Fitch Affirms TFOVIE 12U Notes' Rating at 'A-sf'; Outlook Stable

MONTERREY, Mexico & NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed the TFOVIE 12U notes local currency (LC) rating at 'A-sf' and National Scale long-term rating at 'AAA(mex)'. The Rating Outlook is Stable. The transaction is a securitization of a closed pool of mortgage loans denominated in Veces Salario Minimo and originated by Fondo de Vivienda del Instituto de Seguridad y Servicios Sociales de los Trabajadores del Estado (Fovissste) in Mexico.

KEY RATING DRIVERS

The affirmations reflect the transaction's ability to collect mortgage payments of securitized loans through a payroll deduction mechanism, robust credit protection, growing excess spread and adequate liquidity, as well as, Fovissste's servicing capabilities and good performance metrics of the loan pool.

Fitch considers Fovissste's payroll deduction mechanism as effective in mitigating the borrowers' willingness to pay. Such deductions are conducted by Dependencias (employers of the borrowers) and the respective collections are sent to Fovissste. As of May 2015, 96% of the securitized loans are collected through payroll deduction. The corresponding deducted amount is equivalent to 30% of the borrower's monthly salary. In addition, employers contribute an amount equivalent to 5% of the borrower's monthly salary to Fovissste which in turn directs such amount toward amortizing the mortgage loan.

As of June 2015, credit protection consists of 48.9% overcollateralization (OC) (excluding +90 days delinquent loans). When considering the minimum cash reserve level allowed in the transaction, total credit enhancement equals 52.2%. Fitch considers these levels to be robust in order to promote a consistent amortization pace in the foreseeable future, and therefore, foster adequate coverage of interest and principal payments on the notes.

The financial structure of TFOVIE 12U features a single waterfall for collections and payments. Unlike other traditional Fovissste's RMBS, TFOVIE 12U notes have a scheduled target amortization scheme. During the 12 months through June 2015, the net principal payments coverage ratio (on each quarterly payment date and after paying accrued interest) remains adequate and averaged 1.54x. Fitch expects this indicator to be stable in the future as mortgage collections are stable. TFOVIE 12U's outstanding balance is equivalent to approximately 52.2% of the initial issuance amount.

As of June 2015, excess spread is 2.8%. This level benefits from the current OC level and the consistent amortization of the notes. Available liquidity is, at a minimum, composed of a reserve amount equivalent to the next two coupon payments of interest and principal.

Delinquencies remain low, and in line with Fitch's expectations. As of June 2015, the ratios of +90 days delinquent loans (over the original balance) and +180 days delinquent loans were 3.50% and 2.63%, respectively. Moreover, approximately 17.4% of the outstanding collateral pertains to the top three Dependencias, which compares favorably with other recent RMBS sponsored by Fovissste. Current seasoning is 87 months.

RATING SENSITIVITIES

The Rating Outlook is Stable. A downgrade to the notes' ratings could be triggered by negative trends in OC formation related to sharp increases in delinquencies and/or an amortization pace below the target schedule. In addition, unexpected operational risk at Fovissste (the primary servicer) that leads to cash flow disruptions to the issuing trust could also trigger negative rating actions on both the international and National Scale ratings. The LC long-term rating is sensitive to rating actions on Mexico's sovereign ratings.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

Fitch has affirmed the following ratings:

TFOVIE 12U

--UDI1,138,895,000 notes at 'A-sf' and 'AAA(mex)'; Outlook Stable

Additional information is available at www.fitchratings.com.

Sources of Information:

In addition to the sources of information identified in the criteria, this action was additionally informed by information from Administradora de Activos Financieros S.A., as master servicer.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Criteria for Rating Securitizations in Emerging Markets (pub. 06 Nov 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=809588

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Rating Criteria for RMBS in Latin America (pub. 22 Jan 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=839629

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=988123

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=988123

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150717005666/en/

Fitch Ratings
Primary Analyst
Rene Ibarra
Senior Director
+52 81 8399 9130
Fitch Mexico S.A. de C.V.
Prolongacion Alfonso Reyes 2612
Col. Del Paseo Residencial Monterrey, Nuevo Leon
Mexico
or
Committee Chairperson
Juan Pablo Gil
Senior Director
+1 312 606 2301
or
Media Relations
Alyssa Castelli, +1 212-908-0540
[email protected]

Source: Fitch Ratings

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