NHMFC bonds retain high ratings

MANILA, Philippines - The National Home Mortgage Finance Corp. (NHMFC) retained its PRS Aa rating from the Philippine Ratings Services Corp. for its P420 million residential mortgage backed securitization issue.

NHMFC likewise retained its PRS Baa rating for its P183.74 million class C subordinated notes.

Obligations rated ‘PRS Aa’ are of high quality and are subject to very low credit risk.  This means the issuer’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 likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. 

The ratings reflected the following considerations: sustained strong credit enhancement and standby liquidity facilities; additional layers of protection, as well as collection efficiency enhancements, considering the weakening asset quality of accounts included in the pool and the material amount of restructured loans included in the portfolio; and the relatively positive economic outlook for the Philippines.   

PhilRatings said the interest and penalty collections from the asset pool for the collection period  April 2012 to December 2012  as well as from January to May 2013 have more than adequately covered senior expenses, coupon payments for the Class A and B Senior Notes, as well as servicer fees.   

Philratings said “excess spread has continued to accumulate from April 2012 to May 2013 and were thus transferred to the Seller Restricted Account (SRA).  The SRA is  a restricted bank account under the name of NHMFC, set up to fund principal or interest payment shortfalls, if any.  Excess spread is estimated to have further accumulated for full-year 2013 up to 2014.  This will therefore lead to a higher amount of SRA over the short-term,” PhilRatings said. 

Aside from this, PhilRatings said the cash balance of the principal collection account continued to accumulate as of end-May 2013.  This can more than adequately cover the scheduled principal amortization payments for the succeeding 12-month period of the  Senior Class A and B Notes. “The cash balance is estimated to remain robust and thus provide a strong buffer for the principal amortization of the Class A and B Senior Notes in the short-term,” PhilRatings noted.

However, PhilRatings noted an 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. 

“In addition, a substantial number of the accounts included in the asset pool availed of various restructuring programs that were introduced by NHMFC in the past.  Although NHMFC has since reclassified these accounts to be low-delinquent, a longer period of sustained, timely repayment needs to be established in relation to these accounts,” PhilRatings said.