RATING DRIVERS
Supporting Factors
- Good credit quality of securitised mortgage pool, notwithstanding some deterioration
- Good underwriting practices of TTMF, the originator of the mortgages within the pool
- Simple transaction structure, with an effective built-in credit enhancement
- Legal and regulatory framework supporting the transaction provides adequate protection to investors
Constraining Factor
- Mortgage pool seasoning could increase default risk
Rating Sensitivity Factors
Factor that could, individually, or collectively lead to an improvement of the ratings and/ or Outlook include:
- An improvement in the loan portfolio quality, with an NPL ratio of lower than 5% and/ or a delinquency ratio of less than 7.5%, led by the recovery of delinquent mortgages by TTMF
Factors that could, individually, or collectively lead to a lowering of the ratings and/ or Outlook include:
- Further deterioration in the mortgage pool quality, with an NPL of above 7.5% and/or delinquency of above 20%
- Deterioration in TTMF’s NPLs to Gross loans ratio of above 10.5% sustained for 2 financial periods
CMO 2020-01 is a structured finance debt instrument created by the Home Mortgage Bank (HMB or the Bank). The product was created to securitise residential mortgage assets purchased from the Trinidad Tobago Mortgage Finance Company Limited (TTMF) on the secondary mortgage market. CMO 2020-01 offered participation certificates in 7 tranches in the amount of TT $300 million as follows:
Series A – TT $25.0 million with an average life of 0.50 years at an initial coupon rate of 2.15%
Series B – TT $25.0 million with an average life of 1.54 years at an initial coupon rate of 3.60%
Series C – TT $25.0 million with an average life of 2.56 years at an initial coupon rate of 3.80%
Series D – TT $50.0 million with an average life of 4.11 years at an initial coupon rate of 4.25%
Series E – TT $50.0 million with an average life of 6.32 years at an initial coupon rate of 5.00%
Series F – TT $25.0 million with an average life of 8.30 years at an initial coupon rate of 5.50%
Series G – TT $100.0 million with an average life of 7.12 years at an initial coupon rate of 5.25%
COMPANY BACKGROUND
The collateralised mortgages are held in Trust by TTMF and governed by the laws of the Republic of Trinidad & Tobago and established by a Declaration of Trust. The investment security has monthly coupon payments payable to all certificate holders. The certificates were structured to enable investors to participate in the acquisition and ownership of a pool of residential mortgages. Each Certificate represents an undivided beneficial ownership interest in the Mortgage Pool.
The principal amounts of each tranche available for distribution (Series A to G) are being repaid sequentially from all scheduled payments during an established repayment window. The final principal payment is expected to coincide with the maturity of each respective tranche. Thus, Series A will be fully repaid before principal repayment starts on Series B and so on. However, when unscheduled payments (prepayments, lumpsum payments and payoffs) are received, these payments will be applied in reverse order from Tranche G to Tranche A. Thus, should Series G be repaid from unscheduled payments, further prepayments will be applied to Series F and so on. The Bank also issued 3 additional Series; T1, T2 and R that will not be available for distribution[1].
The distribution of CMO Certificates represents a diversification within the Bank’s funding tools, generating liquidity while managing the Bank’s gearing position. The CMO provides funding to HMB to acquire mortgage loans on the secondary market from Approved Mortgage Lenders and to meet the Bank’s corporate financing needs. Furthermore, CMO issues by HMB also serve to develop the local capital market and the secondary mortgage market in particular, consistent with the Bank’s mission, “to facilitate the growth and development of the housing finance market by the maintenance of a secondary mortgage market funded by capital market activities.”
HMB, as Issuer of the security, has engaged TTMF as the Trustee and Administrator for the transaction. The Bank also performs the roles of Registrar and Paying Agent. The Issuer, HMB, is a related party to the Trustee and Administrator, TTMF, as both entities are subsidiaries of the National Insurance Board of Trinidad and Tobago (NIBTT). The appointed legal advisers for the transaction is the law firm of Pollonais, Blanc, de la Bastide & Jacelon.
This is the fourth CMO issued and initiated by HMB, with the first 2 successfully issued in 1999 and 2000. The third (CMO 2019-01) was issued in early 2019 and has a balance of TT $2.80 million available for distribution as at July 2021. CMO 2019-01 was rated by CariCRIS and carries an overall rating of CariA+ (SO). CMO 2020-01, is similar in structure to CMO 2019-01, with minor adjustments that serve to improve the risk/ return profile and credit enhancements to support its stability. As at July 31, 2021, CMO 2020-01 has a balance of TT $38.69 million available for distribution.
Analytical Contacts:
Kathryn Budhooram
Tel: 1-868-627-8879 Ext. 227
E-mail: [email protected]
E-mail: [email protected]
Website: caricris.com
E-mail: [email protected]:
Disclaimer: CariCRIS has taken due care and caution in compilation of data for this product. Information has been obtained by CariCRIS from sources which it considers reliable. However, CariCRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. No part of this report may be published / reproduced in any form without CariCRIS’ prior written approval. CariCRIS is also not responsible for any errors in transmission and especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of this product.
[1] Fully repaid