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Moody's Investors Service Inc.

Moody's Assigns Aa1 Rating to Indiana Housing and Community Development Authority Multifamily Housing Revenue Bonds

Strategic Insights

— 2 min read

The Indiana Housing and Community Development Authority has issued $17.4 million in multifamily housing revenue bonds, securing an Aa1 rating from Moody's Investors Service. The rating reflects the high credit quality of the collateral provided by Federal National Mortgage Association (FNMA), a sound legal structure, and cash flow projections that exhibit sufficient revenues to pay timely debt service. This transaction mitigates administrative risk through a positive net revenue and build-up of funds in the Revenue Fund, which cannot be released unless MBS payments are clearly limited to investment earnings.

Key Takeaways:

  • The Aa1 rating is based on the high credit quality of the FNMA collateral, sound legal structure, and sufficient cash flow projections to pay timely debt service.
  • The deal reduces administrative complexity through a sound legal structure, positive net revenue, and build-up of funds in the Revenue Fund.
  • The cash flows assume a 0% interest rate, surplus moneys cannot flow out of the trust absent Moody's review, and all fees associated with the deal are paid outside of the trust accounts.
  • Factors that could lead to an upgrade of the rating include an upgrade of the US government rating; those that could lead to a downgrade include a downgrade of the Fannie Mae credit enhancement or counterparties providing investments, and cash flow projections demonstrating insufficient revenues to pay debt service.
  • The bonds are special limited obligations of the issuer payable solely from the trust estate, initially secured by bond proceeds and lender funds on deposit with the trustee.
  • Upon acquisition of the MBS, bondholder security is provided by Fannie Mae's guarantee to pay regularly scheduled interest and principal, regardless of the actual performance of the underlying mortgage loan.

Statistics:

  • Moody's assigned an Aa1 rating to the proposed $17.4 million Indiana Housing and Community Development Authority multfamily housing revenue bonds.
  • The bonds are secured by Fannie Mae's guarantee to pay regularly scheduled interest and principal, regardless of the actual performance of the underlying mortgage loan.
  • The cash flows assume a 0% interest rate, surplus moneys cannot flow out of the trust absent Moody's review, and all fees associated with the deal are paid outside of the trust accounts.
  • The bonds are special limited obligations of the issuer payable solely from the trust estate.

Sources:

  • Moody's Investors Service ("Moody's Ratings (Moody's) has assigned a Aa1 rating to the proposed $17.4 million Indiana Housing and Community Development Authority Multifamily Housing Revenue Bonds (Fannie Mae MBS-Secured) (Carriage House Glendale Apartments) Series 2025.")
  • Moody's Investors Service (Rating Methodologies page on https://ratings.moodys.com)

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