S&P - Public Finance Criteria (2007). - The Global Clearinghouse

HousingTable 3 Examples Of Loss Coverage Calculations At The ‘A’ Rating LevelLarge State Small State/Large County Small County/CityForeclosure frequency (%) 21 32 43Foreclosure costs (%) 22 22 22Market value decline (%) 29 29 39Assumptions:1) 30-year fixed rate, level pay $95,000 Mortgage2) Monthly constant=0.8046%, represents constant monthly payment of principal and interest divided by the original mortgage balance3) Private mortgage insurance down to 72 % (Coverage = 24.21%) case (1)4) 95% loan to value for private mortgage insured properties. 100% loan to value (95,000) for VA-guaranteed properties, 97% loan to value forFHA-insured propertiesMarket value ($) $100,000 $100,000 $100,000Mortgage ($) $95,000 $95,000 $95,000Depression market value ($) 71,000 71,000 61,000Market loss ($) 24,000 24,000 34,000Foreclosure costs ($) 20,900 20,900 20,900Total loss ($) 44,900 44,900 54,900Insurance ClaimCase (1) Private mortgage insurance down to 72%Mortgage $95,000 $95,000 $95,000Foreclosure costs 20,900 20,900 20,900Total claim 115,900 115,900 115,900Recovery 28,059 28,059 28,059Total loss (market value decline + foreclosure costs) ($) 44,900 44,900 54,900Recovery ($) 28,059 28,059 28,059Net loss ($) 16,841 16,841 26,841Loss severity (%) 17.73 17.73 28.25Credit loss coverage (foreclosure frequency x 1.2 x loss serverity (%) 3.72 5.67 12.15Liquidity coverage (foreclosure frequency x 1.2/three yearsx monthly constant x 18 months (%) 1.01 1.54 2.08Guaranty ClaimCase (2) VA guaranty, loan origination prior to 1998Mortgage ($) 95,000 95,000 95,000Foreclosure costs ($) 20,900 20,900 20,900Total claim ($) 115,000 115,000 115,000Recovery (60% to maximum of $27,500) ($) 27,500 27,500 27,500Total loss (market loss + foreclosure costs) ($) 48,450 48,450 57,950Recovery ($) 27,500 27,500 27,500Net loss ($) 20,950 20,950 30,450Loss severity (%) 22.05 22.05 32.05Credit loss Coverage (foreclosure frequency x 1.2 x loss severity (%) 5.56 8.47 16.54Liquidity coverage (foreclosure frequency x 1.2/three yearsx monthly constant x 18 months (%) 1.22 1.85 2.49238 Standard & Poor’s Public Finance Criteria 2007