New Jersey Housing & Mortgage Finance Agency's Series 2019C And D Bonds Rated 'AA'


NEW YORK (S&P Global Ratings) Feb. 1, 2019--S&P Global Ratings assigned its 
'AA' long-term rating to New Jersey Housing & Mortgage Finance Agency's 
(NJHMFA) series 2019C and 2019D bonds, issued under its single-family housing 
revenue bond (HRB) resolution. At the same time, S&P Global Ratings affirmed 
its ratings on all debt outstanding under the resolution. The outlook is 
stable. 

"The rating reflects our view of the resolution's strong loan support, 
improving asset-to-liability parity, and redemption of all existing 
variable-rate debt," said S&P Global Ratings credit analyst David Greenblatt.

Partially offsetting these strengths, in our view, is the HRB resolution's 
whole loan delinquencies of 11.4% as of November 2018, and elevated losses on 
the sale of real estate owned.

The stable outlook reflects our view that NJHMFA's single-family program will 
add loans to its portfolio as part of its second mortgage revenue bond issue 
since 2009, which we believe will help the resolution maintain its strong 
parity levels throughout the two-year outlook period and help stabilize its 
asset base. In June 2018, the agency issued its first mortgage revenue bond 
from this resolution since November 2009, after purchasing 16 loans in 2017 
and 36 loans in 2016. In comparison, the resolution originated 679 loans in 
2010. We view this declining trend as a risk, given the underlying portfolio's 
poor asset quality. This series 2019CD bond issue reflects another step toward 
mitigating this risk, as NJHMFA demonstrates a focus on new single-family loan 
originations funded through bond proceeds.

While the delinquency rate has improved in recent years, we expect this HRB 
resolution to contain among the highest delinquency rates when compared with 
other single-family programs that we rate. The delinquency statistic include 
loans that are at least 60 days delinquent and those in foreclosure. New 
Jersey continues to exhibit higher foreclosure rates even when compared with 
other states with a judicial foreclosure process. As a share of total loans 
outstanding, NJHMFA's HRB resolution reported a delinquency rate of 11.4% of 
the total number of loans in November 2018, compared with a median of about 
4.0% among other housing finance agencies (HFAs) in states with judicial 
foreclosure processes for the same period. In addition, the low-interest-rate 
environment has led to prepayments, which reduced the mortgage balance to 
$437.4 million as of November 2018, albeit a 0.4% increase from March 2018.

We could raise the rating if NJHMFA's loan quality improves to levels 
comparable with those of other HFAs' delinquencies, and the resolution's 
excess assets increase over the outlook period.

We could lower the rating if the agency's delinquencies remain at such 
elevated levels compared with those of peers, or if the agency's ability to 
cover potential loan losses through excess assets declines.
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