Indias First Mortgage-Backed Paper Gets Aaa

Crisil has assigned a AAA rating to the first issue of mortgage-backed securities in the country backed by mortgages of the Housing Development Finance Corporation Ltd (HDFC).

The rating is valid for Rs 62.52-crore worth of senior-class MBS proposed to be issued by a trust established by the National Housing Bank (NHB) which is acting as a special purpose vehicle for the transaction.

The credit enhancement would be subordinate securities and a corporate guarantee from HDFC to the extent of Rs 1.21 crore.

The pool consisting of 9,264 housing loans with a principal outstanding of Rs 98.96 crore as at April 1, 2000, have been drawn from HDFC's individual housing loan portfolio.

 

The remaining tenure of the pool is twelve years and the total receivables from the pool during this period amounts to Rs 194.51 crore.

The NHB will declare a trust with respect to these receivables and the trust will issue Class A MBS and Class B MBS. While Class A securities will be placed with institutional investors, Class B MBS would be retained by HDFC.

The tenure of Class A MBS is seven years and the face value is equal to the principal component of the first seven years worth of scheduled pool receivables which amounts to Rs 62.52 crore.

The Class B MBS will be subordinate to the Class A MBS. Investors in class B MBS will be entitled to receive the balance monthly pool cash flows

after meeting obligations

on Class A MBS fully and after making payments to service providers and topping up the guarantee facility.