Fitch Rates Florida HFC's $18.55MM Hsg Revs Underlying 'A'

Business Wire, Nov 20, 2002

Business Editors

NEW YORK--(BUSINESS WIRE)--Nov. 20, 2002

Fitch Ratings assigns an underlying rating of 'A' to Florida Housing Finance Corp.'s (FHFC) $15.9 million multifamily mortgage revenue bonds, 2002 series O-1, and $2.65 million taxable multifamily mortgage revenue bonds, 2002 series O-2 (Heron Cove Apartments). The bonds, scheduled to sell competitively this week, are expected to be insured by Financial Security Assurance Inc., whose insurer financial strength is rated 'AAA' by Fitch.

The underlying rating reflects the guarantee of the project mortgage during construction by FHFC through its Affordable Housing Guarantee Fund (guarantee fund). Fitch rates the guarantee fund's insurer financial strength 'A' based on the fund's low risk-to-capital ratio, adequate existing reserves, and high asset quality and liquidity of reserve fund investments.

In addition, the project mortgage is expected to be insured by the Federal Housing Administration (FHA) through an agreement between the U.S. Department of Housing and Urban Development (HUD) and the FHFC, as mortgage lender, under HUD's risk-sharing program. According to a firm approval letter issued by HUD and subject to compliance with program requirements, the department will issue its final endorsement of the mortgage following completion of project construction.

The bonds are special obligations of the issuer and are being sold to fund acquisition, construction, and a permanent mortgage for a 298-unit rental housing project in Naples, within Collier County, Florida. The bonds are secured by the project mortgage. In the event of mortgage default during construction, the timely filing of an insurance claim with the guarantee fund will provide adequate proceeds to redeem bonds in full and pay accrued interest. The bonds' rating reflects both the fund's rating and the trust indenture's security provisions which provide for timely filing and payment of insurance claims, if necessary.

Following endorsement, HUD pays a claim in an amount equaling the unpaid balance of the mortgage note plus interest from the date of default to the date of claim payment. Claim proceeds will supply sufficient funds to fully redeem bonds and pay accrued interest. A separate reserve fund equivalent to approximately six months of debt service on the bonds is expected to be in the form of a surety bond or similar facility from a provider rated at least 'AA' by Fitch.