Fovissste US$1.14bn debt program has solid fundamentals, says Moody's

Tuesday, August 16, 2011

The 14bn-peso (US$1.14bn) fundraising program by Mexican public sector housing lender Fovissste stands to benefit from the solid financial foundations behind it, Karen Ramallo, structured finance analyst at ratings agency Moody's, told BNamericas.

Fovissste's issues of residential mortgage-backed securities (RMBS) generally have excess collateral and full turbo priority of payments, which helps to protect against cash flow deterioration by amortizing the bonds, Ramallo said.

More fundamentally, the Mexican public sector, which provides all of Fovissste's customers, is seeing stable employment levels. In contrast to the private sector, the risk of large-scale job cuts in the public sector looks relatively low at the present, added the analyst.

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Moody's has rated just over 13bn pesos of Fovissste's securities in the three tranches announced so far this year. Each issue was rated at Aaa on the local scale and Baa1 on the international scale.

Last week, Fovissste placed in New York its first international securities in the TFOVIS series, selling 5.48bn pesos worth of debt.


"Historically, the performance of these transactions has been good. There's been quite a low level of mortgage delinquencies, which is the key metric we look at," Moody's analyst said.

This year, Fovissste's RMBS have seen a wider range of collateral than usual. The issues have included high proportion of joint mortgages for cohabiting couples, as well as "sustained payment" mortgages. Sustained payments are housing loans that had payment delays of more than three months, generally in the early phase of the mortgage.

Ramallo noted, however, that these products have similar credit characteristics to traditional single mortgages.