We base the preliminary rating on information as of Jan. 22, 2013. Subsequent information may result in the assignment of a final rating that differs from the preliminary rating. We will assign a final rating after JHF finalizes the amount and exact terms of the notes and we complete a full rating analysis, including a satisfactory review of the final pool, cash flow modeling, final structure, transaction documents, and legal and tax opinions.
Standard & Poor’s preliminary rating reflects its opinion on the likelihood of the timely payment of interest, or interest distribution in the case of beneficiary certificates, allowing for a three-month grace period, and the ultimate repayment of principal by the transaction’s legal final maturity date in February 2048.
This transaction is a structured note issuance that JHF originated. We expect the notes to be backed by JPY236.5 billion in beneficiary certificates issued from a trust created with Sumitomo Mitsui Trust Bank Ltd. JHF will entrust 8,681 residential mortgage loan contracts worth about JPY236.5 billion with the trust, along with security rights for each mortgage. The loan pool comprises loans that JHF purchased from private financial institutions. The breakdown of purchased loans is as follows: house construction loans (58.5%), new home purchase loans (27.5%), loans to purchase existing homes (7.6%), and refinancing mortgage loans (6.4%).
JHF will also act as servicer for the transaction, Sumitomo Mitsui Trust Bank as backup servicer, and Sumitomo Mitsui Banking Corp. as beneficiary representative. Due to the structural features of this transaction, the rating on the notes depends to an extent on the credit quality of JHF.
“Counterparty Risk Framework Methodology And Assumptions,” Nov. 29, 2012
“Performance Watch: JHF And GHLC Residential Mortgage-Secured Pass-Through Notes,” Sept. 10, 2012
“Recoveries From Defaulted Japan Housing Finance Agency Loans Are 60% To 70%,” Aug. 27, 2012
“Japan Housing Finance Agency Structured Notes: Structure And Issuance Data Updated For 2012,” April 30, 2012
“Japan RMBS: Post-Disaster Outlook Is Stable For Most RMBS Deals In Fiscal 2012,” April 9, 2012
“Japanese Structured Finance Scenario And Sensitivity Analysis: The Effects Of Major Macroeconomic Factors,” April 6, 2012
“S&P Clarifies Potential Impact On Ratings On JHF’s Structured Notes From Its Proposed Imputed Promises Criteria,” March 7, 2012
“Request For Comment: Methodology For Rating Debt Issues Based On Imputed Promises,” Feb. 10, 2012
“Principles Of Credit Ratings,” Feb. 16, 2011
“Rating Methodology For Residential Mortgage-Backed Securities In Japan,” Aug. 19, 2007
Japan Housing Finance Agency
JPY184.9 billion JHF series 69 fixed-rate residential mortgage-secured
pass-through notes due February 2048
Preliminary rating Amount Coupon type O/C ratio
AAA (sf) JPY184.9 bil. Fixed rate 21.8%
The transaction’s closing date will be Feb. 5, 2013.
The overcollateralization (O/C) ratio is defined as: 1-(A+B)/(C-D-E)
A: the rated obligations and equally ranked obligations
B: prior obligations to the rated obligations
C: underlying assets (including cash)
D: liquidity reserves
E: obligations, except for senior, mezzanine, or subordinate obligations (seller’s interest, etc.)
In the case of a master trust structure, the series base value should be applied.