OREANDA-NEWS. Fitch Ratings has assigned an 'AA' rating to the following Vermont Housing Finance Agency (VHFA) bonds:

--$14.345 million multiple purpose bonds series 2016 A;
--$15.425 million multiple purpose bonds series 2016 B.

Additionally, Fitch has affirmed the ratings on approximately $217 million in parity debt (see full list at the end of this release).

The Rating Outlook on all bonds is Stable.

SECURITY

The bonds are general obligations of the agency and are secured by single-family mortgages, multi-family loans, mortgage-backed securities (MBS), and certain cash and investments held under the resolution. The multiple purpose bond program rating does not rely on the general obligation pledge to maintain the 'AA' rating currently assigned to the bonds.

KEY RATING DRIVERS

STRONG PROGRAM OVERCOLLATERALIZATION: As of FY 2015, the program had 120.3% asset parity level which is sufficient to support the 'AA' rating.

MODERATELY SOUND PORTFOLIO PERFORMANCE: The portfolio's performance is currently adequate for single family loans and strong for multifamily loans; mitigating the potential for losses to the program. Additionally, actual loan losses for this program have been minimal (approximately 1% of bonds outstanding) since program inception in 2007.

INDENTURE PROVISIONS: The supplemental indentures allow for program funds to be withdrawn down to 102% asset parity.

RATING SENSITIVITIES

WITHDRAWAL OF ASSETS: Withdrawing of program funds to the legal requirement of 102% could put negative pressure on the rating and may result in a negative rating action.

CHANGES IN PORTFOLIO COMPOSITION: Any significant changes to the portfolio composition could have a positive or negative influence on the rating.

LOAN PERFORMANCE: If loan performance deteriorates beyond current Fitch stressed loss assumptions, there may be negative pressure on the rating.

CREDIT PROFILE

The 2016 series A and B bonds are expected to be used to refund outstanding obligations previously issued under a separate single-family indenture and to finance the purchase of mortgage-backed security certificates. In conjunction with the refunding of previously issued debt obligations, the mortgage loans and certificates securing the refunded bonds will be transferred to this indenture.

As of Nov. 30, 2015, the multiple purpose portfolio consisted of 60.4% single-family whole loans, 29.5% MBS certificates, and 10.1% multi-family loans. The single-family whole loan portion of the portfolio contains 46.2% uninsured (with an 80% LTV or less), 39.0% privately insured (primarily by Mortgage Guaranty Insurance Corporation), and 14.8% federally insured (FHA/VA/RD). Approximately 6.7% of the single-family loans are delinquent (60+ days); however, actual losses in the program have been minimal since inception in 2007.

The multi-family housing loans, which have an outstanding mortgage balance of $22.4 million, are associated with elderly and family developments diversified throughout the state of Vermont. The uninsured loans are made up of 23 separate multi-family developments consisting of 806 units. Seventeen of the 23 developments are either partially or fully subsidized under Section 8. Currently, there are no delinquencies in the multi-family portfolio.

In addition to the single-family whole loans, the multi-family loans, and the MBS certificates, the program has approximately $42.2 million in cash and investments which are primarily invested in highly-rated securities. As of FY 2015, the program demonstrated an asset parity position of 120.3%. Under Fitch stress scenarios which include interest rate stresses, loan origination stresses, and single-family whole loan loss assumptions, the program demonstrated a minimum of 121.2% asset parity for the life of the bonds. This level of overcollateralization is sufficient to support the 'AA' rating on the program given the current composition of the portfolio. Fitch's ongoing credit analysis will be driven by the indenture's actual asset parity position, portfolio composition and performance, financial results, and cash flow strength.

Fitch has also affirmed the following VHFA multiple purpose bonds at 'AA':

--$13.2 million series 2007 A;
--$18.5 million series 2007 C;
--$10.6 million series 2008 C;
--$2.5 million series 2012 A;
--$28.8 million series 2012 B;
--$11.5 million series 2012 C;
--$5.5 million series 2013 A;
--$8.0 million series 2013 B;
--$13.4 million series 2013 C;
--$23.6 million series 2014 A;
--$18.7 million series 2014 B;
--$0.6 million series 2015 A;
--$20.8 million series 2015 B;
--$4.3 million series 2015 C;
--$8.6 million series 2015 D;
--$3.7 million series 2015 E;
--$10.6 million series 2015 F;
--$15.3 million series 2015 G.