OREANDA-NEWS. Fitch Ratings has published a sector-specific report for rating state housing finance agency (SHFA)-sponsored mortgage insurance or guarantee fund programs. The report identifies factors considered by Fitch in assigning ratings to SHFA-sponsored mortgage insurance or guarantee funds within the scope of the criteria. No changes to the ratings of existing programs are anticipated as a result of the publication of the rating criteria.

Fitch has identified four key rating drivers that affect the credit quality of mortgage insurance or guarantee fund programs:

--Risk-to-Capital Ratio/Financial Profile: Fitch views the primary driver of the rating to be the program's risk-to-capital ratio. This ratio measures the total potential claims risk of an insured loan portfolio to the insurance fund's dedicated reserves and available capital for claim payments.

--Operating Cash Flow Sufficiency: The analysis includes an assessment of the mortgage insurance fund's ability to generate cash flow from operations to cover potential claim payments, additional risk from new insured loans and debt payments (if any). Fitch also reviews the fund's reserve levels and quality of investments given that these reserves are the primary or only source of capital to cover losses from the insured portfolio.

--Insured Portfolio: Fitch views the level of risk in a mortgage insurance fund's portfolio and the quality of the insured loans/mortgages as another key credit component in the analysis. To assess the level of risk and quality, Fitch reviews the program's loan underwriting standards for insured loans/projects, the size of the loan portfolio, the types of loans being insured, the concentration within the risk portfolio and the direction of state economic trends.

--Governance and Management: An assessment of management capabilities and oversight is an important factor in assessing the quality of a mortgage insurance fund. As part of this review, Fitch evaluates the history of financial operations, staff experience and continuity, program oversight abilities, disclosure abilities and the composition of the SHFA's board and their level of participation with the program. Fitch also reviews the history of management's relationship with the state and any past transfers of reserves (and/or the ability to transfer reserves) out of the program.

The criteria report outlines how Fitch evaluates these factors in its rating analysis of mortgage insurance or guarantee fund programs.