credit analyst Adam Cray.

As of April 30, 2013, the rating agency calculated parity for this issue of 92%. Consequently, upon bond maturity in 2016, funds will likely be insufficient to cover 100% of the par outstanding. Moreover, parity is deteriorating over time. As noted in previous articles, the rate at which the bonds are accreting in value is greater than the interest rates on the investments constituting the issue's assets, thus depleting parity as the bonds approach maturity. As this occurs, the agency said it may lower the rating on the bonds to reflect significant increases in credit risk.

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