New York, September 28, 2022 — Moody’s Investors Service has assigned a rating of Aa2 to the proposed $46,920,000 New York State Housing Finance Agency’s (Agency) Affordable Housing Revenue Bonds 2022 Series F-1 (Sustainability Bonds) and $115,090,000 Affordable Housing Revenue Bonds 2022 Series F-2 (Sustainability Bonds). The Bonds will be issued under the Agency’s General Resolution adopted on August 2007 (Resolution). Moody’s maintains an Aa2 rating on all outstanding parity debt issued under the Resolution. Additionally, any related subseries created or changed upon pricing of the deal will also carry the Aa2 rating as applicable. The outlook is stable.
RATINGS RATIONALE
Based on (i) credit quality of the credit support providers for the multifamily mortgage loans pledged to the bondholders under the program’s Resolution and Supplemental Resolutions, (ii) additional funds provided by the Agency and pledged to the bondholders, (iii) active role of management, the program’s track record and management’s flexibility to release assets under certain conditions, and (iv) credit support providers of varying credit quality.
RATING OUTLOOK
The stable outlook is based on our expectation that the overall credit quality of the credit support providers will not vary significantly and that, going forward, management will continue to pledge mortgage loans under the Resolution with credit support providers of similar credit quality.
FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS
– A change in practice that would result in an increase in the overall credit quality of the credit support providers and/or a significant increase in excess assets over liabilities and the commitment to maintain it.
FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS
– A rating downgrade of the State of New York Mortgage Agency (“SONYMA”) Mortgage Insurance Fund (“MIF”) Project Pool Insurance Account (Aa1 stable), or rating downgrades of other credit support providers with a material amount of exposure.
– A substantial weakening in the financial position of the program.
LEGAL SECURITY
The Bonds are special revenue obligations of the Agency, payable solely from and secured by the assets pledged under the Resolution. This includes revenues, funds and accounts, and program assets that mainly consist of mortgage loans and any payments received under credit enhancement facilities. The Resolution provides security for all parity obligations issued under it. The Agency retains a level of flexibility in financing loans with credit enhancement of varying types and credit quality.
The Resolution and Supplemental Resolutions provide that bonds may be purchased in lieu of redemption by or at the direction of the Agency. In addition, certain bonds, upon default of the related Freddie Mac or Fannie Mae credit enhanced loan, may be subject to mandatory tender for purchase to become “Freddie Mac Pledged Bonds” or “Fannie Mae Pledged Bonds.” The rating on the bonds does not apply to any such purchased or tendered bonds while the bonds remain in such status.
USE OF PROCEEDS
We anticipate the proceeds of the Bonds will be used for the purposes of financing six mortgage loans for the construction or acquisition and rehabilitation of affordable housing developments, which are expected to create a total of 829 housing units, located in Westchester, Rensselaer, Bronx, Saratoga, Ulster and Kings Counties. We also anticipate the proceeds of the Bonds to be used by the Agency to fund the Debt Service Reserve Fund Requirement.
Additionally, we anticipate that mortgage loan financed with the proceeds of the Bonds during construction or rehabilitation of the related project will be enhanced by separate direct-pay letters of credit (LOC) as follows: – One from JPMorgan Chase Bank, N.A. (counterparty risk assessments Aa1(cr) and P-1(cr)). – One from Goldman Sachs Bank USA (counterparty risk assessments Aa3(cr) and P-1(cr)).
– One from TD Bank, N.A. (counterparty risk assessments Aa3(cr) and P-1(cr)).
– One from Wells Fargo Bank, National Association (counterparty risk assessments Aa1(cr) and P-1(cr)).
– One from Webster Bank, N.A. (counterparty risk assessments A2(cr) and P-1(cr)) with a backstop from US Bank, National Association (counterparty risk assessments Aa3(cr) and P-1(cr)).
– One from Capital One Bank (USA), N.A. (counterparty risk assessments A2(cr) and P-1(cr)). This is a second LOC from Capital One Bank for this existing project. The LOC will enhance a loan that will finance additional costs incurred by the project.
Furthermore, we anticipate that the SONYMA MIF Project Pool Insurance Account will issue commitments to provide mortgage insurance on three of the mortgage loans after their construction or rehabilitation is complete. SONYMA commitment to provide mortgage insurance for the existing project has already been issued. The remaining two mortgage loans that will not be insured by SONYMA will be insured under the FHA Level II Risk-Sharing during their permanent phase. The loans and the proceeds of credit enhancement on the loans will be pledged to bondholders under the program’s Resolution and Supplemental Resolutions.
PROFILE
The Agency was created as a public benefit corporation in 1960 to finance low and moderate income housing. The Affordable Housing Revenue Bonds Resolution, adopted on August 22, 2007, is the Agency’s active parity resolution with about $4.45 billion of mortgage loans backing about $5.7 billion of bonds outstanding, as April 30, 2022. The Resolution permits the issuance of additional bonds secured equally and ratably by the pledged assets. The Agency anticipates that it will issue additional bonds under the Resolution in the future, primarily for the purpose of financing rental housing developments for persons of low and moderate income in the State of New York, in furtherance of the Agency’s mission. The Resolution also permits the issuance of subordinate obligations, but none have been issued to date.
METHODOLOGY
The principal methodology used in these ratings was US Housing Finance Agency Multifamily Methodology published in November 2021 and available at https://ratings.moodys.com/api/rmc-documents/354688. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the issuer/deal page for the respective issuer on https://ratings.moodys.com.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website https://ratings.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://ratings.moodys.com/documents/PBC_1288235.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody’s office that issued the credit rating is available on https://ratings.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody’s office that issued the credit rating is available on https://ratings.moodys.com.
Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.
Please see the issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating.
Omar Ouzidane
Lead Analyst
Housing
Moody’s Investors Service, Inc.
7 World Trade Center
250 Greenwich Street
New York 10007
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Client Service: 1 212 553 1653
Eva Bogaty
Additional Contact
PF Healthcare
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
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