Fitch Rates Maryland CDA's Housing Revenue Bonds 2013 Series D 'AA+';
NEW YORK -- August 29, 2013
Fitch Ratings assigns a long-term rating of 'AA+' to the following Maryland
Community Development Administration (MCDA) housing revenue bonds:
--$10.790 million MCDA housing revenue bonds, 2013 series D.
Additionally, Fitch affirms approximately $206.7 million of MCDA housing
revenue bonds at 'AA+' (see full list below) out of the approximate $371.5
million of total parity debt outstanding under the Nov. 1, 1996 general bond
resolution. The difference between the outstanding bond amount and the total
debt outstanding under the resolution is from debt obligations that Fitch was
not asked to rate.
The Rating Outlook for the bonds is Stable.
The trust indenture pledges all the mortgages in the loan portfolio consisting
of multifamily, single family and group homes as well as the funds pledged
under the legal provisions of the resolution.
KEY RATING DRIVERS
PORTFOLIO FEDERALLY INSURED: As of March 31, 2013, approximately 97% of the
multi-family portfolio is partially or fully insured by the Federally-backed
entities: Ginnie Mae, Fannie Mae, Freddie Mac, and FHA risk-share.
SUFFICIENT OVER-COLLATERALIZATION: On a cash flow basis, the assets under the
resolution show a minimum asset parity ratio of 108% although MCDA has the
right to withdraw excess assets. However, by practice, MCDA continues to leave
sufficient over-collateralization in the indenture.
CAPABLE MANAGEMENT OVERSIGHT: MCDA has demonstrated strong programmatic
oversight capabilities and has had a long successful history of administering
INDENTURE CONSIDERATIONS: The rating is constrained by the issuer's ability to
withdraw excess assets and to include various types of loans other than first
REMOVAL OF ASSETS: Credit risks to the housing revenue bond portfolio are
somewhat remote given its federally insured portfolio and strong
over-collateralization, which mitigates risks from its loan portfolio.
However, removal of assets may present negative rating pressure.
The 2013 series D bonds are the 44th series of bonds to be sold under a
general bond resolution adopted on Nov. 1, 1996 and are on parity with all
bonds issued previously under the indenture. The $10.64 million 2013 series D
bonds will be used to finance in part the developments known as Orchard Ridge
IV and Riverwoods at St. Michaels and have credit enhancement under the FHA
risk-share program providing a 50/50 split and 75/25 split, respectively, on
the risk of the projects.
The portfolio mainly consists of 59 multifamily residential developments
which, as of March 31, 2013, had an aggregate outstanding mortgage balance of
$361.4 million. Additionally, the portfolio consists of single-family
residences and group homes which account for $8.5 million in loans. As of
March 31, 2013, 97% of the portfolio was insured by a governmental entity such
as: Ginnie Mae (77%), Fannie Mae (5%), Freddie Mac (1%), and FHA risk-share
(14%) providing a 50/50 split on project risk. Going forward, management
expects all new projects will incorporate a 75/25 split under the FHA
risk-share program. All of these entities are backed by the U.S. Government,
which is currently rated 'AAA' with a Negative Outlook by Fitch. In addition,
the Maryland Housing Fund insures 1.6% of the loan portfolio while 0.4%
More than 36% of the multifamily units in the portfolio receive rental
assistance payments under Section 8 of the U.S. Housing Act of 1937 or
interest-rate subsidies under Section 236 of the National Housing Act. The
remaining 64% of the units do not receive rental or interest-rate subsidies.
Credit concerns are related to the bond resolution allowing various types of
loans including uninsured and second lien mortgages. These concerns are
mitigated by the current loan portfolio being 97% insured by a government
entity, management demonstrating strong programmatic oversight, and the
consistent strong performance of the portfolio.
Fitch affirms the following ratings:
--MCDA housing revenue bonds, 2004 series B, C, & D at 'AA+';
--MCDA housing revenue bonds, 2005 series A, B, & C at 'AA+';
--MCDA housing revenue bonds, 2006 series A, B, C, & D at 'AA+';
--MCDA housing revenue bonds, 2007 series A, B, & C at 'AA+';
--MCDA housing revenue bonds, 2008 series A, B, C, & D at 'AA+';
--MCDA housing revenue bonds, 2009 series A at 'AA+';
--MCDA housing revenue bonds, 2012 series A, B, & D at 'AA+;
--MCDA housing revenue bonds, 2013 series A, B, & C at 'AA+'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Rating Criteria for Pooled Multifamily Housing Bonds' (Dec. 20, 2012);
--'Revenue-Supported Rating Criteria' (June 3, 2013).
Applicable Criteria and Related Research:
Rating Criteria for Pooled Multifamily Housing Bonds
Revenue-Supported Rating Criteria
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Charles Giordano, +1 212-908-0607
Fitch Ratings, Inc.
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