NHMFC’s P1.065-B notes issue retains AA rating

MANILA, Philippines - Local credit watcher Philippine Ratings Services Corp. (PhilRatings) retained its double A rating on National Home Mortgage Finance Corp.’s (NHMFC) P1.065 billion class A senior notes.

NHMFC likewise retained its PRS Baa rating for its P310.9 million Class B subordinated notes.

Obligations rated ‘PRS Aa’ are of high quality and are subject to very low credit risk. The obligor’s capacity to meet its financial commitment on the obligation is very strong.

Obligations rated ‘PRS Baa’, on the other hand, exhibit adequate protection parameters. Adverse economic conditions and changing circumstances, however, are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

The Class B subordinated notes provide a degree of protection for the Class A notes as the class B notes will absorb initial losses that may be brought about by mortgage accounts which are included in the asset pool and which may go into default given prevailing circumstances.

Among the factors considered by PhilRatings in assigning the ratings were overall sustainability of credit enhancement and standby liquidity facilities; positive economic fundamentals leading to a possibly improved payment capacity of loan borrowers, as well as to sustainable low-income housing projects; deteriorating asset quality of loans in the asset pool; and continuing measures to improve collection efficiency.

The balances of NHMFC’s standby liquidity facilities (i.e. commingled reserve account or CRA and liquidity reserve account or LRA) likewise continued to comply with the required reserve amounts, thus assuring uninterrupted payment of taxes, expenses, as well as interest and principal on the senior notes A.

“The positive outlook for the economy and the housing sector, in general, is backed by relatively strong fundamentals such as the sustained growth in the country’s Gross Domestic Product (GDP) and robust overseas Filipinos (OF) remittances. These further contribute to economic growth and to the improvement in the livelihood of Filipinos which eventually translates to strengthened payment capacity on the part of housing borrowers,” PhilRatings said.

PhilRatings noted, however, that the increase in the total number and value of accounts included in the asset pool that have missed more than six consecutive payments and have thus gone past the loan eligibility criteria.

While the percentage of the total unpaid principal payments of defaulted accounts to the total value of the remaining residential loans was noted to have gone up, actual default rate remains manageable at this time, PhilRatings said.