Overview
- The JHF series T-1 to T-5 fixed-rate residential mortgage-secured pass-through notes are securitizations that JHF issued. A pool of residential mortgage loans ultimately backs the notes issued under each transaction.
- We assume a foreclosure frequency for the mortgage loans currently outstanding of about 2% under our base-case scenarios.
- We are affirming our 'AAA (sf)' ratings on the five series of notes above following our review.
- Because of the structural features of these transactions, we believe the ratings on the notes depend to an extent on the credit quality of JHF.
TOKYO (S&P Global Ratings) Sept. 28, 2022--S&P Global Ratings today said it has affirmed its 'AAA (sf)' ratings on Japan Housing Finance Agency's (JHF) series T-1 to T-5 fixed-rate residential mortgage-secured pass-through notes (see list below).
Our affirmations reflect the following:
- We assume a foreclosure frequency for the residential mortgage loans currently outstanding of about 2% under our base-case scenarios and about 12%-14% under stress scenarios consistent with our 'AAA' ratings. These rates, which reflect our view of the credit quality of the underlying assets, are prior to applying adjustments for the transactions' convertible pro rata pay structure.
- We also assume a loss severity rate of about 5%-7% for defaulted loans under our 'AAA' stress scenarios.
- We apply a floor for the projected losses (net loss rate after accounting for recoveries from defaulted loans) of 4.0% at the 'AAA' rating level and 0.35% in our base-case scenarios.
- We also consider default scenarios with a duration of 120 and 60 months in addition to the scenarios described in our Japanese RMBS criteria. This is because the number of months remaining on the loans backing the transactions is declining.
- For these transactions, we consider a scenario in which the prepayment rate of the overall mortgage loan pool is 12.0% per year after transaction closing. This is because the mortgage loans backing this transaction consist of seasoned loans that have been outstanding for a significant period.
- No losses have occurred in the underlying pools because JHF has thus far withdrawn from them any loans with impending losses, such as defaulted loans or loans in delinquency for four months. These withdrawals have almost the same effect as prepayments.
- Current credit enhancement available for each rated series of notes is sufficient to cover that transaction's various risks, such as credit risk under a stress scenario consistent with our rating on the transaction.
These transactions are structured note issuances that JHF issued. A pool of residential mortgage loans that Government Housing Loan Corp., the predecessor of JHF, directly extended ultimately secures the notes issued under each transaction. JHF entrusted the loan pool underlying each transaction with a trust as collateral. Because of the structural features of these transactions, we believe the ratings on the notes depend to an extent on JHF's credit quality. In addition, JHF provides regular updates to loan-by-loan data during the surveillance process.
S&P Global Ratings published a request for comment (RFC) on its proposal to expand the scope of its global RMBS criteria to include Japan (see "Request For Comment: Global Methodology And Assumptions: Assessing Pools Of Residential Loans (Japan)," published July 29, 2022). Because the proposed criteria have not been published yet, we did not apply the proposed criteria to our analysis of the transaction this time.
Related Criteria
- Environmental, Social, And Governance Principles In Credit Ratings, Oct. 10, 2021
- Global Framework For Payment Structure And Cash Flow Analysis Of Structured Finance Securities, Dec. 22, 2020
- Counterparty Risk Framework: Methodology And Assumptions, March 8, 2019
- Incorporating Sovereign Risk In Rating Structured Finance Securities: Methodology And Assumptions, Jan. 30, 2019
- Methodology And Assumptions For Rating Japanese RMBS, Dec. 19, 2014
- Global Framework For Assessing Operational Risk In Structured Finance Transactions, Oct. 9, 2014
- Principles Of Credit Ratings, Feb. 16, 2011
- Methodology For Servicer Risk Assessment, May 28, 2009
Related Research
- Request For Comment: Global Methodology And Assumptions: Assessing Pools Of Residential Loans (Japan), July 29, 2022
- Japan Structured Finance Outlook: Coexisting With COVID, Jan. 7, 2022
- Outlook For The Japanese Residential Mortgage Market, Jan. 7, 2022
- ESG Industry Report Card: Residential Mortgage-Backed Securities, March 31, 2021
- Overview Of Japan Housing Finance Agency's Structured Notes, Nov. 19, 2020
- How Will COVID-19 Affect Japanese Structured Finance?, April 8, 2020
- Japanese Structured Finance Scenario And Sensitivity Analysis 2017: The Effects Of The Top Five Macroeconomic Factors, Dec. 26, 2017
- Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016
Ratings Affirmed
Japan Housing Finance Agency
¥50.0 billion JHF Series T-1 fixed-rate residential mortgage secured pass-through notes due May 2032
- AAA (sf); ¥50.0 bil.; closing date June 29, 2018
¥50.0 billion JHF Series T-2 fixed-rate residential mortgage secured pass-through notes due May 2032
- AAA (sf); ¥50.0 bil.; closing date Aug. 31, 2018
¥100.0 billion JHF Series T-3 fixed-rate residential mortgage secured pass-through notes due January 2033
- AAA (sf); ¥100.0 bil.; closing date Nov. 30, 2018
¥50.0 billion JHF Series T-4 fixed-rate residential mortgage secured pass-through notes due April 2033
- AAA (sf); ¥50.0 bil.; closing date Nov. 29, 2019
¥50.0 billion JHF Series T-5 fixed-rate residential mortgage secured pass-through notes due July 2033
- AAA (sf); ¥50.0 bil.; closing date Dec. 26, 2019
| Primary Credit Analyst: | Shota Tatewaki, Tokyo + 81 3 4550 8276; shota.tatewaki@spglobal.com |
| Secondary Contact: | Yuji Hashimoto, Tokyo + 81 3 4550 8275; yuji.hashimoto@spglobal.com |
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