Fitch Rates Maryland CDA's Housing Revenue Bonds 2014 Series A 'AA+';
NEW YORK -- February 6, 2014
Fitch Ratings assigns a long-term rating for the following Maryland CDA
(Maryland CDA or MCDA) Housing Revenue Bonds:
--$4.25 million Maryland CDA Housing Revenue Bonds, 2014 Series A at 'AA+'.
Additionally, Fitch affirms approximately $257.4 million of Maryland CDA
housing revenue bonds at 'AA+' (see full list below) out of the approximate
$374.8 million (at Oct. 1, 2013) 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 the 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 LARGELY GUARANTEED OR PARTIALLY INSURED: As of Sept. 30, 2013,
approximately 96% of the multi-family portfolio is largely guaranteed by the
following entities: Ginnie Mae, Fannie Mae and Freddie Mac, or partially
insured by FHA risk-share.
SUFFICIENT OVER-COLLATERALIZATION: On a cash flow basis, the assets under the
resolution show a minimum asset parity ratio of 109% although Maryland CDA has
the right to withdraw excess assets. However, by practice, Maryland CDA
continues to leave sufficient over-collateralization in the indenture.
CAPABLE MANAGEMENT OVERSIGHT: Maryland CDA has demonstrated strong
programmatic oversight capabilities and has had a long successful history of
administering multifamily programs.
INDENTURE CONSIDERATIONS: The rating is constrained to its current level due
to the fact that the issuer has the ability to withdraw excess assets and to
include various types of loans other than first lien mortgages.
REMOVAL OF ASSETS: Credit risks to the housing revenue bond portfolio are
somewhat remote given its federally insured portfolio and strong
over-collateralization. This over-collateralization mitigates risks from its
loan portfolio. However, removal of assets may present negative rating
The 2014 series A bonds are the 47th 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 $4.25 million 2014 series A
bonds will be used to finance, in part, the development known as Park View at
Laurel II with credit insurance under the FHA risk-share program providing a
75/25 split on the risk of the projects.
The portfolio mainly consists of 58 multifamily residential developments
which, as of Sept. 30, 2013, had an aggregate outstanding mortgage balance of
$352.7 million. Additionally, the portfolio consists of single-family
residences and group homes which account for $8.4 million in loans. As of
Sept. 30, 2013, 96% of the portfolio was guaranteed by a governmental entity
such as: Ginnie Mae (75%), Fannie Mae (3%), Freddie Mac (1%), and insured
under the FHA risk-share insurance program (18%). Going forward, management
expects all new projects will incorporate a 75/25 split under the FHA
risk-share program. All of these governmental entities are currently linked to
the U.S. sovereign rating which is currently rated 'AAA' with a Rating Watch
Negative by Fitch Ratings. In addition, the Maryland Housing Fund (MHF)
insures 1.5% of the loan portfolio while 0.4% remains uninsured. In addition
to the 1.5% covered by MHF, the MHF is backing the risk share amount that is
not covered by HUD totaling approximately $31.0 Million.
More than 43% 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 57% 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 96% guaranteed or insured by a
U. S. government entity, management demonstrating strong programmatic
oversight, and the consistent strong performance of the portfolio.
Additionally, 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, D, E and F at 'AA+'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Rating Criteria for Pooled Multifamily Housing Bonds' (Dec. 12, 2013);
--'Revenue-Supported Rating Criteria' (June 03, 2013).
Applicable Criteria and Related Research:
Rating Criteria for Pooled Multifamily Housing Bonds
Revenue-Supported Rating Criteria
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Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
Ryan J. Pami
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