Housing238 Standard & Poor’s Public Finance Criteria 2007Large State Small State/Large County Small County/CityForeclosure frequency (%) 21 32 43
Foreclosure costs (%) 22 22 22
Market value decline (%) 29 29 39
Assumptions:
1) 30-year fixed rate, level pay $95,000 Mortgage
2) Monthly constant=0.8046%, represents constant monthly payment of principal and interest divided by the original mortgage balance
3) Private mortgage insurance down to 72 % (Coverage = 24.21%) case (1)
4) 95% loan to value for private mortgage insured properties. 100% loan to value (95,000) for VA-guaranteed properties, 97% loan to value for
FHA-insured propertiesMarket value ($) $100,000 $100,000 $100,000
Mortgage ($) $95,000 $95,000 $95,000
Depression market value ($) 71,000 71,000 61,000
Market loss ($) 24,000 24,000 34,000
Foreclosure costs ($) 20,900 20,900 20,900
Total loss ($) 44,900 44,900 54,900
Insurance Claim
Case (1) Private mortgage insurance down to 72%
Mortgage $95,000 $95,000 $95,000
Foreclosure costs 20,900 20,900 20,900
Total claim 115,900 115,900 115,900
Recovery 28,059 28,059 28,059
Total loss (market value decline + foreclosure costs) ($) 44,900 44,900 54,900
Recovery ($) 28,059 28,059 28,059
Net loss ($) 16,841 16,841 26,841
Loss severity (%) 17.73 17.73 28.25
Credit loss coverage (foreclosure frequency x 1.2 x loss serverity (%) 3.72 5.67 12.15
Liquidity coverage (foreclosure frequency x 1.2/three years
x monthly constant x 18 months (%) 1.01 1.54 2.08
Guaranty Claim
Case (2) VA guaranty, loan origination prior to 1998
Mortgage ($) 95,000 95,000 95,000
Foreclosure costs ($) 20,900 20,900 20,900
Total claim ($) 115,000 115,000 115,000
Recovery (60% to maximum of $27,500) ($) 27,500 27,500 27,500
Total loss (market loss + foreclosure costs) ($) 48,450 48,450 57,950
Recovery ($) 27,500 27,500 27,500
Net loss ($) 20,950 20,950 30,450
Loss severity (%) 22.05 22.05 32.05
Credit loss Coverage (foreclosure frequency x 1.2 x loss severity (%) 5.56 8.47 16.54
Liquidity coverage (foreclosure frequency x 1.2/three years
x monthly constant x 18 months (%) 1.22 1.85 2.49
Table 3 Examples Of Loss Coverage Calculations At The ‘A’ Rating Level