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Fitch Rates Illinois Housing Development Authority's $40MM 2012A HRBs 'AAA'; Outlook Negative

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NEW YORK--(BUSINESS WIRE)--

Fitch Ratings has assigned an 'AAA' rating to the $40 million Illinois Housing Development Authority's (IHDA) housing revenue bonds (mortgage-backed securities) series 2012A. The series 2012A bonds consist of the following:

--$40,000,000 series 2012A taxable housing revenue bonds.

The bonds have a Negative Outlook based on the current Rating Outlook for the U.S. full faith and credit rating.

SECURITY

The bonds are secured by Ginnie Mae (GNMA) and Fannie Mae (FNMA) guaranteed mortgage-backed securities (MBS) pledged under the indenture. The aggregate MBS assigned to the trust indenture allow the assets to equal the bond balance.

KEY RATING DRIVERS

GNMA/FNMA Guarantee: The 'AAA' rating on the bonds is based on the guarantee of full and timely payment of principal and interest on the MBS that passes through to bondholders. That guarantee is backed by the rating of the U.S. full faith and credit (currently rated 'AAA', Negative Outlook) and the total MBS certificates will pay principal and interest regardless of the performance of the mortgage loans that are pooled into the MBS.

Structure: The rating also reflects the pass through structure of the MBS as payments of principal and interest are directly passed through to the bondholders each month as the GNMA and FNMA securities are paid.

WHAT COULD TRIGGER A RATING ACTION

The rating on the bonds is based on the rating of the MBS which are backed by the U.S. Government's full faith and credit rating and the rating of Fannie Mae. Any future rating action on the U.S. Government or on Fannie Mae's rating could affect the rating on these bonds as well.

CREDIT PROFILE

The $40,000,000 of bonds are expected to be sold the week of Oct. 29, 2012. The aggregate MBS pledged to the indenture will equal the principal amount of the bonds. As mortgage prepayments are also passed through directly to the bondholders, principal and interest payments may vary from month to month. However, aggregate MBS assets in the indenture will continue to be equal to the bond amount over the life of the bonds.

Fitch rates the structure by reviewing the timing of both the MBS payments to be passed through directly to the bondholders and bond principal and interest payments. At issuance, the bond funds will be used to purchase MBS securities which are packaged from IHDA mortgage programs. The cash flow review included zero, 100% and 500% prepayment speed stresses. All three cash flow stress scenarios included fees and expenses equal to the difference of the GMNA/FNMA rate and the bonds rate paid out each month. Under all the scenarios, the cash flows demonstrate that the assets in the indenture will always be sufficient to service the debt payments.

As part of the legal structure analysis, Fitch reviews the indenture to insure that instructions are provided to the trustee to notify the lender if an MBS payment is missed. Additionally, Fitch reviews the master servicer to determine if it is an approved issuer of GNMA/FNMA MBS. Also part of the legal structure review is that the trust indenture is closed, meaning that the trust is limited to the MBS pledged and that fees and expenses are paid out each month so that there are no residual funds in the trust. No additional bonds can be issued under the indenture.

Additional information is available at www.fitchratings.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Revenue-Supported Rating Criteria' June 12, 2012;
--'U S Municipal Structured Finance Rating Criteria', Feb. 28, 2012.

Applicable Criteria and Related Research:
Revenue-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=681015
U.S. Municipal Structured Finance Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=672570

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Fitch Ratings
Primary Analyst:
Charles Giordano, +1-212-908-0607
Senior Director
Fitch, Inc.
33 Whitehall St.
New York, NY 10004
or
Secondary Analyst:
Kasia Reed, +1-212-908-0500
or
Committee Chairperson:
Maura McGuigan, +1-212-908-0591
Senior Director
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com

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