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

Single-Family Whole Loan ProgramsTable 3 Examples Of Loss Coverage Calculations At The ‘A’ Rating Level (continued)Gauranty Claim Large State Small State/Large County Small County/CityCase (3) VA guaranty, loan origination after 1988Mortgage ($) 95,000 95,000 95,000Foreclosure costs ($) 20,900 20,900 20,900Total claim ($) 115,900 115,900 115,900Recovery (40%, up to $36,000) ($) 36,000 36,000 36,000Total loss (market loss + foreclosure costs) ($) 44,900 44,900 54,900Recovery ($) 36,000 36,000 36,000Net loss ($) 8,900 8,900 18,900Loss severity (%) 9.37 9.37 19.89Credit loss Coverage (foreclosure frequency x1.2 x loss severity (%) 1.97 3.00 8.55Liquidity coverage (foreclosure frequency x1.2/three years x monthly constant x 18 months (%) 1.01 1.54 2.08Insurance ClaimCase (4) FHA Insurance Loss severity will always equal the followingMortgage rate/12 months x two months = 9%/12x2= (%) 1.50Forclosure cost less 12 months accrued interest x 1/2=13%x1/3= (%) 4.33Credit loss coverage (foreclosure frequency x 1.1 xadjusted loss severity (%) 1.35 2.05 2.76Liquidity coverage (foreclosure frequency x 1.1/three years xmonthly constant x 18 months (%) 1.12 1.70 2.28AssumptionsCase (5) RD Insurance30-year, 9% fixed rate, $100,000. Cost Factor = 10.19% of appraised value.Appraised value = depression market value + (depression market value x 10%). 100% loan to valueMarket value ($) 100,000 100,000 100,000Mortgage ($) 100,000 100,000 100,000Depression market value ($) 71,000 71,000 61,000Appraised value ($) 78,100 78,100 67,100Cost factor ($) 7,958 7,958 6,837Foreclosure cost ($) 22,000 22,000 22,000Total loss ($) 51,858 51,858 61,737RD recovery35% of mortgage 35,000 35,000 35,00085% of total loss less 35% of mort. amt. ($) 14,330 14,330 22,727Total RD recovery ($) 49,330 49,330 57,727Standard & Poor’s adjustable recoveryHolding period costs ($) 8,450 8,450 7,050Appraised value less depression market value ($) 7,100 7,100 6,100Total adjusted recovery ($) 33,780 33,780 44,577Net loss ($) 18,079 18,079 17,160Loss severity (%) 18.08 18.08 17.16Foreclosure frequency (%) 25.20 38.40 51.60Loss coverage (%) 4.56 6.94 8.85www.standardandpoors.com239