OREANDA-NEWS. Fitch Ratings places the following Idaho Housing Finance Association (IHFA) single-family mortgage bonds (2006 Indenture) on Rating Watch Negative:

--$344.9 million IHFA single-family mortgage (2006 Indenture) class I bonds currently rated 'AAA';
--$9.3 million IHFA single-family mortgage (2006 Indenture) class II bonds currently rated 'AA'.

SECURITY

The single-family mortgage bonds are issued under a master indenture that pledges revenues, investment earnings, reserves, and other trust funds to secure the bonds. The class I and II bonds have asset parity maintenance requirements directing revenues to be used to call bonds of those classes respectively prior to paying debt service of the next junior class.

CREDIT PROFILE

The Rating Watch Negative reflects certain Class I and II bond series' asset parity ratios falling below minimum indenture requirements. IHFA management is aware of the issue and reports that this problem will be addressed in the coming months. Historically, IHFA has experienced similar asset parity issues in other indentures and has resolved the issue by restoring the bonds to the minimum asset parity requirements.

The Rating Negative Watch will be resolved once management mplements a plan to restore asset parity levels to the minimum indenture requirements. Should management fail to restore the bonds to the minimum asset parity levels in the coming months as required by the respective series indentures, Fitch is likely to downgrade the ratings to reflect current asset parity levels. Additionally, as the percentage of class I and II bonds continues to grow relative to total bonds outstanding, the debt subordination structure provides less security moving forward, which could result in a downgrade of the class I and II bonds.