Standard & Poor's Corp. last week dropped the ratings on three Federal Housing Administration-backed housing issues to BBB from AAA, citing "inadequate" asset levels.

The three deals, totaling $5.78 million, were sold in 1982 by local housing agencies in North Carolina. Nancy Olsen, vice president in the mortgage-related surveillance group at Standard & Poor's, said the cut resulted from an "aggressive" review that turned up anomalies in the three issues.

"What looks like happened is that there are now [capital appreciation bonds] in each of the deals," Ms. Olse said. "That's not a typical FHA structure. We think the structure of the deal was changed after it was rated. We suspect it happened, but it's not absolutely clear."

Wertheim & Co., now Wertheim Schroder & Co., was the investment banker on all three North Carolina deals: the Burlington Housing Assistance Corp.'s $3.12 million 1982, Series A; Greenville Housing Development Corp.'s $1.43 million Series 1982; and Elizabeth City Housing Development Corp.'s $1.23 million Series B borrowing.

Officials at Wertheim Schroder were unavailable for comment late Friday.

In Standard & Poor's view, the situation means the debt service reserves and the FHA mortgage notes do not add up to the total amount of bonds outstanding. As a result, the issues were dropped from the highest possible rating to barely investment grade.

"If they are not doing redemptions to keep the weighted average cost of the debt down," Ms. Olsen noted, "you can have a situation where your liabilities are actually increasing."

But the trustee for the issues, First Union National Bank in Charlotte, said that due to confusion in the indenture, it is "unclear" how much should be in the debt service reserves. "The bonds outstanding are more than the assets," said Terry Baker, corporate assistant vice president at First Union, "but the debt service reserves requirement [on the Burlington issue] has been met."

Ms. Baker said a large and conservative interpretation of Burlington's indenture resulted in a debt service requirement of $268,687, while an estimate of the actual reserve account's balance -- based on the purchase price of the securities in the account -- comes to $511,053, far more than enough to cover the Jan. 1, 1992, interest payment.

On the other hand, the Greenville deal's debt service reserves, again estimated from the tax-cost figure, is well below the required total. The account comes to $186,000, including a $20,000 letter of credit from the Bank of New York, but the reserves necessary to make the Sept. 1 payment total $222,693, according to Ms. Baker.

She noted that the indentures further clouded the situation by not requiring the trustee to take action if the assets and liabilities fell out of balance, as they appear to have done. "There's no requirements for us to do anything" in this situation, she said. "It's inconsistent."

Carol Steele, assistant director of the Burlington Housing Authority, said Standard & Poor's had not notified the issuer of the rating action and that she was unaware of why the agency's borrowing would take such a precipitous decline.

"We haven't heard anything about it," Ms. Steele said. "But we have very little dealings with the project. We mostly rely on notices from First Union."

The finance directors at both of the other housing agencies did not return calls Friday.

A Wall Street analyst familiar with FHA-backed deals said several questions still remain. The analyst, who asked not to be identified, said it was "amazing that they can do that in one fell swoop.

"If there's really an imbalance, why are they still investment grade?" the analyst asked.

The mortgage rate on the Burlington issue is 12%, with the maximum interest rate on the bonds of $11.85%. The first call date was April 1986. The Greenville deal had a mortgage of 11.2%, maximum bond yield of 10%, and first call of March 1985. And the Elizabeth City issue had a 12% mortgage, an 11.5% maximum yield, and a November 1983 first call, according to Standard & Poor's.

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