OREANDA-NEWS. S&P Global Ratings raised its underlying rating (SPUR) on Vermont Housing Finance Agency's (VHFA) single-family bonds, to 'BBB+' from 'BB+'. The outlook is positive.

"The upgrade reflects the recent upgrade to Mortgage Guaranty Insurance Corp. to 'BBB' from 'BB+' on March 1, 2016," said S&P Global Ratings credit analyst Raymond Kim. MGIC is the mortgage insurance provider for 97.3% of the privately insured loan portfolio.

The 'AA' long-term rating reflects the bond insurance policy in effect provided by Assured Guaranty Corp. (AA/Stable/--).

The 'BBB+' SPUR reflects our view of VHFA's:Sufficient resolution reserves and agency operating funds to cover S&P Global Ratings' projected credit losses on the mortgage portfolio for a small state economy;Strong underwriting and servicing; andHistorically low levels of foreclosure losses within the single-family resolution. VHFA first issued single-family bonds under this resolution in 1990, but has not actively done so since 2007. As of December 2015, the resolution had bonds outstanding, with a par amount of $35.9 million; the agency's single family loan portfolio consisted of $41.3 million in mortgage loans, and $6.8 million in investments.

We understand that the agency might refund additional bonds in 2016, which could further strengthen the bond resolution.

The positive outlook reflects our view of the improving credit quality of resolutions loan portfolio, with low-to-moderate default rates of VHFA's mortgage loan portfolio, the improving financial strength of MGIC, and the agency's strong servicing and underwriting practices.

Improvements in the portfolio's credit quality or improved parity from bond refunding could lead to a positive rating action.

Should the portfolio experience increased loan delinquencies and defaults, we might consider a negative rating action.