Fitch Affirms North Texas Higher Education Authority, Inc., Series 2010-2 Indenture of Trust
OREANDA-NEWS. Fitch Ratings affirms the series 2010-2 notes issued from North Texas Higher Education Authority, Inc., Series 2010-2 Indenture of Trust (NTHEA 2010-2). The Rating Outlook on the notes remains Stable.
KEY RATING DRIVERS
High Collateral Quality: The trust collateral consists of 100% of Federal Family Education Loan Program (FFELP) loans of which 11.68% are rehabilitated loans. The credit quality of the trust collateral is high, in Fitch's opinion, based on the guarantees provided by the transaction's eligible guarantors and reinsurance provided by the U.S. Department of Education (ED) for at least 97% of principal and accrued interest. The current U.S. sovereign rating is 'AAA' with a Stable Outlook.
Sufficient Credit Enhancement (CE): Credit Enhancement is provided by overcollateralization (OC; the excess of trust's asset balance over bond balance) and excess spread. As of the January 2016 quarterly distribution date, total parity is 119.33%. The trust is a full turbo structure therefore no cash is released until the note is paid in full.
Adequate Liquidity Support: Liquidity support is provided by a reserve account. The reserve is sized equal to the greater of 0.50% of the pool balance, and $ 500,000.
Acceptable Servicing Capabilities: Higher Education Servicing Corporation (HESC) is the master servicer and is providing day-to-day servicing for 19.28% of the loans. Day-to-day servicing for the remainder of the portfolio is provided by Edfinancial Services, LLC (Edfinancial) (65.66%) and Nelnet Servicing, LLC (Nelnet) (15.07%). All servicers have demonstrated adequate servicing capabilities.
On Nov. 18, 2015, Fitch released an exposure draft that delineates revisions it plans to make to the 'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria', dated June 23, 2014. Fitch has reviewed this transaction under both the existing and proposed criteria.
RATING SENSITIVITIES
Since the FFELP student loan ABS relies on the U.S. government to reimburse defaults, 'AAAsf' FFELP ABS ratings will likely move in tandem with the 'AAA' U.S. sovereign rating. Aside from the U.S. sovereign rating, defaults, basis risk, and loan extension risk account for the majority of the risk embedded in FFELP student loan transactions. Additional defaults, basis shock beyond Fitch's published stresses, lower than expected payment speed, and other factors could result in future downgrades. Likewise, a buildup of CE driven by positive excess spread given favorable basis factor conditions could lead to future upgrades.
Fitch affirms the following:
North Texas Higher Education Authority, Inc., Series 2010-2 Indenture of Trust
--2010-2 notes at 'AAAsf'; Outlook Stable.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
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