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Fitch Ratings-New York-04 May 2009: Fitch Ratings has assigned a Negative Rating Outlook to the U.S. tax-exempt housing sector due to the continued negative credit issues that the broad housing market is currently facing, such as declining mortgage loan performance, home price declines, and a national recession. In addition, for the first time, Fitch also plans to assign Rating Outlooks on specific ratings for state housing finance agencies' (SHFAs) general obligation ratings, bond program ratings, and guarantee fund ratings over the next several months.
'As the difficulties in the credit markets continue, it is even more crucial that Fitch provides investors with program trend analysis for each individual credit in the sector,' said Maura McGuigan, Director at Fitch Ratings. Rising unemployment levels across the country continue to contribute to the increasing foreclosure rates in the mortgage market which could affect the health of Fitch rated SHFA portfolios.
While most SHFA housing credits are expected to be assigned Stable Rating Outlooks, Fitch expects that some housing credits will be assigned Negative Rating Outlooks, driven primarily by pressures from a weakened credit environment, of which aspects include a severe economic recession, constrained access to liquidity, and the credit deterioration of key counterparties. Negative Rating Outlooks indicate that a rating downgrade is likely, although not inevitable, over the next one to two years.
Historically, the public finance housing sector has been very stable, and Fitch expects that the majority of the issuers (SHFAs) and their bond programs will continue to be well managed and, subsequently, highly rated. Nevertheless, housing issuers are facing a challenging credit market, high levels of capital market volatility, and restricted market access given investor caution on mortgage-related financings.
The full special report, 'State Housing Finance Agency Outlook for 2009' discusses the key rating drivers that led to the sector's Negative Rating Outlook and those drivers that may cause Fitch to assign a Negative Rating Outlook to certain program ratings, is available at 'www.fitchratings.com'.
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