Rating agency the Caribbean Information and Credit Rating Services Ltd (CariCRIS) has reaffirmed its overall “high creditworthiness” ratings to the $100 million collateralised mortgage obligation (CMO) of Home Mortgage Bank (HMB), the financial institution that was merged with Trinidad and Tobago Mortgage Finance earlier this year to form Trinidad and Tobago Mortgage Bank (TTMB).
CariCRIS, in a statement yesterday, said it reaffirmed its overall issue ratings of ttAA- (SO) on the T&T national scale to the TT $100 million Collateralised Mortgage Obligation (CMO) of Home Mortgage Bank (HMB) (CMO 2022-01).
This rating indicated that the overall level of creditworthiness of this structured debt obligation, adjudged in relation to other rated debt obligations within T&T, is high.
CMO 2022-01 is a structured finance debt instrument being created by the HMB.
The product was created to securitise residential mortgage assets purchased from the T&T Mortgage Finance Company Ltd (TTMF) on the secondary mortgage market.
CariCRIS also assigned a stable outlook on the ratings.
The stable outlook is based on an expectation of continued improvement in economic conditions in T&T, which should have a positive impact on businesses and households. Additionally, this may also lead to an improvement in asset quality and stability of the overall credit risk of CMO 2022-01, CariCRIS stated.
It said the ratings of CMO 2022-01 continue to reflect the good credit quality of the securitised loans in the mortgage pool, notwithstanding a marginal deterioration between 2022 and 2023.
Notably, CariCRIS said the simple transaction structure with built-in credit enhancements continues to provide adequate protection to investors.
Additionally, the underwriting practices of TTMF, the originator of the mortgages within the pool, continue to remain good.
Furthermore, the rating agency said the legal and regulatory framework which support this transaction also provides adequate protection to investors.
The ratings are however, tempered by the possibility that the seasoning of the underlying mortgage pool could increase default risk over the life of the structured debt obligation.
On the issue of the CMO’s rating sensitivity, the rating agency outlined there are factors individually, or collectively which could lead to an improvement in the ratings and/or outlook including:
An improvement in the credit rating of the sovereign over the next 12 to 15 months;
Satisfactory repayment of Tranche A with payment flows in line with or above CariCRIS’ expectations; and
Sustained improvement in TTMF’s asset quality levels which reduces the originator risk.
Speaking at the launch of TTMB on March 20, Finance Minister Colm Imbert said: “We have two robust companies uniting to become a formidable organisation that would provide healthy competition in mortgage and investment portfolios in a market where fortune favours the brave and those who already have some means.
“As we have sought to do throughout our tenure, we are seeking to change the landscape by bringing some equity into the real estate playing field.”
Imbert told the launch that in February 2006, the TTMF was approved as the sole administrator of the financing regime under the Goernment’s Affordable Housing Programme, which ensured that the housing needs of lower-and-middle-income earners were met..
“Between January 2007 and December 2023, some 20,797 new loans were issued at a value of $9.4 billion...This includes 8,515 loans valued at $4.2 billion, which were issued under the affordable housing financing facility implemented by this administration.”