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Moody's Investors Service Inc.

Moody's Assigns Aa1 Rating to Proposed California Multifamily Housing Revenue Bonds

Strategic Insights

— 1 min read

The Moody's Investors Service has assigned a rating of Aa1 to the proposed $8.96 million California Municipal Finance Authority Multifamily Housing Revenue Bonds (Fannie Mae MBS Secured), a forward MBS transaction backed by the Federal National Mortgage Association (FNMA). The rating is based on the high credit quality of the MBS, where principal and interest are passed through to bondholders semiannually. Fannie Mae's forward commitment to guaranty the permanent financing by issuing the MBS after the construction phase is complete provides additional security.

Key Takeaways:

  • The rating of Aa1 is based on the high credit quality of the FNMA MBS, which is secure through Fannie Mae's forward commitment to guaranty the permanent financing.
  • The transaction is structured to reduce administrative risk, with a positive net revenue and a build-up of funds in the revenue account on each MBS payment date.
  • The deal features a 0% interest rate assumption, surplus moneys that cannot flow out of the trust, and all fees associated with the deal are paid outside of the trust accounts.
  • The bonds are expected to be delivered in July 2025, with a fixed interest rate, and are secured by Fannie Mae's guarantee of timely principal and interest payments.
  • The bond program maintains a minimum 100% asset-to-debt ratio and is expected to increase through maturity.
  • The rating methodology used in this rating was US Standalone Housing Bonds Secured by Credit-Enhanced Mortgages and US Pre-refunded and Escrow-backed Transactions, both published in October 2024.

Statistics:

  • The proposed bond issue is worth $8.96 million.
  • The rating is Aa1.
  • The MBS has a high credit quality rating of Aa1 stable.
  • Debt service payments are made semiannually.
  • Cash flow projections demonstrate full and timely debt service payments through and including the MBS delivery deadline and through final bond maturity.
  • The bond program maintains a minimum 100% asset-to-debt ratio.
  • The bonds are expected to be delivered in July 2025.

Sources:

  • Moody's Investors Service, "Rating Announcement: California Municipal Finance Authority, Multifamily Housing Revenue Bonds (Fannie Mae MBS Secured)"

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