/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/101114.mbx T R O U B L E D C O M P A N Y R E P O R T E R Sunday, November 14, 2010, Vol. 14, No. 316 Headlines 505 CLO: S&P Raises Ratings on Various Classes of Notes ACE SECURITIES: Moody's Downgrades Ratings on 13 Tranches AMERICAN GENERAL: Moody's Confirms Ratings on Seven Tranches AMERICAN HOME: Moody's Downgrades Ratings on Seven Tranches AMERICREDIT AUTOMOBILE: Moody's Assigns Ratings on Various Classes AMERICREDIT AUTOMOBILE: S&P Assigns Ratings on Various Notes ARBOR REALTY: Fitch Downgrades Ratings on Three Classes of Notes BANC OF AMERICA: Moody's Downgrades Ratings on 16 Certificates BANC OF AMERICA: Moody's Downgrades Ratings on 195 Tranches BANC OF AMERICA: S&P Corrects Rating on Class A-2 to 'CC' BEAR STEARNS: Moody's Cuts Ratings on 15 2001-A Tranches BEAR STEARNS: Moody's Affirms Ratings on 12 2006-BBA7 Certificates BERNARD NATIONAL: S&P Withdraws Ratings on Three Classes CALIFORNIA STATEWIDE: Fitch Cuts Rating on $5,540,000 Bonds to BB CASTLE HILL: S&P Raises Ratings on Various Classes of Notes CELERITY CLO: S&P Raises Ratings on Two Classes of Notes CITY OF ANDERSON: Fitch Cuts Rating on Bonds to 'BB+' CITY OF GILMER: Moody's Upgrades Rating on Bonds From 'Ba1' CNL FUNDING: Moody's Reviews Ratings on Four Classes of Certs. COMM 2004-LNB3: S&P Downgrades Ratings on 10 Classes of Securities CORSAIR NO 4: Moody's Upgrades Ratings on Notes to 'Ba3' CREDIT SUISSE: Fitch Downgrades Ratings on 15 2005-C5 Certs. CREDIT SUISSE: Moody's Downgrades Ratings on Five 2001-CK1 Certs. CREDIT SUISSE: Moody's Reviews Ratings on 14 2004-C5 Certificates CREDIT SUISSE: Moody's Downgrades Ratings on Nine 2005-C3 Certs. CREDIT SUISSE: Moody's Affirms Ratings on 12 2007-C3 Certificates CRYSTAL RIVER: Fitch Affirms Ratings on Eight Classes of Notes CWMBS INC: Moody's Downgrades Ratings on 12 Tranches DILLON READ: Fitch Takes Rating Actions on Various Classes FEDERAL FAMILY: S&P Takes Various Rating Actions on 11 Loans FEP RECEIVABLES: Moody's Cuts Ratings on 4 Classes to C (sf) FFCA SECURED: Moody's Reviews Ratings on Various Classes of Notes FIRST MARBLEHEAD: Fitch Downgrades Ratings on 2006-A Notes FLORIDA KEYS: S&P Assigns 'BB+' Rating to Senior Revenue Bonds GE COMMERCIAL: S&P Raises Ratings on Various Classes of Notes GE COMMERCIAL: S&P Withdraws Ratings on Various Classes of Notes GMAC COMMERCIAL: S&P Downgrades Ratings on Five 2000-C2 Notes GRAYSTON CLO: Moody's Upgrades Ratings on Various Classes GREENPOINT HOME: Moody's Downgrades Ratings on 11 Tranches GSC CAPITAL: Moody's Downgrades Ratings on Three Tranches HSI ASSET: Moody's Downgrades Ratings on Six 2007-WF1 Tranches JEFFERSON COUNTY: Moody's Affirms 'Ba3' Rating to Housing Bondss JEFFERIES MILITARY: DBRS Assigns B Rating on Hunter Project Certs. JOHNSON CITY: Moody's Downgrades Ratings on Revenue Bonds to 'Ba3' JP MORGAN: Moody's Downgrades Ratings on 17 Tranches JP MORGAN: Moody's Reviews Ratings on Nine 2003-LN1 Certificates JP MORGAN: Moody's Reviews Ratings on 15 2004-LN2 Certificates JP MORGAN: Moody's Reviews Ratings on 15 2005-CIBC12 Certs. JP MORGAN: Moody's Reviews Ratings on 18 2005-LDP2 Certificates JP MORGAN: Moody's Reviews Ratings on 2006-CIBC15 Certificates JP MORGAN: Moody's Reviews Ratings on 15 2006-CIBC17 Certs. KATONAH IV: S&P Raises Ratings on Various Classes of Notes KIMBERLITE CDO: Fitch Affirms Ratings on Eight Classes of Notes KINGSLAND II: Moody's Upgrades Ratings on Three Classes of Notes LB-UBS COMMERCIAL: Moody's Downgrades Ratings on 2002-C2 Certs. LCM I: S&P Corrects Press Release; Raises Ratings on Various Notes LEHMAN BROTHERS: Moody's Confirms Ratings on 14 2006-C3 Certs. LNR CDO: Fitch Affirms Ratings on 12 Classes of Notes MAGNOLIA FINANCE: S&P Puts 'CCC-' Rating on CreditWatch Positive MERRILL LYNCH: DBRS Upgrades Class G Rating to BB (High) From BB MERRILL LYNCH: DBRS Confirms 'B' Rating on Class K Certs. MERRILL LYNCH: Moody's Takes Rating Actions on 2004-MKB1 Certs. MEZZ CAP: S&P Downgrades Ratings on 13 Classes of Certs. MORGAN STANLEY: Moody's Reviews Ratings on 18 2007-HQ11 Certs. MORGAN STANLEY: Moody's Reviews Ratings on 15 2007-TOP25 Certs. MORGAN STANLEY: S&P Raises Rating on Class H 1998-HF1 Certs. MORGAN STANLEY: S&P Downgrades Ratings on Eight 2002-IQ3 Certs. MORGAN STANLEY: S&8P Downgrades Ratings on 12 2007-XLF9 Certs. NEW CENTURY: Moody's Downgrades Ratings on 11 Tranches NEWGATE FUNDING: Moody's Reviews Ratings on Various Classes PHH ALTERNATIVE: Moody's Downgrades Ratings on 17 Tranches PHH WACHOVIA: Moody's Downgrades Ratings on Six Tranches PHOENIX CLO: S&P Raises Ratings on Various Classes of Notes PROTECTIVE FINANCE: Moody's Upgrades Ratings on Six Classes PORTER SQUARE: Fitch Cuts Rating on CDO I Class B Notes to 'Csf' PORTER SQUARE: Fitch Cuts Rating on CDO II Class A-2 Notes to Csf PORTER SQUARE: Fitch Cuts Rating on CDO III A-2 & B Notes to 'Dsf' PRETSL COMBINATION: Moody's Cuts Rating on XXVI-2 Certs. to C (sf) PRUDENTIAL SECURITIES: Moody's Takes Actions on 1999-NRF1 Notes SALOMON BROTHERS: Moody's Downgrades Ratings on Five Classes SCHOONER TRUST: DBRS Confirms B Rating on 2006-6 Class K Certs. SCHOONER TRUST: DBRS Confirms B Rating on 2007-8 Class K Certs. SEQUOIA ALTERNATIVE: Moody's Downgrades Ratings on Two Tranches SOLOSO CDO: S&P Downgrades Ratings on Two Classes to 'D' SOUNDVIEW HOME: Moody's Downgrades Ratings on Three Tranches STARM MORTGAGE: Moody's Downgrades Ratings on 10 Tranches TCW HIGH: Moody's Upgrades Ratings on Four Classes of Notes TEXAS PUBLIC: Fitch Upgrades Rating on $86.2 Mil. Bonds From 'BB+' WACHOVIA BANK: Moody's Downgrades Ratings on 17 2006-C24 Certs. WACHOVIA BANK: Moody's Reviews Ratings on 11 2006-C28 Certs. WCP WIRELESS: Fitch Rates Class C Notes at 'BB-sf' WESTERLY HOSPITAL: Moody's Junks Ratings on Series 1994 Bonds WIREFREE PARTNERS: S&P Withdraws 'BB-' Rating on $138.5 Mil. Notes * Fitch Downgrades Ratings on 229 Bonds in 155 RMBS Deals * Moody's Reviews Ratings on Tranches From Three Subprime RMBS * S&P Downgrades Ratings on 71 Certs. From 10 CMBS Transactions * S&P Takes Various Rating Actions on Three Market Value CDOs ********* 505 CLO: S&P Raises Ratings on Various Classes of Notes ------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class B, C, D, and E notes issued by 505 CLO III Ltd., a collateralized loan obligation transaction managed by CIT Asset Management LLC, and removed them from CreditWatch with positive implications. At the same time, S&P affirmed its 'AAA (sf)' ratings on the class A- 1 and A-2 notes. The raised ratings reflect improvement in the credit enhancement available to support the notes since S&P affirmed its ratings on these notes on Feb. 4, 2010. Since that time, the transaction has paid down approximately $181.04 million to the class A-1 and A-2 notes, pro rata, including a total payment of $47.6 million on the Aug. 20, 2010, distribution, thereby increasing the overcollateralization available to support the rated notes. The trustee reported these O/C ratios in the Sept. 28, 2010, monthly report: * The class A/B O/C ratio was 181.79%, compared with a reported ratio of 145.12% in November 2009; and * The class C O/C ratio was 156.51%, compared with a reported ratio of 131.88% in November 2009; * The transaction has also benefitted from an improvement in credit quality. As of the Sept. 28, 2010, trustee report, the transaction had $21.8 million in defaulted assets, down from $31 million noted in the Nov. 25, 2009 trustee report. Furthermore, assets from obligors rated in the 'CCC' category were reported at $165.6 million in September 2010, compared with $253.7 million in November 2009. Standard & Poor's will continue to review whether, in its view, the ratings currently assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as S&P deems necessary. Rating And Creditwatch Actions 505 CLO III Ltd. Rating ------ Class To From ----- -- ---- B AAA (sf) AA (sf)/Watch Pos C AAA (sf) A (sf)/Watch Pos D AA+ (sf) BBB (sf)/Watch Pos E AA+ (sf) BB (sf)/Watch Pos Ratings Affirmed 505 CLO III Ltd. Class Rating ----- ------ A-1 AAA (sf) A-2 AAA (sf) Transaction Information ----------------------- Issuer: 505 CLO III Ltd. Collateral manager: CIT Asset Management LLC Underwriter: Morgan Stanley & Co. Inc. Trustee: U.S. Bank National Association Transaction type: Cash flow CLO ACE SECURITIES: Moody's Downgrades Ratings on 13 Tranches --------------------------------------------------------- Moody's Investors Service has downgraded the ratings of 13 tranches from 8 RMBS transactions issued by ACE Securities Corp. Home Equity Loan Trust. The collateral backing these deals primarily consists of closed end second lien loans. Ratings Rationale The actions are a result of the continued performance deterioration in second lien pools in conjunction with home price and unemployment conditions that remain under duress. The actions reflect Moody's updated loss expectations on second lien pools. The primary source of assumption uncertainty is the current macroeconomic environment, in which unemployment remains at high levels, and weakness persists in the housing market. Moody's notes an increasing potential for a double-dip recession, which could cause a further 20% decline in home prices (versus its baseline assumption of roughly 5% further decline). Overall, Moody's assumes a further 5% decline in home prices with stabilization in early 2011, accompanied by continued stress in national employment levels through that timeframe. If expected losses on the each of the collateral pools were to increase by 10%, model implied results indicate that all of the deals' ratings would remain stable. Moody's Investors Service received and took into account one or more third party due diligence reports on the underlying assets or financial instruments in this transaction and the due diligence reports had a neutral impact on the rating. Complete rating actions are: Issuer: ACE Securities Corp. Home Equity Loan Trust, Series 2005- SL1 * Expected Losses (as a % of Original Balance): 29% -- Cl. M-1, Downgraded to Ca (sf); previously on March 18, 2010 B3 (sf) Placed Under Review for Possible Downgrade Issuer: ACE Securities Corp. Home Equity Loan Trust, Series 2006- ASL1 * Expected Losses (as a % of Original Balance): 51% -- Cl. A, Downgraded to Ca (sf); previously on March 18, 2010 B3 (sf) Placed Under Review for Possible Downgrade Issuer: ACE Securities Corp. Home Equity Loan Trust, Series 2006- SL1 * Expected Losses (as a % of Original Balance): 46% -- Cl. A, Downgraded to C (sf); previously on March 18, 2010 B1 (sf) Placed Under Review for Possible Downgrade Issuer: ACE Securities Corp. Home Equity Loan Trust, Series 2006- SL2 * Expected Losses (as a % of Original Balance): 66% -- Cl. A, Downgraded to C (sf); previously on March 18, 2010 Ca (sf) Placed Under Review for Possible Downgrade Issuer: ACE Securities Corp. Home Equity Loan Trust, Series 2006- SL3 * Expected Losses (as a % of Original Balance): 57% -- Cl. A-1, Downgraded to C (sf); previously on March 18, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. A-2, Downgraded to C (sf); previously on March 18, 2010 Ca (sf) Placed Under Review for Possible Downgrade Issuer: ACE Securities Corp. Home Equity Loan Trust, Series 2006- SL4 * Expected Losses (as a % of Original Balance): 51% -- Cl. A-1, Downgraded to C (sf); previously on March 18, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. A-2, Downgraded to C (sf); previously on March 18, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. A-3, Downgraded to C (sf); previously on March 18, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade Issuer: ACE Securities Corp. Home Equity Loan Trust, Series 2007- ASL1 * Expected Losses (as a % of Original Balance): Group 1 - 68%, Group 2 -- 77% -- Cl. A-1, Downgraded to C (sf); previously on March 18, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. A-2, Downgraded to C (sf); previously on March 18, 2010 Ca (sf) Placed Under Review for Possible Downgrade Issuer: ACE Securities Corp. Home Equity Loan Trust, Series 2007- SL1 * Expected Losses (as a % of Original Balance): Group 1 - 67%, Group 2 -- 75% -- Cl. A-1, Downgraded to C (sf); previously on March 18, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. A-2, Downgraded to C (sf); previously on March 18, 2010 Ca (sf) Placed Under Review for Possible Downgrade AMERICAN GENERAL: Moody's Confirms Ratings on Seven Tranches ------------------------------------------------------------ Moody's Investors Service has confirmed the ratings of 7 tranches from American General Mortgage Pass-Through Certificates, Series 2006-1. The collateral backing this deal primarily consists of first-lien, fixed rate Alt-A residential mortgages. Ratings Rationale The actions are a result of the continued performance deterioration in Alt-A pools in conjunction with home price and unemployment conditions that remain under duress. The actions reflect Moody's updated loss expectations on Alt-A pools issued from 2005 to 2007. To assess the rating implications of the updated loss levels on Alt-A RMBS, each individual pool was run through a variety of scenarios in the Structured Finance Workstation(R), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to small increments in losses on the underlying mortgage pool is taken into consideration when assigning ratings. The above mentioned approach "Alt-A RMBS Loss Projection Update: February 2010" is adjusted slightly when estimating losses on pools left with a small number of loans. To project losses on pools with fewer than 100 loans, Moody's first estimates a "baseline" average rate of new delinquencies for the pool that is dependent on the vintage of loan origination (10%, 19% and 21% for the 2005, 2006 and 2007 vintage respectively). This baseline rate is higher than the average rate of new delinquencies for the vintage to account for the volatile nature of small pools. Even if a few loans in a small pool become delinquent, there could be a large increase in the overall pool delinquency level due to the concentration risk. Once the baseline rate is set, further adjustments are made based on 1) the number of loans remaining in the pool and 2) the level of current delinquencies in the pool. The fewer the number of loans remaining in the pool, the higher the volatility and hence the stress applied. Once the loan count in a pool falls below 75, the rate of delinquency is increased by 1% for every loan less than 75. For example, for a pool with 74 loans from the 2005 vintage, the adjusted rate of new delinquency would be 10.10%. If current delinquency levels in a small pool is low, future delinquencies are expected to reflect this trend. To account for that, the rate calculated above is multiplied by a factor ranging from 0.2 to 2.0 for current delinquencies ranging from less than 2.5% to greater than 50% respectively. Delinquencies for subsequent years and ultimate expected losses are projected using the approach described in the methodology publication. The primary source of assumption uncertainty is the current macroeconomic environment, in which unemployment remains at high levels, and weakness persists in the housing market. Moody's notes an increasing potential for a double-dip recession, which could cause a further 20% decline in home prices (versus its baseline assumption of roughly 5% further decline). Overall, Moody's assumes a further 5% decline in home prices with stabilization in early 2011, accompanied by continued stress in national employment levels through that timeframe. Moody's Investors Service received and took into account one or more third party due diligence reports on the underlying assets or financial instruments in this transaction and the due diligence reports had a neutral impact on the rating. Complete rating actions are: Issuer: American General Mortgage Pass-Through Certificates, Series 2006-1 -- Cl. A-2, Confirmed at Aaa (sf); previously on Jan. 14, 2010 Aaa (sf) Placed Under Review for Possible Downgrade -- Cl. A-3, Confirmed at Aaa (sf); previously on Jan. 14, 2010 Aaa (sf) Placed Under Review for Possible Downgrade -- Cl. A-4, Confirmed at Aaa (sf); previously on Jan. 14, 2010 Aaa (sf) Placed Under Review for Possible Downgrade -- Cl. A-5, Confirmed at Aaa (sf); previously on Jan. 14, 2010 Aaa (sf) Placed Under Review for Possible Downgrade -- Cl. M-1, Confirmed at Aa2 (sf); previously on Jan. 14, 2010 Aa2 (sf) Placed Under Review for Possible Downgrade -- Cl. M-2, Confirmed at A1 (sf); previously on Jan. 14, 2010 A1 (sf) Placed Under Review for Possible Downgrade -- Cl. B-1, Confirmed at A3 (sf); previously on Jan. 14, 2010 A3 (sf) Placed Under Review for Possible Downgrade AMERICAN HOME: Moody's Downgrades Ratings on Seven Tranches ----------------------------------------------------------- Moody's Investors Service has downgraded the ratings of seven tranches and confirmed the ratings of two tranches from eight RMBS transactions issued by American Home Mortgage Investment Trust. The collateral backing these deals primarily consists of closed end second lien loans and home equity lines of credit. Ratings Rationale The actions are a result of the continued performance deterioration in second lien pools in conjunction with home price and unemployment conditions that remain under duress. The actions reflect Moody's updated loss expectations on second lien pools. For securities insured by a financial guarantor, the rating on the securities is the higher of (i) the guarantor's financial strength rating and (ii) the current underlying rating (i.e., absent consideration of the guaranty) on the security. The principal methodology used in determining the underlying rating is the same methodology for rating securities that do not have a financial guaranty and is as described earlier. Class IX-A issued by American Home Mortgage Investment Trust 2005-1, Class VI-A issued by American Home Mortgage Investment Trust 2005-2, Class II-A issued by American Home Mortgage Investment Trust 2005-4 are wrapped by Financial Guaranty Insurance Company (Rating Withdrawn). Additionally Class V-A issued by American Home Mortgage Investment Trust 2006-2 is wrapped by CIFG Assurance North America, Inc. (Rating Withdrawn). RMBS securities wrapped by Financial Guaranty Insurance Company or CIFG Assurance North America, Inc. are rated at their underlying rating without consideration of the respective guaranties. The primary source of assumption uncertainty is the current macroeconomic environment, in which unemployment remains at high levels, and weakness persists in the housing market. Moody's notes an increasing potential for a double-dip recession, which could cause a further 20% decline in home prices (versus its baseline assumption of roughly 5% further decline). Overall, Moody's assumes a further 5% decline in home prices with stabilization in early 2011, accompanied by continued stress in national employment levels through that timeframe. If expected losses on the each of the collateral pools were to increase by 10%, model implied results indicate that all of the deals' ratings would remain stable. Moody's Investors Service received and took into account one or more third party due diligence reports on the underlying assets or financial instruments in this transaction and the due diligence reports had a neutral impact on the rating. Complete rating actions are: Issuer: American Home Mortgage Investment Tr 2006-3 * Expected Losses (as a % of Original Balance): 59% -- Cl. IV-A, Downgraded to C (sf); previously on March 18, 2010 Ca (sf) Placed Under Review for Possible Downgrade Issuer: American Home Mortgage Investment Trust 2005-1 * Expected Losses (as a % of Original Balance): 10% -- Cl. IX-A, Downgraded to Ca (sf); previously on March 18, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Financial Guarantor: Financial Guaranty Insurance Company (Insured Rating Withdrawn March 25, 2009) Issuer: American Home Mortgage Investment Trust 2005-2 * Expected Losses (as a % of Original Balance): 16% -- Cl. VI-A, Downgraded to Ca (sf); previously on March 18, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade -- Financial Guarantor: Financial Guaranty Insurance Company (Insured Rating Withdrawn March 25, 2009) Issuer: American Home Mortgage Investment Trust 2005-4 * Expected Losses (as a % of Original Balance): 20% -- Cl. II-A, Downgraded to Ca (sf); previously on March 18, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade -- Financial Guarantor: Financial Guaranty Insurance Company (Insured Rating Withdrawn March 25, 2009) Issuer: American Home Mortgage Investment Trust 2005-SD1 * Expected Losses (as a % of Original Balance): 39% -- Cl. II-A1, Confirmed at Caa1 (sf); previously on March 18, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade Issuer: American Home Mortgage Investment Trust 2006-2 * Expected Losses (as a % of Original Balance): Group IV 52%, Group V 35% -- Cl. IV-A, Downgraded to C (sf); previously on March 18, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. V-A, Confirmed at Ca (sf); previously on March 18, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Financial Guarantor: CIFG Assurance North America, Inc. (Insured Rating Withdrawn Nov 12, 2009) Issuer: American Home Mortgage Investment Trust 2007-2 * Expected Losses (as a % of Original Balance): 82% -- Cl. II-A, Downgraded to C (sf); previously on March 18, 2010 Ca (sf) Placed Under Review for Possible Downgrade Issuer: American Home Mortgage Investment Trust 2007-A * Expected Losses (as a % of Original Balance): 68% -- Cl. II-A, Downgraded to C (sf); previously on March 18, 2010 Ca (sf) Placed Under Review for Possible Downgrade AMERICREDIT AUTOMOBILE: Moody's Assigns Ratings on Various Classes ------------------------------------------------------------------ Moody's Investors Service has assigned provisional ratings to the notes to be issued by AmeriCredit Automobile Receivables Trust 2010-4. This is the sixth overall and fourth senior/subordinated transaction of the year for AmeriCredit Financial Services, Inc. The complete rating actions are: Issuer: AmeriCredit Automobile Receivables Trust 2010-4 -- Class A-1 Notes, rated (P) Prime-1 (sf); -- Class A-2 Notes, rated (P) Aaa (sf); -- Class A-3 Notes, rated (P) Aaa (sf); -- Class B Notes, rated (P) Aa1 (sf); -- Class C Notes, rated (P) Aa3 (sf); -- Class D Notes, rated (P) Baa2 (sf); -- Class E Notes, rated (P) Ba2 (sf); Ratings Rationale Moody's said the ratings are based on the quality of the underlying auto loans and their expected performance, the strength of the structure, the availability of excess spread over the life of the transaction, the experience and expertise of AmeriCredit Financial Services, Inc., as servicer, and the backup servicing arrangement with Aa2-rated Wells Fargo Bank, N.A. Moody's median cumulative net loss expectation for the AMCAR 2010- 4 pool is 11.5% and total credit enhancement required to achieve Aaa rating (i.e. Aaa proxy) is 40.0%. The loss expectation was based on an analysis of AmeriCredit's portfolio vintage performance as well as performance of past securitizations, and current expectations for future economic conditions. The Assumption Volatility Score for this transaction is Low/Medium versus a Medium for the sector. This is driven by the a Low/Medium assessment for Governance due to the strong back-up servicing arrangement present in this transaction in addition to the size and strength of AmeriCredit's servicing platform. Moody's V Scores provide a relative assessment of the quality of available credit information and the potential variability around the various inputs to a rating determination. The V Score ranks transactions by the potential for significant rating changes owing to uncertainty around the assumptions due to data quality, historical performance, the level of disclosure, transaction complexity, the modeling and the transaction governance that underlie the ratings. V Scores apply to the entire transaction (rather than individual tranches). Moody's Parameter Sensitivities: If the net loss used in determining the initial rating were changed to 20%, 25% or 35.0%, the initial model output for the Class A notes might change from Aaa to Aa1, Aa2, and A2, respectively; Class B notes might change from Aa1 to A3, Baa3, and below B2, respectively; Class C notes might change from Aa3 to Ba1, B3, and below B3, respectively; Class D notes might change from Baa2 to below B3 in all three scenarios; and Class D notes might change from Ba2 to below B3 in all three scenarios. Parameter Sensitivities are not intended to measure how the rating of the security might migrate over time, rather they are designed to provide a quantitative calculation of how the initial rating might change if key input parameters used in the initial rating process differed. The analysis assumes that the deal has not aged. Parameter Sensitivities only reflect the ratings impact of each scenario from a quantitative/model-indicated standpoint. Qualitative factors are also taken into consideration in the ratings process, so the actual ratings that would be assigned in each case could vary from the information presented in the Parameter Sensitivity analysis. Moody's Investors Service did not receive or take into account a third party due diligence report on the underlying assets or financial instruments in this transaction. AMERICREDIT AUTOMOBILE: S&P Assigns Ratings on Various Notes ------------------------------------------------------------ Standard & Poor's Ratings Services assigned its preliminary ratings to AmeriCredit Automobile Receivables Trust 2010-4's $682.546 million automobile receivables-backed notes. The preliminary ratings are based on information as of Nov. 8, 2010. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect S&P's view of: The availability of approximately 43.9%, 38.7%, 31.5%, 25.0%, and 22.5% credit support for the class A, B, C, D, and E notes, respectively (based on stressed cash flow scenarios, including excess spread), which provides coverage of more than 3.50x, 3.00x, 2.55x, 1.75x, and 1.50x S&P's 11.75%-12.25% expected cumulative net loss range for the class A, B, C, D, and E notes, respectively. These credit support levels are commensurate with the assigned preliminary 'AAA (sf)', 'AA (sf)', 'A+ (sf)', 'BBB (sf)', and 'BB (sf)' ratings on the class A, B, C, D, and E notes, respectively. S&P's expectation that under a moderate, or 'BBB (sf)', stress scenario, the ratings on the class A, B, and C notes would not decline by more than one rating category (all else being equal). In the case of the 'AAA' and 'AA' rated securities, this is consistent with S&P's rating stability criteria. In the case of the 'A+' rated notes, this is slightly superior to its minimum rating stability criteria, which permits a two-category downgrade. The credit enhancement in the form of subordination, overcollateralization, a reserve account, and excess spread. The timely interest and ultimate principal payments made under the stressed cash flow modeling scenarios, which are consistent with the assigned preliminary ratings. The collateral characteristics of the securitized pool of subprime automobile loans. AmeriCredit Corp.'s extensive securitization performance history going back to 1994. The transaction's payment and legal structures. Preliminary Ratings Assigned AmeriCredit Automobile Receivables Trust 2010-4 Interest Amount Class Rating Type rate (mil. $)* ----- ------ ---- -------- --------- A-1 A-1+ (sf) Senior Fixed 182.800 A-2 AAA (sf) Senior Fixed 223.000 A-3 AAA (sf) Senior Fixed 90.327 B AA (sf) Subordinate Fixed 53.846 C A+ (sf) Subordinate Fixed 66.843 D BBB (sf) Subordinate Fixed 65.730 E** BB (sf) Subordinate Fixed 17.454 * The actual size of these tranches will be determined on the pricing date. ** Class E will be privately placed and is not included in the amount of the public offering. ARBOR REALTY: Fitch Downgrades Ratings on Three Classes of Notes ---------------------------------------------------------------- Fitch Ratings has downgraded three classes and affirmed one class of Arbor Realty Mortgage Securities Series 2004-1 Ltd/LLC, reflecting Fitch's increased base case loss expectation of 56.8%. Fitch's performance expectation incorporates prospective views regarding commercial real estate market value and cash flow declines. The downgrades of the bottom three rated classes are a result of the increased base case expected loss of 56.8% from 46.3% at last review. Since last review, four assets were removed from the pool, including two payoffs and two investment grade rated CMBS sold at slight discounts to par; these assets had little to no base case expected losses at last review. Further, defaulted assets have risen slightly to 4.8% from 1.5% while loans of concern have increased significantly to 35.1% from 13.5% at last review. ARMSS 2004-1 is a commercial real estate collateralized debt obligation managed by Arbor Realty Trust, Inc. The transaction had a five-year reinvestment period that ended in April 2009. As of the Oct. 15, 2010 trustee report, all over collateralization and interest coverage ratios were in compliance. However, the class A/B OC test had a cushion of only 0.2%; failure of this test will result in interest proceeds being diverted from lower classes to pay down the senior class. Under Fitch's methodology, approximately 74.5% of the portfolio is modeled to default in the base case stress scenario, defined as the 'B' stress. In this scenario, the modeled average cash flow decline is 7.6% from, generally, either year end 2009 or trailing 12-month first or second quarter 2010. Fitch estimates that average recoveries will be 23.8% as the majority of the assets are highly leveraged and subordinate in nature. The largest component of Fitch's base case loss expectation is a B-note secured by a portfolio of six full and limited service hotels located in Daytona Beach, Florida. The portfolio was recently taken out of bankruptcy. An Arbor affiliate is anticipated to take title to the properties. Fitch modeled a full loss on this overleveraged position in its base case scenario. The next largest component of Fitch's base case loss expectation is a B-note secured by a multifamily property located in Ypsilanti, Michigan. Performance has suffered due to poor market conditions; and cash flow from the property is not supporting debt service. Fitch modeled a substantial loss in its base case scenario. The third largest component of Fitch's base case loss expectation is a B-note secured by a multifamily property located in Clearwater, Florida. Property performance has not improved as expected, and the borrower has requested interest rate relief on multiple occasions. Fitch modeled a term default and a full loss on this highly leveraged position in its base case scenario. This transaction was analyzed according to the 'U.S. CREL CDO Surveillance Criteria', which applies stresses to property cash flows and debt service coverage ratio tests to project future default levels for the underlying portfolio. Cash flow stresses have been updated to reflect more recently available data on commercial real estate performance. Recoveries are based on stressed cash flows and Fitch's long-term capitalization rates. The default levels were then compared to the breakeven levels generated by Fitch's cash flow model of the CDO under the various default timing and interest rate stress scenarios, as described in the report 'Global Criteria for Cash Flow Analysis in CDOs'. Based on this analysis, the class A notes' credit characteristics are generally consistent with the 'BB' rating category, and the class B notes' credit characteristics are generally consistent with the 'B' rating category. The ratings for classes C and D are based on a deterministic analysis, which considers Fitch's base case loss expectation for the pool, and the current percentage of defaulted assets and Fitch Loans of Concern factoring in anticipated recoveries relative to each class' credit enhancement. Based on this analysis, classes C and D are consistent with the 'CCC' rating category, meaning default is a real possibility. Fitch's base case loss expectation of 56.8% exceeds these classes' respective current credit enhancement levels. Classes A and B maintain a Negative Rating Outlook, reflecting Fitch's expectation of further negative credit migration of the underlying collateral. These classes also maintain Loss Severity ratings of 'LS4' and 'LS5', respectively. The LS ratings indicate each tranche's potential loss severity given default, as evidenced by the ratio of tranche size to the expected loss for the collateral under the 'B' stress. LS ratings should always be considered in conjunction with probability of default indicated by a class' long-term credit rating. Classes C and D are assigned Recovery Ratings to provide a forward-looking estimate of recoveries on currently distressed or defaulted structured finance securities. Recovery Ratings are calculated using Fitch's cash flow model, and incorporate Fitch's current 'B' stress expectation for default and recovery rates, the 'B' stress US$ LIBOR up-stress, and a 24-month recovery lag. All modeled distributions are discounted at 10% to arrive at a present value and compared to the class' tranche size to determine a Recovery Rating. The assignment of 'RR6' to class C and D reflects modeled recoveries of less than 10% of each classes' outstanding principal balance. Fitch has affirmed this class: -- $155,171,330 class A at 'BBsf/LS4'; Outlook Negative. Fitch has downgraded and assigned Recovery Ratings (RR) to these classes: -- $51,590,000 class B to 'Bsf/LS5' from BBsf/LS5; Outlook Negative; -- $27,635,768 class C to 'CCCsf/RR6' from 'Bsf/LS5'; -- $11,183,232 class D to 'CCCsf/RR6' from 'Bsf/LS5'. BANC OF AMERICA: Moody's Downgrades Ratings on 16 Certificates -------------------------------------------------------------- Moody's Investors Service downgraded the ratings of 16 classes and affirmed nine classes of Banc of America Commercial Mortgage Inc., Commercial Pass-Through Certificates, Series 2006-1: -- Cl. A-1 Certificate, Affirmed at Aaa (sf); previously on March 14, 2006 Definitive Rating Assigned Aaa (sf) -- Cl. A-2 Certificate, Affirmed at Aaa (sf); previously on March 14, 2006 Definitive Rating Assigned Aaa (sf) -- Cl. A-3A Certificate, Affirmed at Aaa (sf); previously on March 14, 2006 Definitive Rating Assigned Aaa (sf) -- Cl. A-3B Certificate, Affirmed at Aaa (sf); previously on March 14, 2006 Assigned Aaa (sf) -- Cl. A-4 Certificate, Affirmed at Aaa (sf); previously on March 14, 2006 Definitive Rating Assigned Aaa (sf) -- Cl. A-1A Certificate, Affirmed at Aaa (sf); previously on March 14, 2006 Definitive Rating Assigned Aaa (sf) -- Cl. A-SBFL Certificate, Affirmed at Aaa (sf); previously on March 14, 2006 Definitive Rating Assigned Aaa (sf) -- Cl. XP Certificate, Affirmed at Aaa (sf); previously on March 14, 2006 Definitive Rating Assigned Aaa (sf) -- Cl. XC Certificate, Affirmed at Aaa (sf); previously on March 14, 2006 Definitive Rating Assigned Aaa (sf) -- Cl. A-M Certificate, Downgraded to Aa1 (sf); previously on Sept. 29, 2010 Aaa (sf) Placed Under Review for Possible Downgrade -- Cl. A-J Certificate, Downgraded to Baa1 (sf); previously on Sept. 29, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade -- Cl. B Certificate, Downgraded to Baa2 (sf); previously on Sept. 29, 2010 A1 (sf) Placed Under Review for Possible Downgrade -- Cl. C Certificate, Downgraded to Ba1 (sf); previously on Sept. 29, 2010 A2 (sf) Placed Under Review for Possible Downgrade -- Cl. D Certificate, Downgraded to B3 (sf); previously on Sept. 29, 2010 A3 (sf) Placed Under Review for Possible Downgrade -- Cl. E Certificate, Downgraded to Caa1 (sf); previously on Sept. 29, 2010 Baa2 (sf) Placed Under Review for Possible Downgrade -- Cl. F Certificate, Downgraded to Caa2 (sf); previously on Sept. 29, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade -- Cl. G Certificate, Downgraded to Ca (sf); previously on Sept. 29, 2010 Ba2 (sf) Placed Under Review for Possible Downgrade -- Cl. H Certificate, Downgraded to C (sf); previously on Sept. 29, 2010 B1 (sf) Placed Under Review for Possible Downgrade -- Cl. J Certificate, Downgraded to C (sf); previously on Sept. 29, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. K Certificate, Downgraded to C (sf); previously on Sept. 29, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. L Certificate, Downgraded to C (sf); previously on Sept. 29, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. M Certificate, Downgraded to C (sf); previously on Sept. 29, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. N Certificate, Downgraded to C (sf); previously on Sept. 29, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade -- Cl. O Certificate, Downgraded to C (sf); previously on Sept. 29, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade -- Cl. P Certificate, Downgraded to C (sf); previously on Sept. 29, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade Ratings Rationale The downgrades are due to higher expected losses for the pool resulting from realized and anticipated losses from specially serviced and troubled loans. The affirmations are due to key parameters, including Moody's loan to value ratio, Moody's stressed debt service coverage ratio and the Herfindahl Index, remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. On September 29, 2010, Moody's placed classes AM through P on review for possible downgrade. This action concludes Moody's review. Moody's rating action reflects a cumulative base expected loss of 10.1% of the current balance. At last review, Moody's cumulative base expected loss was 3.8%. Moody's stressed scenario loss is 18.8% of the current balance. Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes. Moody's analysis reflects a forward-looking view of the likely range of collateral performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside an acceptable range of the key parameters may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated during the current review. Even so, deviation from the expected range will not necessarily result in a rating action. There may be mitigating or offsetting factors to an improvement or decline in collateral performance, such as increased subordination levels due to amortization and loan payoffs or a decline in subordination due to realized losses. Primary sources of assumption uncertainty are the current stressed macroeconomic environment and continuing weakness in the commercial real estate and lending markets. Moody's currently views the commercial real estate market as stressed with further performance declines expected in the industrial, office, and retail sectors. Hotel performance has begun to rebound, albeit off a very weak base. Multifamily has also begun to rebound reflecting an improved supply / demand relationship. The availability of debt capital is improving with terms returning towards market norms. Job growth and housing price stability will be necessary precursors to commercial real estate recovery. Overall, Moody's central global scenario remains "hook-shaped" for 2010 and 2011; Moody's expect overall a sluggish recovery in most of the world's largest economies, returning to trend growth rate with elevated fiscal deficits and persistent unemployment levels. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.50 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score, a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in Moody's analysis. Based on the model pooled credit enhancement levels at Aa2 and B2, the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade credit estimates is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit estimate of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the credit estimate level, is incorporated for loans with similar credit estimates in the same transaction. Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 50, compared to 57 at last review. Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated February 9, 2009. Moody's Investors Service did not receive or take into account a third party due diligence report on the underlying assets or financial instruments related to the monitoring of this transaction in the past six months. Deal Performance As of the October 12, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 7% to $1.956 billion from $2.037 billion at securitization. The Certificates are collateralized by 192 mortgage loans ranging in size from less than 1% to 8% of the pool, with the top ten loans representing 36% of the pool. No loans have defeased. The pool contains two loans, representing 10% of the pool with investment grade credit estimates. Forty nine loans, representing 20% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. No loans have been liquidated from the pool. Nineteen loans, representing 8% of the pool, are currently in special servicing. The largest specially serviced loan is the Marriot Courtyard Grand Cayman Loan ($28.1 million -- 1.5% of the pool), which is secured by a 232 room hotel property located in the Grand Cayman Islands. The loan was transferred to special servicing in January 2009 due to the hotel's closing as a result of damage from hurricane Paloma in November 2008. A August 2010 appraisal valued this property at $2.0 million. The remaining specially serviced loans are secured by a mix of property types. The master servicer has recognized appraisal reductions totaling $86.5 million for 17 of the specially serviced loans. Moody's has estimated an aggregate $105.9 million loss (67% expected loss on average) for the specially serviced loans. Moody's has assumed a high default probability for 24 poorly performing loans representing 9% of the pool and has estimated a $50.1 million loss (27% expected loss based on a 58% probability default) from these troubled loans. Based on the most recent remittance statement, Classes G through Q have experienced cumulative interest shortfalls totaling $6.8 million. Moody's anticipates that the pool will continue to experience interest shortfalls because of the exposure to specially serviced loans. Interest shortfalls are caused by special servicing fees, including workout and liquidation fees, appraisal subordinate entitlement reductions and extraordinary trust expenses. Moody's was provided with full year 2009 operating results for 82% of the conduit pool. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 104% compared to 137% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 12% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.5%. Excluding specially serviced and troubled loans, Moody's actual and stressed DSCRs are 1.31X and 1.06X, respectively, compared to 1.07X and 0.91X at last review. Moody's actual DSCR is based on Moody's net cash flow and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. The largest loan with a credit estimate is the Kinder Care Portfolio Loan ($142.8 million -- 7.5% of the pool), which is secured by 713 childcare facilities located in 37 states. The loan represents a pari passu interest in a $632.5 million first mortgage loan. The largest state concentration is California, with 12% of the portfolio. Moody's current credit estimate and stressed DSCR are A3 and 1.86X, respectively, compared to A3 and 1.28X at Moody's last full review. The second largest loan with a credit estimate is the Torre Mayor Loan ($52.7 million -- 2.8% of the pool), which is secured by an 829,000 square foot Class A office building located in Mexico City, Mexico. The loan represents a 50% pari-passu interest in a $125.4 million senior note. There is also a subordinate $19.2 million note held outside the trust. The property was 98% leased as of December 2009. Moody's current credit estimate and stressed DSCR are A1 and 1.64X, respectively, compared to A1 and 2.08X at last review. The top three performing conduit loans represent 12% of the pool balance. The largest loan is the Desert Passage Loan ($128.7 million -- 6.8% of the pool), which secured by a 500,000 square foot specialty retail and entertainment center located on the ground level of the Planet Hollywood Resort and Casino in Las Vegas, Nevada. The loan represents 33% pari passu interest in a $390 million first mortgage loan. The property was 91% leased as of June 2010 compared to 95% at last review. Moody's LTV and stressed DSCR are 108% and 0.90X, respectively, compared to 123% and 0.80X at last review. The second largest loan is the Waterfront at Port Chester Loan ($105.5 million -- 2.8% of the pool), which is secured by a 295,000 square foot retail center located in Port Chester (Westchester County), New York. The center has maintained 100% occupancy since securitization. Moody's LTV and stressed DSCR are 113% and 0.81X, respectively, compared to 136% and 0.7X at last review. The third largest loan is the Fairmont Sonoma Mission Inn & Spa Loan ($55.0 million -- 2.9% of the pool), which is secured by a 266 room full service hotel located in Sonoma, California. The loan is currently on the watchlist due to a decline in performance. Performance has declined as a result of decreased occupancy. Moody's LTV and stressed DSCR are 243% and 0.49X, respectively, compared to 116% and 1.02X at last review. BANC OF AMERICA: Moody's Downgrades Ratings on 195 Tranches ----------------------------------------------------------- Moody's Investors Service has downgraded the ratings of 195 tranches, confirmed the ratings of 13 tranches and upgraded the ratings of 6 tranches from 12 RMBS transactions issued by Banc of America Funding Trust. The collateral backing these deals primarily consists of first-lien, fixed and adjustable-rate Alt-A residential mortgages. Ratings Rationale The actions are a result of the continued performance deterioration in Alt-A pools in conjunction with home price and unemployment conditions that remain under duress. The actions reflect Moody's updated loss expectations on Alt-A pools issued from 2005 to 2007. To assess the rating implications of the updated loss levels on Alt-A RMBS, each individual pool was run through a variety of scenarios in the Structured Finance Workstation(R), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to small increments in losses on the underlying mortgage pool is taken into consideration when assigning ratings. The above mentioned approach "Alt-A RMBS Loss Projection Update: February 2010" is adjusted slightly when estimating losses on pools left with a small number of loans. To project losses on pools with fewer than 100 loans, Moody's first estimates a "baseline" average rate of new delinquencies for the pool that is dependent on the vintage of loan origination (10%, 19% and 21% for the 2005, 2006 and 2007 vintage respectively). This baseline rate is higher than the average rate of new delinquencies for the vintage to account for the volatile nature of small pools. Even if a few loans in a small pool become delinquent, there could be a large increase in the overall pool delinquency level due to the concentration risk. Once the baseline rate is set, further adjustments are made based on 1) the number of loans remaining in the pool and 2) the level of current delinquencies in the pool. The fewer the number of loans remaining in the pool, the higher the volatility and hence the stress applied. Once the loan count in a pool falls below 75, the rate of delinquency is increased by 1% for every loan less than 75. For example, for a pool with 74 loans from the 2005 vintage, the adjusted rate of new delinquency would be 10.10%. If current delinquency levels in a small pool is low, future delinquencies are expected to reflect this trend. To account for that, the rate calculated above is multiplied by a factor ranging from 0.2 to 2.0 for current delinquencies ranging from less than 2.5% to greater than 50% respectively. Delinquencies for subsequent years and ultimate expected losses are projected using the approach described in the methodology publication. The primary source of assumption uncertainty is the current macroeconomic environment, in which unemployment remains at high levels, and weakness persists in the housing market. Moody's notes an increasing potential for a double-dip recession, which could cause a further 20% decline in home prices (versus its baseline assumption of roughly 5% further decline). Overall, Moody's assumes a further 5% decline in home prices with stabilization in early 2011, accompanied by continued stress in national employment levels through that timeframe. Moody's Investors Service received and took into account one or more third party due diligence reports on the underlying assets or financial instruments in this transaction and the due diligence reports had a neutral impact on the rating. Complete rating actions are: Issuer: Banc of America Funding 2006-7 Trust, Mortgage Pass- Through Certificates, Series 2006-7 -- Cl. 1-A-1, Downgraded to Caa1 (sf); previously on Jan. 14, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-2, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-3, Downgraded to Caa1 (sf); previously on Jan. 14, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-4, Downgraded to Caa1 (sf); previously on Jan. 14, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-5, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-7, Upgraded to Baa1 (sf); previously on Jan. 14, 2010 B2 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-8, Upgraded to Baa2 (sf); previously on Jan. 14, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-9, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-10, Downgraded to C (sf); previously on Jan. 14, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-11, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-12, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. T2-A-1, Downgraded to Caa3 (sf); previously on Aug. 5, 2010 Downgraded to Caa1 (sf) and Remained On Review for Possible Downgrade -- Cl. T2-A-2, Downgraded to Caa3 (sf); previously on Aug. 5, 2010 Downgraded to Caa1 (sf) and Remained On Review for Possible Downgrade -- Cl. T2-A-3, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. T2-A-4, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. T2-A-5, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. T2-A-6, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. T2-A-7, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. T2-A-8, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. T2-A-A, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. T2-A-B, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. 30-IO, Downgraded to Caa1 (sf); previously on Jan. 14, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade -- Cl. 30-PO, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade Issuer: Banc of America Funding 2006-G Trust -- Cl. 1-A-1, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-1, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-2, Upgraded to Aaa (sf); previously on Jan. 14, 2010 A2 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-3, Upgraded to A2 (sf); previously on Jan. 14, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-4, Downgraded to Ca (sf); previously on Jan. 14, 2010 Ba2 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-5, Downgraded to Ca (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 3-A-1, Upgraded to Aa3 (sf); previously on Jan. 14, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade -- Cl. 3-A-2, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade -- Cl. 3-A-3, Downgraded to Ca (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade Issuer: Banc of America Funding 2006-H Trust -- Cl. 5-A-1, Confirmed at Caa3 (sf); previously on Jan. 14, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade -- Cl. 5-A-2, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. 6-A-1, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. 6-A-2, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade Issuer: Banc of America Funding 2006--8T2 Trust -- Cl. A-1, Downgraded to Caa3 (sf); previously on Jul 8, 2010 Downgraded to Caa1 (sf) and Remained On Review for Possible Downgrade -- Cl. A-2, Downgraded to Caa3 (sf); previously on Jul 8, 2010 Downgraded to Caa1 (sf) and Remained On Review for Possible Downgrade -- Cl. A-3, Downgraded to Caa3 (sf); previously on Jul 8, 2010 Downgraded to Caa1 (sf) and Remained On Review for Possible Downgrade -- Cl. A-4, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. A-5, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. A-6, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. A-7, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. A-8, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. A-9, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. A-10, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. A-11, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade Issuer: Banc of America Funding 2007-1 Trust, Mortgage Pass- Through Certificates, Series 2007-1 -- Cl. 1-A-1, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-2, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-3, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-4, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-5, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-6, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-7, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-8, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-9, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-10, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-12, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-13, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-14, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-15, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-16, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-17, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-18, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-19, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-20, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-21, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-22, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-23, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-24, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-25, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-26, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-27, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-28, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-29, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 30-IO, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 30-PO, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-1A, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-1B, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-2, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-3A, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-3B, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-4, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-5, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-6, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-7, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-8, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-9, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-10, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-11, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade Issuer: Banc of America Funding 2007-4 Trust -- Cl. 1-A-1, Downgraded to B1 (sf); previously on Jan. 14, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-2, Confirmed at Ca (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. 1-PO, Confirmed at Caa1 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-1, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-2, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-3, Confirmed at B2 (sf); previously on Jan. 14, 2010 B2 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-4, Confirmed at B2 (sf); previously on Jan. 14, 2010 B2 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-5, Downgraded to Ca (sf); previously on Jan. 14, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-6, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-7, Downgraded to Caa1 (sf); previously on Jan. 14, 2010 B2 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-8, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-9, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-10, Downgraded to Caa1 (sf); previously on Jan. 14, 2010 B2 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-11, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-13, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B2 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-14, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-15, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 3-A-1, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 3-A-2, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. 3-A-3, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 3-IO, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 4-A-1, Downgraded to Caa1 (sf); previously on Dec. 17, 2009 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 4-A-2, Downgraded to Caa1 (sf); previously on Dec. 17, 2009 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 5-A-1, Downgraded to Caa1 (sf); previously on Dec. 17, 2009 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 5-A-2, Downgraded to B3 (sf); previously on Dec. 17, 2009 B2 (sf) Placed Under Review for Possible Downgrade -- Cl. 5-A-3, Downgraded to Caa1 (sf); previously on Dec. 17, 2009 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 6-A-1, Upgraded to Baa1 (sf); previously on Dec. 17, 2009 Ba2 (sf) Placed Under Review for Possible Downgrade -- Cl. 7-A-1, Downgraded to B2 (sf); previously on Dec. 17, 2009 Ba2 (sf) Placed Under Review for Possible Downgrade -- Cl. 8-A-1, Confirmed at B3 (sf); previously on Dec. 17, 2009 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. S-IO, Downgraded to B3 (sf); previously on Dec. 17, 2009 B2 (sf) Placed Under Review for Possible Downgrade -- Cl. S-PO, Downgraded to Caa1 (sf); previously on Dec. 17, 2009 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-1A, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-1B, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-2, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-3, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-4, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-5, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-6, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-7, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-P1, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-P2, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade Issuer: Banc of America Funding 2007-A Trust -- Cl. 1-A-1, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-1, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-2, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-3, Downgraded to Ba2 (sf); previously on Jan. 14, 2010 A3 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-4, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B2 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-5, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade Issuer: Banc of America Funding 2007-B Trust -- Cl. A-1, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. A-2, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade Issuer: Banc of America Funding 2007-D Trust -- Cl. 1-A-1, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-2, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-3, Confirmed at B2 (sf); previously on Jan. 14, 2010 B2 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-4, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-5, Downgraded to Ca (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade Issuer: Banc of America Funding 2007--2 Trust -- Cl. 1-A-1, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-2, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-3, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-4, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-5, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-6, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-7, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-8, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-9, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-10, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-11, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B2 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-12, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B2 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-13, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-14, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-15, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-16, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-17, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-18, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-19, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-20, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-22, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-23, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-24, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-25, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-26, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-27, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-28, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-29, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-30, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-31, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-32, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B2 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-33, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-34, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-35, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-36, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-37, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-38, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-39, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-40, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-41, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-42, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-1, Downgraded to B1 (sf); previously on Jan. 14, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade -- Cl. 30-IO, Downgraded to B1 (sf); previously on Jan. 14, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade -- Cl. 30-PO, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-1A, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-1B, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-2, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-3, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-4, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-5, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. T-A-6, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade Issuer: Banc of America Funding 2007--5 Trust -- Cl. 1-A-1, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-1, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-3, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-4, Confirmed at Caa3 (sf); previously on Jan. 14, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade -- Cl. 3-A-1, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. 3-A-2, Confirmed at Caa3 (sf); previously on Jan. 14, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade -- Cl. 4-A-1, Downgraded to Ca (sf); previously on Jan. 14, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade -- Cl. 4-A-2, Downgraded to Ca (sf); previously on Jan. 14, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade -- Cl. 4-A-5, Downgraded to Ca (sf); previously on Jan. 14, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade -- Cl. 5-A-1, Downgraded to B2 (sf); previously on Jan. 14, 2010 Aaa (sf) Placed Under Review for Possible Downgrade -- Cl. 6-A-1, Downgraded to B1 (sf); previously on Jan. 14, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade -- Cl. C-A-1, Confirmed at Caa3 (sf); previously on Jan. 14, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade -- Cl. C-A-4, Confirmed at Caa3 (sf); previously on Jan. 14, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade -- Cl. C-A-5, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. C-A-11, Confirmed at Caa3 (sf); previously on Jan. 14, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade Issuer: Banc of America Funding Corporation 2007-6 -- Cl. A-1, Confirmed at Caa2 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. A-2, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. A-3, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade BANC OF AMERICA: S&P Corrects Rating on Class A-2 to 'CC' --------------------------------------------------------- Standard & Poor's Ratings Services corrected its rating to 'CC (sf)' from 'AAA (sf)'on class A-2, a super-senior, lockout class from Banc of America Funding 2006-R1 Trust, a residential mortgage-backed securities resecuritized real estate mortgage investment conduit transaction. On April 1, 2010, S&P incorrectly affirmed its 'AAA (sf)' rating on class A-2. In addition, S&P lowered its ratings to 'CC (sf)' from 'CCC (sf)' on two other senior classes: class A-1, a senior, sequential pay class, and class A-3, a super-senior support, lockout class. The downgrades on all three classes follow S&P's analysis of the transaction using the September 2010 performance data, which reflect what S&P considers significant deterioration in performance of the mortgage loans backing the underlying certificates. As a result of this performance deterioration, the amount of credit enhancement S&P expects to be available to the underlying certificates and consequently to the downgraded classes is insufficient to cover S&P's current projected losses at the previous rating levels. Classes A-1, A-2, and A-3 benefit from a certificate insurance policy provided by CIFG Assurance North America Inc. (not rated). The transaction is a resecuritization of 41 senior and subordinate certificates from eight previously issued prime jumbo transactions and four Alternative-A transactions. The underlying transactions were issued by Bank of America N.A. and Countrywide Home Loans in 2005 and 2006. The prime jumbo and Alt-A collateral for these trusts consists of U.S. residential fixed-rate mortgages secured by first liens on one- to four-family residential properties. Over the past two years, S&P has revised its RMBS default and loss assumptions, and consequently its projected losses, to reflect the continuing decline in mortgage loan performance and the housing market. The performance deterioration of most U.S. RMBS has continued to outpace the market's expectation. Rating Corrected Banc of America Funding 2006-R1 Trust Rating ------ Class CUSIP To From ----- ----- -- ---- A-2 05950CAB8 CC (sf) AAA (sf) Rating Actions Banc of America Funding 2006-R1 Trust Rating ------ Class CUSIP To From ----- ----- -- ---- A-1 05950CAA0 CC (sf) CCC (sf) A-3 05950CAC6 CC (sf) CCC (sf) BEAR STEARNS: Moody's Cuts Ratings on 15 2001-A Tranches -------------------------------------------------------- Moody's Investors Service has downgraded the ratings of 15 tranches and confirmed the ratings of four tranches from 11 RMBS transactions issued by Bear Stearns Home Loan Owner Trust, Bear Stearns Mortgage Funding Trust, and Bear Stearns Second Lien Trust. The collateral backing these deals primarily consists of closed end second lien loans and home equity lines of credit. Ratings Rationale The actions are a result of the continued performance deterioration in second lien pools in conjunction with home price and unemployment conditions that remain under duress. The actions reflect Moody's updated loss expectations on second lien pools. For securities insured by a financial guarantor, the rating on the securities is the higher of (i) the guarantor's financial strength rating and (ii) the current underlying rating (i.e., absent consideration of the guaranty) on the security. The principal methodology used in determining the underlying rating is the same methodology for rating securities that do not have a financial guaranty and is as described earlier. The primary source of assumption uncertainty is the current macroeconomic environment, in which unemployment remains at high levels, and weakness persists in the housing market. Moody's notes an increasing potential for a double-dip recession, which could cause a further 20% decline in home prices (versus its baseline assumption of roughly 5% further decline). Overall, Moody's assumes a further 5% decline in home prices with stabilization in early 2011, accompanied by continued stress in national employment levels through that timeframe. If expected losses on the each of the collateral pools were to increase by 10%, model implied results indicate that most of the deals' ratings would remain stable with the exception of -- Cl. A-2 of Bear Stearns Second Lien Trust 2007-SV1/ Group 1 for which model implied results would be one notch lower (for example, Ba2 versus Ba1, or Ca versus Caa3). Moody's Investors Service received and took into account one or more third party due diligence reports on the underlying assets or financial instruments in this transaction and the due diligence reports had a neutral impact on the rating. Complete rating actions are: Issuer: Bear Stearns Home Loan Owner Trust 2001-A * Expected Losses (as a % of Original Balance): 21% -- Cl. M-2, Confirmed at Ba3 (sf); previously on March 18, 2010 Ba3 (sf) Placed Under Review for Possible Downgrade Issuer: Bear Stearns Mortgage Funding Trust 2006-SL1 * Expected Losses (as a % of Original Balance): 67% -- Cl. A, Downgraded to C (sf); previously on March 18, 2010 Ca (sf) Placed Under Review for Possible Downgrade Issuer: Bear Stearns Mortgage Funding Trust 2006-SL2 * Expected Losses (as a % of Original Balance): 70% -- Cl. A, Downgraded to C (sf); previously on March 18, 2010 Ca (sf) Placed Under Review for Possible Downgrade Issuer: Bear Stearns Mortgage Funding Trust 2006-SL3 * Expected Losses (as a % of Original Balance): 74% -- Cl. A, Downgraded to C (sf); previously on March 18, 2010 Ca (sf) Placed Under Review for Possible Downgrade Issuer: Bear Stearns Mortgage Funding Trust 2006-SL4 * Expected Losses (as a % of Original Balance): 77% -- Cl. A, Downgraded to C (sf); previously on March 18, 2010 Ca (sf) Placed Under Review for Possible Downgrade Issuer: Bear Stearns Mortgage Funding Trust 2006-SL5 * Expected Losses (as a % of Original Balance): Group 1 81%, Group 2 80% -- Cl. I-A, Downgraded to C (sf); previously on March 18, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. II-A, Downgraded to C (sf); previously on March 18, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade Issuer: Bear Stearns Mortgage Funding Trust 2006-SL6 * Expected Losses (as a % of Original Balance): Group 1 82%, Group 2 83% -- Cl. I-A, Downgraded to C (sf); previously on March 18, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. II-A, Downgraded to C (sf); previously on March 18, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade Issuer: Bear Stearns Mortgage Funding Trust 2007-SL1 * Expected Losses (as a % of Original Balance): Group 1 85%, Group 2 85% -- Cl. I-A, Downgraded to C (sf); previously on March 18, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. II-A, Downgraded to C (sf); previously on March 18, 2010 Ca (sf) Placed Under Review for Possible Downgrade Issuer: Bear Stearns Mortgage Funding Trust 2007-SL2 * Expected Losses (as a % of Original Balance): Group 1 86%, Group 2 84% -- Cl. I-A, Downgraded to C (sf); previously on March 18, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. II-A, Downgraded to C (sf); previously on March 18, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade Issuer: Bear Stearns Second Lien Trust 2007-1 * Expected Losses (as a % of Original Balance): Group 1 76%, Group 2 89%, Group 3 76% -- Cl. I-A, Downgraded to C (sf); previously on April 16, 2010 Downgraded to Ca (sf) and Placed Under Review for Possible Downgrade -- Underlying Rating: Downgraded to C (sf); previously on March 18, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Financial Guarantor: Ambac Assurance Corporation (Segregated Account - Unrated) -- Cl. II-A, Downgraded to C (sf); previously on April 16, 2010 Downgraded to Ca (sf) and Placed Under Review for Possible Downgrade -- Underlying Rating: Downgraded to C (sf); previously on March 18, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Financial Guarantor: Ambac Assurance Corporation (Segregated Account - Unrated) -- Cl. III-A, Downgraded to C (sf); previously on April 16, 2010 Downgraded to Ca (sf) and Placed Under Review for Possible Downgrade -- Underlying Rating: Downgraded to C (sf); previously on March 18, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Financial Guarantor: Ambac Assurance Corporation (Segregated Account - Unrated) Issuer: Bear Stearns Second Lien Trust 2007-SV1 * Expected Losses (as a % of Original Balance): 38% -- Cl. A-1, Confirmed at B3 (sf); previously on March 18, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. A-2, Confirmed at Caa3 (sf); previously on March 18, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade -- Underlying Rating: Confirmed at Caa3 (sf); previously on March 18, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade -- Financial Guarantor: Syncora Guarantee Inc. (Downgraded to Ca, Outlook Developing on March 9, 2009) -- Cl. A-3, Confirmed at Caa2 (sf); previously on March 18, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Underlying Rating: Confirmed at Caa2 (sf); previously on March 18, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Financial Guarantor: Syncora Guarantee Inc. (Downgraded to Ca, Outlook Developing on March 9, 2009 BEAR STEARNS: Moody's Affirms Ratings on 12 2006-BBA7 Certificates ------------------------------------------------------------------ Moody's Investors Service affirmed the ratings of 12 classes of Bear Stearns Commecial Mortgage Securities Inc. Commercial Mortgage Pass-Through Certificates, Series 2006-BBA7: -- Cl. A-1, Affirmed at Aaa (sf); previously on July 12, 2006 Definitive Rating Assigned Aaa (sf) -- Cl. A-2, Affirmed at Aa2 (sf); previously on Feb. 24, 2009 Downgraded to Aa2 (sf) -- Cl. X-1B, Affirmed at Aaa (sf); previously on July 12, 2006 Assigned Aaa (sf) -- Cl. X-3, Affirmed at Aaa (sf); previously on July 12, 2006 Assigned Aaa (sf) -- Cl. B, Affirmed at A2 (sf); previously on Sept. 3, 2009 Downgraded to A2 (sf) -- Cl. C, Affirmed at A3 (sf); previously on Sept. 3, 2009 Downgraded to A3 (sf) -- Cl. D, Affirmed at Baa1 (sf); previously on Sept. 3, 2009 Downgraded to Baa1 (sf) -- Cl. E, Affirmed at Baa3 (sf); previously on Sept. 3, 2009 Downgraded to Baa3 (sf) -- Cl. F, Affirmed at Ba1 (sf); previously on Sept. 3, 2009 Downgraded to Ba1 (sf) -- Cl. G, Affirmed at B1 (sf); previously on Sept. 3, 2009 Downgraded to B1 (sf) -- Cl. H, Affirmed at B2 (sf); previously on Sept. 3, 2009 Downgraded to B2 (sf) -- Cl. J, Affirmed at B3 (sf); previously on Sept. 3, 2009 Downgraded to B3 (sf) The affirmations were based on key rating parameters, including Moody's loan to value ratio and debt service coverage ratio, remaining within an acceptable range. The determination was based on Moody's valuation of the hotel properties that serve as collateral for the two remaining loans in the trust, as well as Moody's positive industry outlook for the U.S. Lodging and Cruise Sectors. Moody's positive industry outlook reflects Moody's expectation that hotel operating profits will increase 5% to 10% through the end of 2011 and that demand will outpace supply growth. Moody's analysis reflects a forward-looking view of the likely range of collateral performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside an acceptable range of the key parameters may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated during the current review. Even so, deviation from the expected range will not necessarily result in a rating action. There may be mitigating or offsetting factors to an improvement or decline in collateral performance, such as increased subordination levels due to amortization and loan payoffs or a decline in subordination due to realized losses. Primary sources of assumption uncertainty are the current stressed macroeconomic environment and continuing weakness in the commercial real estate and lending markets. Moody's currently views the commercial real estate market as stressed with further performance declines expected in the industrial, office, and retail sectors. Hotel performance has begun to rebound, albeit off a very weak base. Multifamily has also begun to rebound reflecting an improved supply / demand relationship. The availability of debt capital is improving with terms returning towards market norms. Job growth and housing price stability will be necessary precursors to commercial real estate recovery. Overall, Moody's central global scenario remains "hook-shaped" for 2010 and 2011; Moody's expect overall a sluggish recovery in most of the world's largest economies, returning to trend growth rate with elevated fiscal deficits and persistent unemployment levels. Moody's review incorporated the use of the excel-based CMBS Large Loan Model v 8.0 which is used for both large loan and single borrower transactions. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan level proceeds derived from Moody's loan level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type, and sponsorship. These aggregated proceeds are then further adjusted for any pooling benefits associated with loan level diversity, other concentrations and correlations. The model also incorporates a supplementary tool to allow for the testing of the credit support at various rating levels. The scenario or "blow-up" analysis tests the credit support for a rating assuming that loans in the pool default with an average loss severity that is commensurate with the rating level being tested. Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated September 3, 2009. Deal Performance As of the October 15, 2010 payment date, the transaction's certificate balance has decreased by 18% to $573.9 million from $700 million at securitization due to scheduled amortization and the payoff of three loans originally in the pool. Currently the mortgage pool consists of two portfolio loans secured by hotel properties. Both loans are special serviced loans and both had final maturity dates of October 12, 2010. Moody's was provided with year-to-date operating statements for each of the hotel properties that serve as collateral for the two portfolio loans in the pool. Mood's weighted average LTV is 81% compared to 86% at last review. Moody's stressed DSCR is 1.34X compared to 1.35X at last review. Moody's stressed DSCR is based on Moody's net cash flow and a 9.25% stressed rate applied to the loan balance. Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. Large loan transactions have a Herf of less than 20. This pool has a Herf of 1, the same as at Moody's prior review. The Columbia Sussex Portfolio Loan ($534.5 million -- 93% of the pooled balance) is secured by 14 full-service hotel properties located in ten states, Washington, D.C. and Toronto, Canada with a total of 5,821 rooms. The portfolio is branded by six Westin flags, two Sheraton flags, three Hilton flags, two Marriott flags and one Wyndham flag. At securitization, ten of the properties in the portfolio had Wyndham flags. The Columbia Sussex Portfolio loan was transferred to special servicing in June 2010 due to a maturity default. Negotiations are on-going between the special servicer and the borrower to address the default. The loan collateral was appraised in August 2010 for $809.6 million. Moody's believes that a recent development in October 2010 has positive implications for the loan. Blackstone Group LP purchased, at a discount, approximately $300 million of the $495 million outstanding mezzanine debt, putting Blackstone in position to gain control of the 14 hotel properties. Blackstone had sold the hotels to Columbia Sussex for $1.4 billion in 2006. Moody's LTV is 80%, compared to 85% at last review. The CPI Hilton Portfolio Loan ($39.4 million -- 7%) is secured by five limited service hotel properties including four Hilton Garden Inns and one Homewood Suites. The properties are located in five states and have a total of 944 rooms. Moody's LTV is 95% compared to 97% at last review. The CPI Hilton Portfolio Loan was transferred to special servicing in July 2009. An appraisal, completed in December 2009, indicates a value of $58.7 million for the portfolio. A modification has been approved to extend the loan to December 2011. The loan modification and extension is moving towards a closing. BERNARD NATIONAL: S&P Withdraws Ratings on Three Classes -------------------------------------------------------- Standard & Poor's Ratings Services withdrew its ratings on three classes of notes from Bernard National Loan Investors Ltd. and Liberty Square CDO I Ltd. The withdrawals on these two cash flow collateralized loan obligation transactions follow complete paydowns to the rated notes. Ratings Withdrawn Bernard National Loan Investors Ltd. Rating ------ Class To From ----- -- ---- A-2 NR BB+ (sf) A-3c NR BB+ (sf) Liberty Square CDO I Ltd. Rating ------ Class To From ----- -- ---- A NR AAA (sf) NR - Not rated. CALIFORNIA STATEWIDE: Fitch Cuts Rating on $5,540,000 Bonds to BB ----------------------------------------------------------------- Fitch Ratings has downgraded to 'BB' from 'BBB-' its rating on $5,540,000 California Statewide Communities Development Authority certificates of participation, Sonoma County Indian Health Project. Rating Rationale: -- The downgrade reflects the non-compliance of the Indian Health Services with regard to certain provisions of a memorandum of understanding agreement between IHS and SCIHP. Specifically, the direct transfer to the bond trustee of a portion of IHS grant funds to cover debt service, which was called for by the original terms of the debt issuance, is not occurring. -- While IHS is not compelled to make the direct transfer, the described payment mechanism was a principal positive factor that mitigated credit concern about SCIHP's extremely small revenue base and narrow breadth of services, which limit SCIHP's ability to withstand adverse economic conditions. -- Both operating profitability and debt service coverage of maximum annual debt service declined between 2006 and 2009; however, in fiscal year 2010, SCIHP generated a 3.3% operating margin and a MADS coverage ratio by EBITDA of 4.2 times. -- Balance sheet ratios are solid with very good liquidity ratios. SCIHP has 337.9 days of cash on hand and a 275.4% cash to debt ratio. -- SCIHP's utilization trends are positive with limited competition in the service area. The Rating Outlook is Stable. Key Rating Drivers The continuation of stable operating profitability and balance sheet strength, which mitigates the credit risk inherent to the entity's small size and narrow market focus. Security First lien and security interest in certain property subject to permitted encumbrances; pledge of gross revenues with a lockbox on a missed loan payment; fully funded debt service reserve fund. Credit Summary The downgrade reflects the non-compliance of the IHS with regard to the flow of funds in the memorandum of understanding agreement between IHS and SCIHP. At the time of the initial rating, the key credit strength was the expectation that the structure of the transaction would include a "lockbox" mechanism that required IHS to deposit payments directly to the trustee prior to the release of operating funds to SCIHP. As part of the annual surveillance process, and after several discussions with SCIHP's counsel, Fitch learned that IHS has not been providing payment directly to the bond trustee since at least 2002. Fitch notes, however, that SCIHP has been making regularly scheduled debt service payments to the trustee, all bond payments are current, and SCIHP's counsel is endeavoring to correct the situation. In 2009, SCIHP lost $105,000 on $16.9 million in total revenues, producing a negative operating margin of 0.6% and coverage of MADS of 1.7x. In 2009, SCIHP executed a three-year engagement with a new auditing firm after several changes in both auditors and method of presentation. In May 2010, SCIHP hired a new CFO with significant experience in healthcare operations. Fitch has reviewed several years of audited financial statements and feels confident in the quality and content of the most recent financial statements. SCIHP's operations have improved significantly in 2010. At fiscal year end June 30, SCIHP earned $569,000 from operations on total revenues of $17.2 million, producing an operating margin of 3.3% and an operating EBITDA margin of 7.7%. Investment earnings totaling $784,000 produced an excess margin of 7.6%. MADS coverage by operating EBITDA is good at 2.6x and MADS as a percentage of revenues is moderate at 2.9%. SCIHP's balance sheet ratios are solid. Also at fiscal year end, SCIHP had $14.9 million in unrestricted cash and investments versus $5.5 million in long-term debt. SCIHP has 337 days of cash on hand, a 29.7x cushion ratio and a 275.4% cash-to-debt ratio. Utilization trends are positive. SCIHP registrations have increased approximately 5% since 2008. SCIHP's unique market niche protects it from direct competition in its service area. The Stable Rating Outlook reflects Fitch's expectation that the improved operating profitability evidenced in fiscal year 2010 will be maintained. SCIHP was established in 1971 to provide health care for the Native American population of Sonoma County. As a health clinic, SCIHP provides medical, dental, and other services in a 36,000 square foot ambulatory care center in Santa Rosa, CA. SCIHP's covenants to provide, upon request, annual financial statements (including management discussion and analysis and utilization statistics) within 120 days of the end of the fiscal year, and within 45 days of the end of the fiscal year. CASTLE HILL: S&P Raises Ratings on Various Classes of Notes ----------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-1a, A-1b, and B notes, and the class A-1a senior secured insured remarketed certificates from Castle Hill III CLO Ltd., a collateralized loan obligation transaction managed by Sankaty Advisors LLC. At the same time, S&P removed its ratings on the class A-1a, A-1b, and B notes from CreditWatch with positive implications. The upgrades of the A-1a, A-1b, and B notes reflect the improved performance S&P has observed in the transaction's underlying asset portfolio since October 2009, at which time S&P lowered its ratings on the A-1a, A-1b, and B notes following a review of the transactions under S&P's criteria for rating corporate collateralized debt obligations published in September 2009. According to the Sept. 30, 2009 trustee report, the transaction was holding approximately $27.0 million in defaulted obligations and $26.0 million in underlying obligors with a rating, either by Standard & Poor's or another rating agency, of 'CCC+' or lower. As of Sept. 30, 2010, the transaction was holding $6.2 in defaulted obligations and $7.4 million in underlying obligors with ratings of 'CCC+' or lower. To date, the Castle Hill III CLO Ltd. transaction has paid down the class A-1a and A-1b notes to approximately 48.5% of their original outstanding balances, including $81.2 million over the past year. The reductions in the defaulted and 'CCC+' or lower rated assets and the $81.2 million paydown on the class A-1a and A-1b notes has reduced the overall credit risk for the remaining outstanding notes. The rating on the A-1a senior secured insured remarketed certificates reflects the rating on the underlying securities, the Castle Hill III CLO Ltd.'s class A-1a notes. These certificates are insured by Assured Guaranty Municipal Corp. ('AA+/Stable'). Standard & Poor's will continue to review whether, in S&P's view, the ratings currently assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as S&P deem necessary. Rating And Creditwatch Actions Castle Hill III CLO Ltd. Rating ------ Class To From ----- -- ---- A-1 AAA (sf) AA+ (sf)/Watch Pos A-2 AAA (sf) AA+ (sf)/Watch Pos B A- (sf) BB+ (sf)/Watch Pos Rmkd certs AAA (sf) AA+ (sf) CELERITY CLO: S&P Raises Ratings on Two Classes of Notes -------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class C and class D notes issued by Celerity CLO Ltd., a collateralized loan obligation transaction managed by TCW Asset Management Co. and removed its rating on the class C notes from CreditWatch with positive implications. At the same time, S&P affirmed its ratings on the class A funded notes, class B notes, and class E notes. S&P also withdrew its rating on the class A revolving notes following a termination of the commitment to fund for those notes. The upgrades reflect the improved performance S&P has observed in the deal since December 2009, when S&P lowered the rating on the class C, D, and E notes following a review of the transaction under its updated criteria for rating corporate collateralized debt obligations that S&P published in September 2009. The affirmations reflect the availability of the credit support at the current rating levels. At the time of S&P's last rating action, according to the trustee report dated Oct. 9, 2009, the transaction was holding approximately $14 million in defaulted obligations and more than $32 million in underlying obligors with a rating, either by Standard & Poor's or another rating agency, in the 'CCC' range. Since that time, a number of defaulted obligors held in the deal emerged from the bankruptcy process, with some receiving proceeds that were higher than their carrying value in the overcollateralization ratio test calculations. In combination with a reduction in the 'CCC' range assets and a $51 million paydown on the class A funded notes, this benefited all O/C ratio tests in the transaction. For example, the senior O/C test increased to 164.13% by Oct. 8, 2010, from 137.3% as of Oct. 9, 2009. To date, the transaction has paid down the class A funded notes to approximately 44% of their original outstanding balance. According to information S&P has received from the deal's trustee and collateral manager, the purchaser of the class A revolving notes defaulted on their obligation to fund the class A revolving notes at the termination of the reinvestment period for the transaction. This resulted in a net zero balance on the class A revolving notes. Since the class A revolving notes no longer have the ability to fund, S&P is withdrawing the rating on this note. Standard & Poor's will continue to review whether, in its view, the ratings currently assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as S&P deem necessary. Rating And Creditwatch Actions Celerity CLO Ltd. Class To From ----- -- ---- Class A revolving notes NR AAA (sf) Class C notes AA+ (sf) BBB+ (sf)/Watch Pos Class D notes BB+ (sf) CCC- (sf) Ratings Affirmed Celerity CLO Ltd. Class Rating ----- ------ Class A funded notes AAA (sf) Class B notes AAA (sf) Class E notes CCC- (sf) CITY OF ANDERSON: Fitch Cuts Rating on Bonds to 'BB+' ----------------------------------------------------- Fitch Ratings has downgraded the rating on these City of Anderson, Indiana Economic Development Revenue Refunding and Improvement bonds issued on behalf of Anderson University to 'BB+' from 'BBB-': -- $45.1 million city of Anderson, Indiana economic development revenue refunding and improvement bonds (Anderson University project). The Rating Outlook is revised to Negative from Stable. Rating Rationale: -- The downgrade to below investment grade reflects AU's significantly weakened financial profile as the operating margin and available funds have declined considerably in recent years. -- Due to strong reliance on student-generated revenues, AU's multi-year negative enrollment trend has significantly pressured fiscal operations. -- While the university's senior leadership and the board recognize the urgency of the situation and are taking steps to try and stabilize performance, an immediate turnaround is unlikely. What Could Trigger A Downgrade: -- Further deterioration in financial metrics, driven primarily by a failure to stem enrollment losses; -- Additional debt issuance, of which none is anticipated, without a significant increase in financial resources available for repayment. Security: The bonds are an unsecured general obligation of the university. Unlike similarly-rated institutions, the security package does not include a mortgaged facility. However, bond proceeds were used for a debt service fund ($3.6 million at issuance) which remains fully funded. Credit Summary: AU's credit profile deteriorated over the past two years as operating performance trended negative and available funds weakened considerably. Historically AU maintained a positive operating margin which provided an important measure of financial flexibility. However, in fiscal 2009 the university generated a slight negative 0.4% operating deficit (inclusive of affiliate operations reported in the university's audited financial statements) and was virtually breakeven at 0.1% in 2010. Without a consistent surplus, AU is dependent on a thin available funds cushion (cash and investments that are not permanently restricted) that weakened during recent market declines and has yet to fully recover. In fiscal 2009, available funds of $5.6 million (driven downwards largely through market declines) provided very low coverage of operating expenses and total debt of 11.1% (37.3% in 2008) and 10.4% (33% in 2008), respectively. While the liquidity cushion grew nearly 10% in 2010, coverage of operating expenses and debt was still very limited (16.5% and 15.4%, respectively). Multiple years of enrollment declines, primarily in undergraduates and more recently in graduate students, have pressured AU's fiscal operations which are heavily dependent on student-generated sources. In fall 2010, headcount of 2,565 (2,022 undergraduates) was down 4.7% from fall 2009 (2,691, with 2,137 undergraduates), and down 6.1% from five years ago (2,733, with 2,201 undergraduates). Student-generated revenues (net tuition and fees, and auxiliary revenues) accounted for the vast majority of AU's revenue base, providing 79.5% of fiscal 2010 operating revenues. Net tuition and fees declined 2.4% in 2010 reflecting both headcount declines and increased tuition discounting (a high 38.1%). Management reports that affordability is a chief concern for students, applicants, and their families. For the current school year, annual tuition increased 4.5% to $23,490, while room and board increased 4.6% to $8,350. AU's major competitors (according to data provided by management) are a mix of public and private institutions which are all priced lower. The university's leadership team, at both the management and board level, appear to recognize that AU is at a critical juncture in terms of long-term financial health. After falling short of the fall 2010 enrollment target, the university initiated a 100-day 'turnaround' plan to engage the entire campus in an effort to cut $600,000 from the current budget to restore balanced operations. Management reports that AU's board of trustees recently met and acknowledged the urgency of the situation and advocated rapid exploration of corrective actions. Given the price sensitivity of AU's marketplace and decreased availability of scholarship funding for state residents because of state budget cuts, a material turnaround in the short term is unlikely. Fitch will closely monitor AU's efforts to address its fiscal and operating issues. Continuation of current trends of weakening financial performance and/or declining enrollment would likely trigger further negative rating action. Should enrollment fail to rebound to historical levels, the university will likely have to make significant adjustments in its expense structure to match a smaller revenue base and stabilize operations. The ongoing budgetary impact of future capital projects including a new recital hall (donations are in hand, and construction is planned for next spring) and a new university center (currently under preliminary consideration, with construction to be funded with donations), will have to be carefully reviewed. While no bonds are planned for these or other projects, Fitch notes that AU does borrow on a limited scale through bank lines of credit, and secured and unsecured notes payable. Given the current financial pressures, any substantial long-term debt would likely have negative rating implications. AU is a Christian university located in the city of Anderson, Indiana. The university was founded by the Church of God in 1917 and is the only COG-affiliated school in the Midwest. COG members comprise approximately one-third of undergraduate enrollment. The university encompasses 166 acres, and is approximately 35 miles northeast of Indianapolis. CITY OF GILMER: Moody's Upgrades Rating on Bonds From 'Ba1' ----------------------------------------------------------- Moody's Investors Service has upgraded the City of Gilmer's general obligation rating to Baa3 from Ba1. The rating upgrade affects $6.6 million in outstanding general obligation limited tax debt. Rating Rationale The rating action reflects the city's improved, but still limited financial position and Moody's expectation that the general fund balance which has been historically supported by water and sewer fund transfers will remain positive and in line with other similarly rated investment grade credits. The Baa3 rating also reflects the stable but small tax base and an elevated debt burden. Negative Fund Balance Is Corrected; General Fund Continues To Be Supported By Water And Sewer Revenues The city's general fund has historically relied on a transfer from the water and sewer fund to cover operating expenses. (The city's water and sewer revenue debt is rated Baa1 and has recently been affirmed by Moody's). Historically, the general fund balance has been negative as a result of a $1.3 million liability to the water and sewer fund. Negative fund balances ranged from a negative $842,000 in fiscal 2002 to a low of $1.1 million in fiscal 2004. The liability was a result of an inter-fund loan that the general fund did not have the liquid resources to repay. In fiscal 2008 the city removed the liability from the general fund and the corresponding receivable in the water and sewer fund, resulting in a positive fund balance for the first time since fiscal 2002. Although the fund balance has been restored to a positive 8,8% of revenues at FYE 2009, the city's cash position of $276,000 supports less than one month of general fund operations. Additionally, the general fund continues to rely on transfers from the water and sewer fund to support general city operations. From fiscal 2005 through 2009, transfers from the water and sewer fund to the general fund have averaged a significant 18% of general fund revenues. City officials report the transfer is done to meet the needs of the general fund and is not based on a payment-in- lieu of taxes calculation or internal services cost allocation. Absent a clearly defined transfer policy, Moody's views the general fund's reliance on the transfer to be a structural imbalance in the general fund and notes the city's budgetary practices are not consistent with prudent financial management. However, given the recent accounting adjustment, Moody's expects the fund balance to remain in a positive but limited position in the near-term. Stable But Limited Local Economy Gilmer is located in East Texas and is the county seat of Upshur County and has an estimated population of 5,249. The rural economy is based largely on agriculture and a limited amount of industrial activity. The tax base has expanded at a five year average annual pace of 7.1% reaching $263 million in fiscal 2011. Unemployment in Upshur County of 7.8% (as of August 2010) is favorably below both the state and nation of 8.4% and 9.5% respectively. Per capita income is average at 77.9% of the US. Moody's expects the tax base to remain stable but limited. Elevated Debt Burden Both the direct debt burden of 4.5% and the overall debt burden of 6.9% (as a percentage of fiscal 2011 ad valorem values) are elevated. The direct debt burden consists of $6 million of debt issued for water and sewer projects with the remaining $675,000 issued for general government purposes. The debt burden is not adjusted for the water and sewer debt as the city's debt service tax rate supports the debt service payment for the certificates of obligation. Amortization is below average with 42.9% retired in ten years. The city does not have current plans to issue additional debt. Given the slow payout and lack of self-support for the majority of the city's debt, Moody's expects the debt burden to remain elevated. Key Statistics * Estimated 2008 Population: 5,249 * Per Capita Income: $16,823 (86% of state and 77.9% of US) * 2011 Full Value: $263 million * 2011 Full Value per Capita: $50,209 * Direct Debt Burden: 4.5% * Overall Debt Burden: 6.9% * Payout in Ten Years: 42.9% * Fiscal 2009 General Fund Balance: $276,000 (8.8%) * General Obligation Debt Outstanding: $6.6 million What Could Change The Rating - Up -- Self support of general fund that indicates sound financial management practices -- Trend of improved financial flexibility in general fund What Could Change The Rating - Down -- Return to negative fund balance -- Trend of deficit spending in general fund that results in narrowing of cash position CNL FUNDING: Moody's Reviews Ratings on Four Classes of Certs. -------------------------------------------------------------- Moody's Investors Service has placed on review for possible downgrade four classes of certificates issued by CNL Funding 98-1, LP, and six classes of certificates issued by CNL Funding 99-1, LP. The certificates are backed by franchise loans made to fast- food and casual dining restaurants. The review actions are prompted by deteriorating performance of the collateral properties, and potentially insufficient levels of credit enhancement available for the certificates against future losses relative to current ratings. The complete rating action is: Issuer: CNL Funding 99-1, LP -- Class A-2, Aa2 (sf) Placed Under Review for Possible Downgrade; previously on June 30, 2009 Downgraded to Aa2 (sf) -- Class IO, Aa2 (sf) Placed Under Review for Possible Downgrade; previously on June 30, 2009 Downgraded to Aa2 (sf) -- Class B, A2 (sf) Placed Under Review for Possible Downgrade; previously on June 30, 2009 Downgraded to A2 (sf) -- Class C, Baa1 (sf) Placed Under Review for Possible Downgrade; previously on June 30, 2009 Downgraded to Baa1 (sf) -- Class D, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on June 30, 2009 Downgraded to Baa3 (sf) -- Class E, B1 (sf) Placed Under Review for Possible Downgrade; previously on June 30, 2009 Downgraded to B1 (sf) Issuer: CNL Funding 98-1, LP -- Class E-1, B3 (sf) Placed Under Review for Possible Downgrade; previously on Dec. 12, 2008 Downgraded to B3 (sf) -- Class E-2, B2 (sf) Placed Under Review for Possible Downgrade; previously on Dec. 12, 2008 Downgraded to B2 (sf) -- Class D-1, Ba2 (sf) Placed Under Review for Possible Downgrade; previously on Dec. 12, 2008 Downgraded to Ba2 (sf) -- Class D-2, Ba1 (sf) Placed Under Review for Possible Downgrade; previously on Dec. 12, 2008 Downgraded to Ba1 (sf) Considerations for the rating actions: In CNL Funding 98-1, LP, the fixed (D-1 and E-1) and floating rate (D-2 and E-2) certificates are backed by fixed and floating rate loans, respectively. The fixed and floating rate pools are cross supported with losses allocated to both subpools in reverse alphabetical order. This deal currently has 3 loans in special servicing which represent 16.4% of the underlying collateral. The loans are either being restructured or the associated properties are being marketed for sale. In addition, the deal has concept concentration risks with Burger King (17% of outstanding loan pool), Taco Bell (32%), and Wendy's (11%). In CNL Funding 99-1, LP, the credit support for the certificates consists of subordination and overcollateralization of the bonds by the loans. Class B through Class H certificates are subordinated to Class IO and Class A certificates, providing a total credit support of 47.2% to Class A certificates as of October 18, 2010. The subordinated certificates provide credit support of 34.3% to Class B certificates; 26.7% to Class C certificates; 22.8% to Class D certificates; 15.1% to Class E; 11.3%. There is no overcollateralization at this time. Significant concept concentration risks in this transaction are Wendy's (29% of outstanding pool), KFC (14%), and Taco Bell (11%). During the review period, Moody's will estimate the recovery rates of foreclosed properties and assess any future stresses on the rest of the collateral pool. Moody's will also qualitatively assess the business challenges currently faced by the restaurant industry. In order to estimate losses on the collateral pool, Moody's calculates the expected loss given default of the obligors that have become nonperforming, and also estimates future losses on performing portion of the pool, all as a percentage of the outstanding pool. In evaluating the nonperforming loans, key factors include collateral valuations and expected recovery rates, volatility around those recovery rates, historical obligor performance, time until recovery or liquidation on defaulted obligors, concessions due to restructuring which may negatively impact the overall cash flow of the trust and/or the collateral, and future industry expectations. Net losses are then evaluated against the available credit enhancement provided by overcollateralization, subordination, and excess spread. Sufficiency of coverage is considered in light of remaining borrower concentrations and concepts, remaining bond maturities, and economic outlook. COMM 2004-LNB3: S&P Downgrades Ratings on 10 Classes of Securities ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on 10 classes of commercial mortgage-backed securities from COMM 2004- LNB3. Concurrently, S&P affirmed its ratings on nine other classes from the same transaction. The downgrades reflect S&P's analysis of the remaining collateral in the pool, the deal structure, and interest shortfalls that have affected the trust. The downgrades also reflect several classes' increased susceptibility to future interest shortfalls and credit support erosion S&P anticipates will occur upon the resolution of four of the five specially serviced loans. As of the October 2010 remittance report, the trust experienced monthly interest shortfalls totaling $179,945. The shortfalls were primarily related to appraisal subordinate entitlement reduction amounts ($164,768) associated with two of the specially serviced loans as well as special servicing fees ($15,177). S&P lowered its ratings on classes K, L, M, and N to 'D (sf)' due to recurring interest shortfalls that S&P expects will continue. The affirmations of the ratings on the principal and interest certificates, of the other nine classes reflect subordination levels and available liquidity that is consistent with the outstanding ratings. The rating on class O was previously lowered to D '(sf)' due to interest shortfalls. As of the October remittance report, the security list was 91.9% of its original principal balance. S&P affirmed its rating on the class X interest-only certificates based on S&P's current criteria. S&P's analysis included a review of the credit characteristics of all of the loans in the pool. Using servicer-provided financial information, S&P calculated an adjusted debt service coverage of 2.01x and a loan-to-value ratio of 75.15%. S&P further stressed the loans' cash flows under S&P's 'AAA' scenario to yield a weighted average DSC of 1.92x and an LTV ratio of 93.88%. The implied defaults and loss severity under the 'AAA' scenario were 35.14% and 23.5%, respectively. The DSC and LTV calculations S&P noted above exclude all four ($59 million; 5.3%) of the specially serviced loans and nine defeased loans ($248.3 million; 22.4%). S&P separately estimated losses for these four specially serviced loans, which S&P included in its 'AAA' scenario implied default and loss severity figures. Credit Considerations As of the Oct. 12, 2010, remittance report, five loans ($64.6 million; 5.8%) in the pool were with the special servicer, CW Capital Asset Management LLC. The reported payment status of the special serviced loans include one 60-plus-days delinquent ($35.2 million; 3.17%) loan, three crossed collateralized and cross defaulted loans reported as matured balloons ($23.7 million; 2.1%), and one 30-plus-days delinquent ($5.6 million, .5%) loan. Two of specially serviced loans have appraisal reduction amounts in effect totaling $16.2 million. The Beau Terre Office loan ($35.2 million; 3.17%), is secured by 36 office buildings totaling 378,000 sq.-ft. in Bentonville, Ark., built in 1984. The loan was transferred to the special servicer on May 24, 2010, due to an imminent payment default and is now reported as 60-plus-days delinquent. The reported DSC was 1.21x for year-end 2009, while the reported occupancy was 63% as of April 1, 2010. An ARA of $14.6 million is in effect on the loan. Standard & Poor's expects a moderate loss upon the eventual resolution of this asset. The three crossed collateralized and cross defaulted Beyman loans ($23.7 million; 2.1%) are secured by three multifamily properties with 538 aggregate units in Florida. The loans were transferred to the special servicer on June 15, 2009, due to monetary default and are now reported as matured balloons. The weighted average reported DSC was 0.83x for the six months ending June 30, 2009, while the weighted average reported occupancy was 88% as of June 2009. Standard & Poor's expects a moderate loss upon the eventual resolution of this asset. A modification of the remaining specially serviced loan ($5.6 million, 0.5%) is being negotiated by the special servicer. Excluding the transaction's defeased and specially serviced loans, 2 loans ($109.1 million, 9.57%) have anticipated repayment dates or final maturity dates through year-end 2011. Standard & Poor's considered this moderate volume of loans with near-term ARDs and or maturities, in its rating actions. Transaction Summary As of the Oct. 10, 2010, remittance report, the transaction had an aggregate trust balance of $1.1 billion (87 loans), compared with a $1.3 billion trust balance (94 loans) at issuance. Midland Commercial Mortgage Servicing, the master servicer, provided financial information for 95.5% of the nondefeased loans. All of the servicer-provided financial information was either full-year 2008, partial-year 2009, or full-year 2009 data. S&P calculated a weighted average DSC of 2.01x for the nondefeased loans in the pool based on the reported figures. S&P's adjusted DSC was 1.92x and its adjusted LTV was 75.15%, and both exclude four of the five specially serviced loans ($59 million; 5.3%) and nine defeased loans ($248.3 million; 22.4%). S&P separately estimated losses for the four of the five specially serviced loans. Seventeen loans are on the master servicer's watchlist ($118.6 million; 10.7%). Five loans ($30.1 million, 2.7%) have a reported DSC between 1.0x and 1.1x, and eight loans ($72.2 million, 6.5%) have a reported DSC of less than 1.0x. The trust has experienced three principal losses to date totaling $17.1 million. Summary of Top 10 Loans The top 10 loans secured by real estate have an aggregate outstanding trust balance of $576 million (51.8%). Using servicer-reported information, S&P calculated a weighted average DSC of 2.31x. S&P's adjusted DSC and LTV figures for the top 10 loans were 2.16x and 71.16%, respectively. These figures exclude the Beau Terre Office loan ($35.3 million; 3.2%), which is with the special servicer and discussed above. One of the top 10 loans appears on the master servicer's watchlist and is discussed below. The Alexan Mira Vista loan aka Regency Park Apartments, ($32.9 million; 3.0%) is the 10th-largest loan in the pool and is secured by a 528 unit multifamily property in Austin, Texas, that was built in 2003. This loan appears on the master servicer's watchlist due to a DSC. The reported DSC was 0.95x for year-end 2009, while the reported occupancy was 89% as of June 2010. Occupancy has since improved to 91% resulting in an estimated DSC of 1.07x. Standard & Poor's stressed the loans in the pool according to its U.S. conduit/fusion criteria. The resultant credit enhancement levels are consistent with S&P's lowered and affirmed ratings. Ratings Lowered COMM 2004-LNB3 Commercial mortgage pass-through certificates Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- D BBB+ (sf) A+ (sf) 9.13 E BB+ (sf) A- (sf) 6.87 F BB- (sf) BBB+ (sf) 5.52 G B- (sf) BBB (sf) 4.32 H CCC (sf) BBB- (sf) 3.27 J CCC- (sf) BB+ (sf) 2.22 K D (sf) BB (sf) 1.62 L D (sf) BB- (sf) 1.32 M D (sf) B+ (sf) 0.87 N D (sf) B (sf) 0.41 Ratings Affirmed COMM 2004-LNB3 Commercial mortgage pass-through certificates Class Rating Credit enhancement (%) ----- ------ ---------------------- A-2 AAA (sf) 16.79 A-3 AAA (sf) 16.79 A-4 AAA (sf) 16.79 A-5 AAA (sf) 16.79 A-1 A AAA (sf) 16.79 B AA+ (sf) 13.19 C AA (sf) 11.68 O D (sf) N/A X AAA (sf) N/A N/A - Not applicable. CORSAIR NO 4: Moody's Upgrades Ratings on Notes to 'Ba3' -------------------------------------------------------- Moody's Investors Service announced this rating action on Corsair (Jersey) No. 4 Limited, a collateralized debt obligation transaction. The CSO, closed in 2004, referenced a portfolio of synthetic corporate senior unsecured bonds. Issuer: Corsair (Jersey) No. 4 Limited -- US$15M US$$15,000,000 Deferrable Fixed Rate Secured Portfolio Credit-Linked Notes due 2014 Notes, Upgraded to Ba3 (sf); previously on Oct. 16, 2009 Downgraded to B1 (sf) Ratings Rationale Moody's explained that the rating action taken is the result of the relative stability of the credit quality of the reference portfolio, the shortened time to maturity of the CSO and a substantial level of credit enhancement remaining. The 10-year weighted average rating factor of the portfolio is 1099, equivalent to Ba2 (excluding settled credit events) compared to a 1177 WARF, equivalent to a Ba2 rating, as of the last rating action. The remaining subordination protecting the rated tranche from portfolio losses amounts to 7.5% of the portfolio notional. The portfolio concentration in referenced entities rated Caa1 and below has slightly improved from 8.3% to 7.5%, and the concentration in B rated entities has deteriorated from 4.1% to 7.5%. There are 21 entities with a negative outlook compared to six with positive outlook, and four entities on watch for downgrade compared to one on watch for upgrade. The portfolio has experienced 5 credit events, equivalent to 1.0% loss of the initial subordination. Since the last rating action, CIT Group Inc. has been subject to a credit event. In addition, the portfolio is exposed to Clear Channel Communication and Harrah's Operating Company, which are not credit events, but are modelled at Ca. The maturity of the note is 3.9 years. Moody's rating action factors in the modeling result of a number of sensitivity analyses and stress scenarios: * Time to maturity -- The committee has reviewed the impact of a scenario consisting of reducing the maturity by one year, keeping all other things equal. Reducing the maturity of the transaction generated a result that is one notch worse than the model's result generated under the base case. * MIRs -- Moody's rating action first took into account the result of a sensitivity analysis consisting of modeling MIRs in place of the corporate fundamental rating to derive the default probability of each corporate name in the reference portfolio. The gap between an MIR and a Moody's corporate fundamental rating is an indicator of the extent of the divergence of credit view between Moody's and the market on each referenced name in the CSO portfolio. The result of this run was one notch better than under the base case. * Potential defaults -- A sensitivity analysis consisting of defaulting all entities rated Caa1 and below was done. This run generated an expected loss that is three notches below the one modeled under the base case. * Removing the notch down on all reference entities on negative outlook -- This run generated an expected loss that is one notch above the one modeled under the base case. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, and specific documentation features. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. Moody's Investors Service did not receive or take into account a third party due diligence report on the underlying assets or financial instruments related to the monitoring of this transaction in the past 6 months. Due to the impact of revised and updated key assumptions referenced in "Moody's Approach to Rating Corporate Synthetic Obligations", key model inputs used by Moody's in its analysis may be different from the manager/arranger's reported numbers. In particular, rating assumptions for all publicly rated corporate credits in the underlying portfolio have been adjusted for "Review for Possible Downgrade", "Review for Possible Upgrade", or "Negative Outlook". Moody's did not run a separate loss and cash flow analysis other than the one already done using the CDOROM model. For a description of the analysis, refer to the methodology and the CDOROM user guide on Moody's website. Moody's analysis of CSOs is subject to uncertainties, the primary sources of which includes complexity, governance and leverage. Although the CDOROM model captures many of the dynamics of the Corporate CSO structure, it remains a simplification of the complex reality. Of greatest concern are (a) variations over time in default rates for instruments with a given rating, (b) variations in recovery rates for instruments with particular seniority/security characteristics and (c) uncertainty about the default and recovery correlations characteristics of the reference pool. Similarly on the legal/structural side, the legal analysis although typically based in part on opinions (and sometimes interpretations) of legal experts at the time of issuance, is still subject to potential changes in law, case law and the interpretations of courts and (in some cases) regulatory authorities. The performance of this CSO is also dependent on on- going decisions made by one or several parties, including the Manager and the Trustee. Although the impact of these decisions is mitigated by structural constraints, anticipating the quality of these decisions necessarily introduces some level of uncertainty in Moody's assumptions. Given the tranched nature of Corporate CSO liabilities, rating transitions in the reference pool may have leveraged rating implications for the ratings of the Corporate CSO liabilities, thus leading to a high degree of volatility. All else being equal, the volatility is likely to be higher for more junior or thinner liabilities. The base case scenario modeled fits into the central macroeconomic scenario predicted by Moody's of a sluggish recovery scenario of the corporate universe. Should macroeconomics conditions evolves towards a more severe scenario such as a double dip recession, the CSO rating will likely be downgraded to an extent depending on the expected severity of the worsening conditions. Regulatory Disclosures Information sources used to prepare the credit rating are these: parties involved in the rating and parties not involved in the rating. Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of maintaining a credit rating. Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process. CREDIT SUISSE: Fitch Downgrades Ratings on 15 2005-C5 Certs. ------------------------------------------------------------ Fitch Ratings downgrades 15 classes of Credit Suisse First Boston Mortgage Securities http://www.facebook.com/notifications.phpCorp. 2005-C5, commercial mortgage pass-through certificates, due to further deterioration of performance primarily due to increased losses on the specially serviced loans. As a result of the expected losses on loans currently in special servicing, Fitch expects classes O thru Q to be fully depleted and class N to be significantly impacted. Fitch expects losses of 4.6% (4.7% cumulative transaction losses) based on expected losses on the specially serviced loans and loans that could not refinance at maturity. As of the October 2010 distribution date, the pool's aggregate principal balance has decreased 5.3% to $2.8 billion from $2.9 billion at issuance. Nine loans (3.5%) are currently defeased. As of October 2010, there are cumulative interest shortfalls in the amount of $1.1 million, currently affecting classes Q and S. Fitch has designated 74 loans (21.4%) as Fitch Loans of Concern, which includes 23 specially serviced loans (6.5%). The largest specially serviced loan (1.6%) is secured by a 258,345 square foot office property located in Wayne, PA, approximately 20 miles northwest of Philadelphia. The loan transferred to special servicing in June 2010 due to imminent maturity default. The loan matured on Sept. 1, 2010. As of June 30, 2010, the property is 99% leased (85% dark) as a result of two of the largest tenants at the property vacating. The next largest specially serviced loan (0.7%) is secured by a 576 unit multifamily property located in Comstock Park, MI. The loan transferred to special servicing in September 2010 due to imminent monetary default as a result of insufficient property cash flow. The borrower is unable to continue to fund the monthly property shortfalls and requested a loan modification. The special servicer is pursuing a dual track of foreclosure and workout strategy. Fitch stressed the value of the non-defeased loans by applying a 5% haircut to 2009 fiscal year-end net operating income and applying an adjusted market cap rate between 7.25% and 10% to determine value. Similar to Fitch's prospective analysis of recent vintage commercial mortgage backed securities, each loan also underwent a refinance test by applying an 8% interest rate and 30-year amortization schedule based on the stressed cash flow. Loans that could refinance to a debt service coverage ratio of 1.25 times or higher were considered to pay off at maturity. Of the non- defeased or non-specially serviced loans, 148 loans (58.2% of the overall pool) were assumed not to be able to refinance, of which Fitch modeled losses for 50 loans (18.3%) in instances where Fitch's derived value was less than the outstanding balance. Fitch has downgraded these classes, Revised Outlooks, and assigned Recovery Ratings as indicated: -- $224.8 million class A-J to 'AA/LS3' from 'AAA/LS3'; Outlook Stable; -- $24.9 million class B to 'A/LS5' from 'AA/LS5'; Outlook Stable. -- $47.6 million class C to 'BBB/LS5' from 'A/LS4'; Outlook Stable; -- $21.8 million class D to 'BBB/LS5' from 'A/LS5'; Outlook Stable; -- $18.1 million class E to 'BBB-/LS5' from 'A/LS5'; Outlook to Stable from Negative; -- $29 million class F to 'BB/LS5' from 'BBB/LS5'; Outlook to Stable from Negative; -- $36.3 million class G to 'BB/LS5' from 'BBB-/LS5'; Outlook Negative; -- $21.8 million class H to 'B/LS5' from 'BB/LS5'; Outlook Negative; -- $32.6 million class J to 'B-/LS5' from 'BB/LS5'; Outlook Negative; -- $32.6 million class K to 'B-/LS5' from 'B/LS5'; Outlook Negative; -- $14.5 million class M to 'CCC/RR1' from 'B-/LS5'; -- $10.9 million class N to 'C/RR6' from 'B-/LS5'; -- $3.6 million class O to 'C/RR6' from 'B-/LS5'; -- $7.3 million class P to'C/RR6' from 'B-/LS5'; -- $10.9 million class Q to 'C/RR6' from 'CCC/RR3'. In addition, Fitch has affirmed and Revised Rating Outlooks as indicated: -- $486.8 million class A-1A at 'AAA/LS1'; Outlook Stable; -- $95 million class A-2 at 'AAA/LS1'; Outlook Stable; -- $149 million class A-3 at 'AAA/LS1'; Outlook Stable; -- $1 billion class A-4 at 'AAA/LS1'; Outlook Stable; -- $136.2 million class A-AB at 'AAA/LS1'; Outlook Stable; -- $290.2 million class A-M at 'AAA/LS3'; Outlook Stable; -- $7.3 million class L at 'B-/LS5'; Outlook Negative; -- $5.4 million class 375-A at 'BBB+'; Outlook to Stable from Negative; -- $9.4 million class 375-B at 'BBB'; Outlook to Stable from Negative; -- $20.6 million class 375-C at 'BBB-'; Outlook to Stable from Negative. Fitch does not rate the $24 million class S. Class A-1 has been paid in full. Fitch withdraws the ratings on the interest-only classes A-X, A-SP, and A-Y. CREDIT SUISSE: Moody's Downgrades Ratings on Five 2001-CK1 Certs. ----------------------------------------------------------------- Moody's Investors Service downgraded the ratings of five classes and affirmed 11 classes of Credit Suisse First Boston Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2001-CK1: -- Cl. A-3, Affirmed at Aaa (sf); previously on March 16, 2001 Definitive Rating Assigned Aaa (sf) -- Cl. A-X, Affirmed at Aaa (sf); previously on March 16, 2001 Definitive Rating Assigned Aaa (sf) -- Cl. A-Y, Affirmed at Aaa (sf); previously on March 16, 2001 Definitive Rating Assigned Aaa (sf) -- Cl. A-CP, Affirmed at Aaa (sf); previously on March 16, 2001 Assigned Aaa (sf) -- Cl. B, Affirmed at Aaa (sf); previously on May 19, 2005 Upgraded to Aaa (sf) -- Cl. C, Affirmed at Aaa (sf); previously on Jan. 16, 2008 Upgraded to Aaa (sf) -- Cl. D, Affirmed at Aaa (sf); previously on Jan. 16, 2008 Upgraded to Aaa (sf) -- Cl. E, Affirmed at Aaa (sf); previously on Jan. 16, 2008 Upgraded to Aaa (sf) -- Cl. F, Affirmed at Aa2 (sf); previously on Jan. 16, 2008 Upgraded to Aa2 (sf) -- Cl. G, Affirmed at A2 (sf); previously on Jan. 16, 2008 Upgraded to A2 (sf) -- Cl. H, Affirmed at Baa2 (sf); previously on Jan. 16, 2008 Upgraded to Baa2 (sf) -- Cl. J, Downgraded to Ca (sf); previously on March 16, 2001 Definitive Rating Assigned Ba2 (sf) -- Cl. K, Downgraded to C (sf); previously on March 16, 2001 Definitive Rating Assigned Ba3 (sf) -- Cl. L, Downgraded to C (sf); previously on May 19, 2005 Downgraded to B2 (sf) -- Cl. M, Downgraded to C (sf); previously on Nov. 2, 2006 Downgraded to Caa2 (sf) -- Cl. N, Downgraded to C (sf); previously on Nov. 2, 2006 Downgraded to Caa3 (sf) Ratings Rationale The downgrades are due to higher expected losses for the pool resulting from realized and anticipated losses from specially serviced and troubled loans and concerns about refinancing risk associated with loans approaching maturity in an adverse environment. Twenty-eight loans, representing 70% of the pool, mature within the next 24 months. Ten of these loans, representing 25% of the pool, have a Moody's stressed debt service coverage ratio less than 1.0X. The affirmations are due to key parameters, including Moody's loan to value ratio, Moody's stressed DSCR and the Herfindahl Index , remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. Moody's rating action reflects a cumulative base expected loss of 12.9% of the current balance. At last review, Moody's cumulative base expected loss was 1.8%. Moody's stressed scenario loss is 15% of the current balance. Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes. Moody's analysis reflects a forward-looking view of the likely range of collateral performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside an acceptable range of the key parameters may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated during the current review. Even so, deviation from the expected range will not necessarily result in a rating action. There may be mitigating or offsetting factors to an improvement or decline in collateral performance, such as increased subordination levels due to amortization and loan payoffs or a decline in subordination due to realized losses. Primary sources of assumption uncertainty are the current stressed macroeconomic environment and continuing weakness in the commercial real estate and lending markets. Moody's currently views the commercial real estate market as stressed with further performance declines expected in the industrial, office, and retail sectors. Hotel performance has begun to rebound, albeit off a very weak base. Multifamily has also begun to rebound reflecting an improved supply / demand relationship. The availability of debt capital is improving with terms returning towards market norms. Job growth and housing price stability will be necessary precursors to commercial real estate recovery. Overall, Moody's central global scenario remains "hook-shaped" for 2010 and 2011; Moody's expect overall a sluggish recovery in most of the world's largest economies, returning to trend growth rate with elevated fiscal deficits and persistent unemployment levels. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.50 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score , a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in Moody's analysis. Based on the model pooled credit enhancement levels at Aa2 and B2, the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade credit estimates is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit estimate of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the credit estimate level, is incorporated for loans with similar credit estimates in the same transaction. Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 4 compared to 27 at last review. In cases where the Herf falls below 20, Moody's also employs the large loan/single borrower methodology. This methodology uses the excel-based Large Loan Model v 8.0 and then reconciles and weights the results from the two models in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan level proceeds derived from Moody's loan level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type, and sponsorship. These aggregated proceeds are then further adjusted for any pooling benefits associated with loan level diversity, other concentrations and correlations. Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated January 16, 2008. Moody's Investors Service did not receive or take into account a third-party due diligence report on the underlying assets or financial instruments related to the monitoring of this transaction in the past six months. Deal Performance As of the October 18, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 73% to $270.8 million from $997 million at securitization. The Certificates are collateralized by 41 mortgage loans ranging in size from less than 1% to 26% of the pool, with the top ten loans representing 51% of the pool. Eleven loans, representing 29% of the pool, have defeased and are collateralized with U.S. Government securities. There are no loans with investment grade credit estimates. Twenty one loans, representing 51% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Fourteen loans have been liquidated from the pool, resulting in an aggregate realized loss of $23.0 million (41% loss severity). Eight loans, representing 20% of the pool, are currently in special servicing. The largest specially serviced loan is the College Park Medical Office Building Portfolio ($17.9 million -- 6.6% of the pool) which are two loans secured by a office building and retail center, both located in Detroit, Michigan. The loans were transferred to special servicing on March 18, 2008 due to imminent default and are real estate owned. The second largest specially serviced loan is the Reflections Apartments Loan ($11.4 million -- 4.2% of the pool), which is secured by 282 unit multifamily property located in Fort Meyers, Florida. The loan was transferred to special servicing on December 11, 2008 due to monetary default. A modification agreement has been recently executed and the loan is expected to be returned to the master servicer shortly. The remaining specially serviced loans are secured by a mix of property types. The master servicer has recognized appraisal reductions totaling $7.8 million for two of the specially serviced loans. Moody's has estimated an aggregate $24.9 million loss (47% expected loss on average) for the specially serviced loans. Moody's has assumed a high default probability for nine poorly performing loans representing 14% of the pool and has estimated a $7.9 million loss (22% expected loss based on a 52% probability default) from these troubled loans. Based on the most recent remittance statement, Classes K through M have experienced cumulative interest shortfalls totaling $447,592. Moody's anticipates that the pool will continue to experience interest shortfalls because of the exposure to specially serviced loans. Interest shortfalls are caused by special servicing fees, including workout and liquidation fees, appraisal subordinate entitlement reductions and extraordinary trust expenses. Moody's was provided with full year 2009 operating results for 100% of the conduit pool. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 55% compared to 81% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 16% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.5%. Excluding specially serviced and troubled loans, Moody's actual and stressed DSCRs are 1.91X and 1.97X, respectively, compared to 1.39X and 1.38X at last review. Moody's actual DSCR is based on Moody's net cash flow and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. The top three performing conduit loans represent 37% of the pool balance. The largest loan is the Stonewood Center Mall Loan ($71.2 million -- 26.3% of the pool), which is secured by the borrower's interest in a 931,000 square foot regional mall (collateral is 630,000 square feet) located approximately 13 miles southeast of Los Angeles in Downey, California. The mall is anchored by J.C. Penney, Macy's and Sears. The loan sponsors are Macerich Co. and the Ontario Teachers Pension Fund. The center was 98% leased as of June 2010, the same as at last review. The loan matures in December 2010 and the borrower has requested a payoff statement. Moody's LTV and stressed DSCR are 45% and 2.19X, respectively, compared to 55% and 1.80X at last review. The second largest loan is the One Renaissance Center Loan ($17.2 million -- 6.3% of the pool), which is secured by a 160,000 square foot office building located in Raleigh, North Carolina. The property was 75% leased as of June 2010. The loan matures in January 2011. Moody's LTV and stressed DSCR are 125% and 0.86X, respectively, compared to 106% and 1.01X at last review. The third largest loan is the Trendwest Office Building Loan ($10.6 million -- 3.9% of the pool), which is secured by a 76,300 square foot office property located in Redmond, Washington. The loan matures in December 2010. Moody's LTV and stressed DSCR are 89% and 1.21X, respectively, compared to 94% and 1.15X at last review. CREDIT SUISSE: Moody's Reviews Ratings on 14 2004-C5 Certificates ----------------------------------------------------------------- Moody's Investors Service placed 14 classes of Credit Suisse First Boston Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2004-C5, on review for possible downgrade: -- Cl. A-J, Aaa (sf) Placed Under Review for Possible Downgrade; previously on May 25, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. B, Aa2 (sf) Placed Under Review for Possible Downgrade; previously on May 25, 2005 Definitive Rating Assigned Aa2 (sf) -- Cl. C, Aa3 (sf) Placed Under Review for Possible Downgrade; previously on May 25, 2005 Definitive Rating Assigned Aa3 (sf) -- Cl. D, A2 (sf) Placed Under Review for Possible Downgrade; previously on May 25, 2005 Definitive Rating Assigned A2 (sf) -- Cl. E, A3 (sf) Placed Under Review for Possible Downgrade; previously on May 25, 2005 Definitive Rating Assigned A3 (sf) -- Cl. F, Baa2 (sf) Placed Under Review for Possible Downgrade; previously on June 4, 2009 Downgraded to Baa2 (sf) -- Cl. G, Ba1 (sf) Placed Under Review for Possible Downgrade; previously on June 4, 2009 Downgraded to Ba1 (sf) -- Cl. H, B1 (sf) Placed Under Review for Possible Downgrade; previously on June 4, 2009 Downgraded to B1 (sf) -- Cl. J, B2 (sf) Placed Under Review for Possible Downgrade; previously on June 4, 2009 Downgraded to B2 (sf) -- Cl. K, B3 (sf) Placed Under Review for Possible Downgrade; previously on June 4, 2009 Downgraded to B3 (sf) -- Cl. L, Caa1 (sf) Placed Under Review for Possible Downgrade; previously on June 4, 2009 Downgraded to Caa1 (sf) -- Cl. M, Caa2 (sf) Placed Under Review for Possible Downgrade; previously on June 4, 2009 Downgraded to Caa2 (sf) -- Cl. N, Caa3 (sf) Placed Under Review for Possible Downgrade; previously on June 4, 2009 Downgraded to Caa3 (sf) -- Cl. O, Caa3 (sf) Placed Under Review for Possible Downgrade; previously on June 4, 2009 Downgraded to Caa3 (sf) The classes were placed on review for possible downgrade due to higher expected losses for the pool resulting from realized and anticipated losses from specially serviced and troubled loans. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated June 4, 2009. Deal And Performance Summary As of the October 18, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 15% to $1.6 billion from $1.9 billion at securitization. The Certificates are collateralized by 204 mortgage loans ranging in size from less than 1% to 20% of the pool. Forty-six loans, representing 39% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Ten loans have been liquidated from the trust since securitization, resulting in a $11.9 million loss (27% loss severity). Currently 10 loans, representing 4% of the pool, are in special servicing. The largest specially serviced loan is the Kingwood Lakes Apartments loan ($15.5 million -- 1.0%), which was transferred to special servicing in June 2010. The master servicer has recognized an appraisal reduction of $3.9 million for this loan and an aggregate $14.8 million appraisal reduction for all of the specially serviced loans. Moody's review will focus on potential losses from specially serviced and troubled loans and the performance of the overall pool. CREDIT SUISSE: Moody's Downgrades Ratings on Nine 2005-C3 Certs. ---------------------------------------------------------------- Moody's Investors Service downgraded the ratings of nine classes and affirmed 14 classes of Credit Suisse First Boston Commercial Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2005-C3: -- Cl. A-2, Affirmed at Aaa (sf); previously on July 11, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. A-3, Affirmed at Aaa (sf); previously on July 11, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. A-AB, Affirmed at Aaa (sf); previously on July 11, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. A-4, Affirmed at Aaa (sf); previously on July 11, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. A-1-A, Affirmed at Aaa (sf); previously on July 11, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. A-X, Affirmed at Aaa (sf); previously on July 11, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. A-SP, Affirmed at Aaa (sf); previously on July 11, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. A-Y, Affirmed at Aaa (sf); previously on July 11, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. A-M, Downgraded to Aa1 (sf); previously on Oct. 13, 2010 Aaa (sf) Placed Under Review for Possible Downgrade -- Cl. A-J, Downgraded to Baa1 (sf); previously on Oct. 13, 2010 A1 (sf) Placed Under Review for Possible Downgrade -- Cl. B, Downgraded to B2 (sf); previously on Oct. 13, 2010 A3 (sf) Placed Under Review for Possible Downgrade -- Cl. C, Downgraded to Caa2 (sf); previously on Oct. 13, 2010 Baa2 (sf) Placed Under Review for Possible Downgrade -- Cl. D, Downgraded to Caa3 (sf); previously on Oct. 13, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade -- Cl. E, Downgraded to Ca (sf); previously on Oct. 13, 2010 Ba3 (sf) Placed Under Review for Possible Downgrade -- Cl. F, Downgraded to Ca (sf); previously on Oct. 13, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. G, Downgraded to C (sf); previously on Oct. 13, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. H, Downgraded to C (sf); previously on Oct. 13, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. J, Affirmed at C (sf); previously on Nov 12, 2009 Downgraded to C (sf) -- Cl. K, Affirmed at C (sf); previously on Nov 12, 2009 Downgraded to C (sf) -- Cl. L, Affirmed at C (sf); previously on Nov 12, 2009 Downgraded to C (sf) -- Cl. M, Affirmed at C (sf); previously on Nov 12, 2009 Downgraded to C (sf) -- Cl. N, Affirmed at C (sf); previously on Nov 12, 2009 Downgraded to C (sf) -- Cl. O, Affirmed at C (sf); previously on Nov 12, 2009 Downgraded to C (sf) Ratings Rationale The downgrades are due to higher expected losses for the pool resulting from realized and anticipated losses from specially serviced and troubled loans and concerns about loans approaching maturity in an adverse environment. Twelve loans, representing 15% of the pool, mature within the next 24 months and have a Moody's stressed debt service coverage ratio less than 1.0X. The affirmations are due to key parameters, including Moody's loan to value ratio, Moody's stressed debt service coverage ratio and the Herfindahl Index, remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. On October 13, 2010, Moody's placed classes AM through P on review for possible downgrade. This action concludes Moody's review. Moody's rating action reflects a cumulative base expected loss of 10.1% of the current balance. At last review, Moody's cumulative base expected loss was 6.5%. Moody's stressed scenario loss is 20.2% of the current balance. Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes. Moody's analysis reflects a forward-looking view of the likely range of collateral performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside an acceptable range of the key parameters may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated during the current review. Even so, deviation from the expected range will not necessarily result in a rating action. There may be mitigating or offsetting factors to an improvement or decline in collateral performance, such as increased subordination levels due to amortization and loan payoffs or a decline in subordination due to realized losses. Primary sources of assumption uncertainty are the current stressed macroeconomic environment and continuing weakness in the commercial real estate and lending markets. Moody's currently views the commercial real estate market as stressed with further performance declines expected in the industrial, office, and retail sectors. Hotel performance has begun to rebound, albeit off a very weak base. Multifamily has also begun to rebound reflecting an improved supply / demand relationship. The availability of debt capital is improving with terms returning towards market norms. Job growth and housing price stability will be necessary precursors to commercial real estate recovery. Overall, Moody's central global scenario remains "hook-shaped" for 2010 and 2011; Moody's expect overall a sluggish recovery in most of the world's largest economies, returning to trend growth rate with elevated fiscal deficits and persistent unemployment levels. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.50 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score, a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in Moody's analysis. Based on the model pooled credit enhancement levels at Aa2 and B2, the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade credit estimates is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit estimate of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the credit estimate level, is incorporated for loans with similar credit estimates in the same transaction. Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 25, the same at last review. Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated November 13, 2009. Moody's Investors Service did not receive or take into account a third party due diligence report on the underlying assets or financial instruments related to the monitoring of this transaction in the past six months. Deal Performance As of the October 18, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 9% to $1.488 billion from $1.636 billion at securitization. The Certificates are collateralized by 189 mortgage loans ranging in size from less than 1% to 8% of the pool, with the top ten loans representing 38% of the pool. The pool includes 53 loans, representing 14% of the outstanding loan balance, which are secured by residential co-ops located throughout New York City. These loans have credit estimates of Aaa. Seven loans, representing 7% of the pool, have defeased and are collateralized with U.S. Government securities. Defeasance at last review represented 5% of the pool. Twenty five loans, representing 10% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Five loans have been liquidated from the pool, resulting in an aggregate realized loss of $12.6 million (62% loss severity). Seventeen loans, representing 15% of the pool, are currently in special servicing. The largest specially serviced loan is the Southland Center Mall ($105.7 million -- 7.0% of the pool), which is secured by a 639,575 square foot mall located in Taylor, Michigan. The property is owned by an affiliate of General Growth Properties, Inc. (GGP). The loan was transferred to special servicing due to GGP's bankruptcy filing on April 16, 2009. The loan maturity was not extended as part of the bankruptcy plan and the borrower has the option to offer the property to the lender via a deed in lieu. The remaining specially serviced loans are secured by a mix of property types. The master servicer has recognized appraisal reductions totaling $75.1 million for ten of the specially serviced loans. Moody's has estimated an aggregate $92.4 million loss (40% expected loss on average) for the specially serviced loans. Moody's has assumed a high default probability for ten poorly performing loans representing 3% of the pool and has estimated a $16.9 million loss (40% expected loss based on a 50% probability default) from these troubled loans. Based on the most recent remittance statement, Classes E through P have experienced cumulative interest shortfalls totaling $3.7 million. Moody's anticipates that the pool will continue to experience interest shortfalls because of the exposure to specially serviced loans. Interest shortfalls are caused by special servicing fees, including workout and liquidation fees, appraisal subordinate entitlement reductions and extraordinary trust expenses. Moody's was provided with full year 2009 operating results for 88% of the conduit pool. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 102%, the same as at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 12% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.1%. Excluding specially serviced and troubled loans, Moody's actual and stressed DSCRs are 1.31X and 1.02X, respectively, compared to 1.29X and 0.99X at last review. Moody's actual DSCR is based on Moody's net cash flow and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. The top three performing conduit loans represent 17% of the pool balance. The largest loan is the San Diego Office Park Loan ($113.0 million -- 7.5% of the pool), which is secured by an 11- building 645,000 square foot Class A office complex located in San Diego, California. The loan sponsor is Maguire Properties. The property was 75% leased as of June 2010 compared to 100% at last review. The loan matures in April 2015 and is interest only during the entire loan term. Moody's LTV and stressed DSCR are 127% and 0.77X, respectively, compared to 110% and 0.73X at last review. The second largest loan is the 80-90 Maiden Lane Loan ($88.5 million -- 5.9% of the pool), which is secured by two Class B office buildings totaling 545,000 square feet located in New York City. The property was 96% leased as of December 2009 compared to 99% at last review. The loan matures in April 2015. Moody's LTV and stressed DSCR are 105% and 0.93X, respectively, compared to 103% and 0.94X at last review. The third largest loan is Och Ziff Portfolio Loan ($52.5 million - - 3.5% of the pool), which is secured by eight limited-service hotels located in Columbus, Ohio and Covington, Kentucky. Performance has declined since last review due to lower revenues and increased expenses. The loan matures in May 2012. Moody's LTV and stressed DSCR are 122% and 1.02X, respectively, compared to 118% and 1.05X at last review. CREDIT SUISSE: Moody's Affirms Ratings on 12 2007-C3 Certificates ----------------------------------------------------------------- Moody's Investors Service affirmed the ratings of 12 classes and downgraded 13 classes of Credit Suisse Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2007-C3: -- Cl. A-2, Affirmed at Aaa (sf); previously on July 30, 2007 Definitive Rating Assigned Aaa (sf) -- Cl. A-3, Affirmed at Aaa (sf); previously on July 30, 2007 Definitive Rating Assigned Aaa (sf) -- Cl. A-X, Affirmed at Aaa (sf); previously on July 30, 2007 Definitive Rating Assigned Aaa (sf) -- Cl. A-AB, Downgraded to Aa2 (sf); previously on Oct. 20, 2010 Aaa (sf) Placed Under Review for Possible Downgrade -- Cl. A-4, Downgraded to Aa2 (sf); previously on Oct. 20, 2010 Aaa (sf) Placed Under Review for Possible Downgrade -- Cl. A-1-A1, Downgraded to Aa2 (sf); previously on Oct. 20, 2010 Aaa (sf) Placed Under Review for Possible Downgrade -- Cl. A-1-A2, Downgraded to Aa2 (sf); previously on Oct. 20, 2010 Aaa (sf) Placed Under Review for Possible Downgrade -- Cl. A-M, Downgraded to A3 (sf); previously on Oct. 20, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade -- Cl. A-J, Downgraded to B3 (sf); previously on Oct. 20, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade -- Cl. B, Downgraded to Caa1 (sf); previously on Oct. 20, 2010 Ba3 (sf) Placed Under Review for Possible Downgrade -- Cl. C, Downgraded to Caa3 (sf); previously on Oct. 20, 2010 B2 (sf) Placed Under Review for Possible Downgrade -- Cl. D, Downgraded to Ca (sf); previously on Oct. 20, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. E, Downgraded to C (sf); previously on Oct. 20, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. F, Downgraded to C (sf); previously on Oct. 20, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade -- Cl. G, Downgraded to C (sf); previously on Oct. 20, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. H, Downgraded to C (sf); previously on Oct. 20, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. J, Affirmed at C (sf); previously on Dec. 16, 2009 Downgraded to C (sf) -- Cl. K, Affirmed at C (sf); previously on Dec. 16, 2009 Downgraded to C (sf) -- Cl. L, Affirmed at C (sf); previously on Dec. 16, 2009 Downgraded to C (sf) -- Cl. M, Affirmed at C (sf); previously on Dec. 16, 2009 Downgraded to C (sf) -- Cl. N, Affirmed at C (sf); previously on Dec. 16, 2009 Downgraded to C (sf) -- Cl. O, Affirmed at C (sf); previously on Dec. 16, 2009 Downgraded to C (sf) -- Cl. P, Affirmed at C (sf); previously on Dec. 16, 2009 Downgraded to C (sf) -- Cl. Q, Affirmed at C (sf); previously on Dec. 16, 2009 Downgraded to C (sf) -- Cl. S, Affirmed at C (sf); previously on Dec. 16, 2009 Downgraded to C (sf) Ratings Rationale The downgrades are due to higher expected losses for the pool resulting from realized and anticipated losses from specially serviced and troubled loans. The affirmations are due to key parameters, including Moody's loan to value ratio, Moody's stressed debt service coverage ratio and the Herfindahl Index, remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. On October 20, 2010, Moody's placed 13 classes on review for possible downgrade. This action concludes Moody's review. Moody's rating action reflects a cumulative base expected loss of 12.8% of the current balance compared to 12.1% at Moody's prior review. Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes. Moody's analysis reflects a forward-looking view of the likely range of collateral performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside an acceptable range of the key parameters may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated during the current review. Even so, deviation from the expected range will not necessarily result in a rating action. There may be mitigating or offsetting factors to an improvement or decline in collateral performance, such as increased subordination levels due to amortization and loan payoffs or a decline in subordination due to realized losses. Primary sources of assumption uncertainty are the current stressed macroeconomic environment and continuing weakness in the commercial real estate and lending markets. Moody's currently views the commercial real estate market as stressed with further performance declines expected in the industrial, office, and retail sectors. Hotel performance has begun to rebound, albeit off a very weak base. Multifamily has also begun to rebound reflecting an improved supply / demand relationship. The availability of debt capital is improving with terms returning towards market norms. Job growth and housing price stability will be necessary precursors to commercial real estate recovery. Overall, Moody's central global scenario remains "hook-shaped" for 2010 and 2011; Moody's expect overall a sluggish recovery in most of the world's largest economies, returning to trend growth rate with elevated fiscal deficits and persistent unemployment levels. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.50 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score , a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in Moody's analysis. Based on the model pooled credit enhancement levels at Aa2 and B2, the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade credit estimates is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit estimate of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the credit estimate level, is incorporated for loans with similar credit estimates in the same transaction. Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated December 16, 2009. Moody's Investors Service did not receive or take into account a third-party due diligence report on the underlying assets or financial instruments related to the monitoring of this transaction in the past six months. Deal Performance As of the October 18, 2010 distribution date, the transaction's aggregate certificate balance had decreased by 3% to $2.62 billion from $2.68 billion at securitization. The Certificates are collateralized by 232 mortgage loans ranging in size from less than 1% to 6% of the pool, with the top ten loans representing 32% of the pool. The pool does not contain any defeased loans or loans with credit estimates. Sixty-one loans, representing 22% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Eleven loans have been liquidated from the pool since securitization, resulting in an aggregate $31.6 million loss (60% loss severity on average). Currently, 30 loans, representing 26% of the pool, are in special servicing. The largest specially serviced loan is the Main Plaza Loan ($160.7 million -- 6% of the pool), which is secured by two 12-story office buildings located in Irving, California. The two buildings total 583,000 square feet. As of March 2010, the property was 70% leased compared to 65% at last review. The loan was transferred to special servicing in July 2010 for imminent default when the borrower requested a loan modification. The loan remains current. The master servicer has recognized an aggregate $153.8 million appraisal reduction for 20 of the specially serviced loans. Moody's has estimated an aggregate loss of $215.5 million (34% expected loss on average) for all of the specially serviced loans. Moody's has also assumed a high default probability for 23 poorly performing loans representing 4% of the pool. Moody's has estimated a $26.0 million loss (25% expected loss based on a 50% default probability) from the troubled loans. Moody's was provided with full year 2009 and partial year 2010 operating results for 82% and 63% of the pool, respectively. Moody's weighted average LTV, excluding specially serviced and troubled loans, is 117% compared to 131% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 12.5% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.2%. Moody's actual and stressed DSCRs, excluding specially serviced and troubled loans, are 1.26X and 0.87X, respectively, compared to 1.21X and 0.83X at last review. Moody's actual DSCR is based on Moody's net cash flow and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 52 compared to 79 at Moody's prior review. The top three performing loans represent 18% of the pool. The largest loan is the Mandarin Oriental Loan ($135.0 million -- 5.1% of the pool), which is secured by a 248-key luxury hotel located at Columbus Circle in New York City. The loan is on the watch list for low debt service coverage. Performance has declined since securitization due to a significant decline in tourist and business travel in 2008 and 2009. However, the property has demonstrated improved performance in 2010. For year-to-date through September 2010, occupancy and revenue per available room (RevPAR) were 69% and $522, respectively, compared to 60% and $460 at last review. The borrower is Istithimar Building FZE, which has been funding debt service shortfalls for approximately two years. Per the special servicer, the borrower has initiated discussions regarding a possible loan modification. The loan is interest-only for its entire term and matures in March 2012. Moody's LTV and stressed DSCR are 121% and 0.89X, essentially the same as at last review. The second largest loan is the Westwood Complex Loan ($95.0 million -- 3.6% of the pool), which is secured by a six building mixed-use complex located in Bethesda, Maryland. The six buildings consist of two apartment buildings, a retail center, a mixed-use space, an assisted living facility and a bowling alley. As of June 2010, the properties were 99% leased, essentially the same as at last review and securitization. Moody's LTV and stressed DSCR are 139% and 0.66X, essentially the same as at last review. The third largest conduit loan is the TRT Industrial Portfolio Loan ($85.0 million -- 3.2% of the pool), which is secured by a pool of seven industrial properties located across six states. As of June 2010, the portfolio was 86% leased. Moody's LTV and stressed DSCR are 129% and 0.76X, respectively, compared to 134% and 0.71X at last review. CRYSTAL RIVER: Fitch Affirms Ratings on Eight Classes of Notes -------------------------------------------------------------- Fitch Ratings has affirmed eight and downgraded two classes of notes issued by Crystal River Resecuritization CDO 2006-1, Ltd./LLC. The rating actions are a result of continued interest shortfalls on the underlying collateral. On the April 22, 2010 payment date, the class B notes did not receive their full interest distribution as a result of insufficient interest proceeds due to continued interest shortfalls on the underlying collateral. On May 3, 2010, the trustee declared an event of default due to non-payment of full and timely accrued interest to the class B notes. The class B notes are non-deferrable classes and are downgraded due to default in the payment of their accrued interest. Since Fitch's last rating action in December 2009, approximately 58% of the portfolio has been downgraded, and 31.4% is currently on Rating Watch Negative. The entire collateral pool is rated below investment grade and 73.2% has a rating in the 'CCC' rating category or lower, compared to 100% and 49.5%, respectively, at last review. This transaction was analyzed under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using the Portfolio Credit Model for projecting future default levels for the underlying portfolio. Based on this analysis, all PCM rating loss rates exceed the credit enhancement available to all classes. For all classes, Fitch compared the respective credit enhancement levels to the amount of distressed assets ('CC' and below) and assets that are experiencing interest shortfalls (68.9%). Given the high probability of default of the underlying assets and the expected limited recovery prospects upon default, class A and classes C through K are rated 'C', indicating that default is inevitable at maturity. Crystal River is a static commercial real estate collateralized debt obligation that closed on Jan. 12, 2007. The transaction is collateralized by 71 CMBS assets, of which 91.9% are from the 2005 and 2006 vintages, with the balance from the 2007 vintage (7.4%) and the 2002 vintage (0.7%). Fitch has taken action on these classes: -- $220,537,897 class A notes downgraded to 'Csf' from 'CCsf'; -- $35,131,000 class B notes downgraded to 'Dsf' from 'Csf'; -- $17,565,000 class C notes affirmed at 'Csf'; -- $19,517,000 class D notes affirmed at 'Csf'; -- $10,734,000 class E notes affirmed at 'Csf'; -- $9,271,000 class F notes affirmed at 'Csf'; -- $4,391,000 class G notes affirmed at 'Csf'; -- $5,855,000 class H notes affirmed at 'Csf'; -- $14,638,000 class J notes affirmed at 'Csf'; -- $19,517,000 class K notes affirmed at 'Csf'. CWMBS INC: Moody's Downgrades Ratings on 12 Tranches ---------------------------------------------------- Moody's Investors Service has downgraded the ratings of 12 tranches from CWMBS, Inc. Mortgage Pass-Through Certificates, Series 2006-7. The collateral backing this deal primarily consists of first-lien, fixed rate Alt-A residential mortgages. Ratings Rationale The actions are a result of the continued performance deterioration in Alt-A pools in conjunction with home price and unemployment conditions that remain under duress. The actions reflect Moody's updated loss expectations on Alt-A pools issued from 2005 to 2007. To assess the rating implications of the updated loss levels on Alt-A RMBS, each individual pool was run through a variety of scenarios in the Structured Finance Workstation(R), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to small increments in losses on the underlying mortgage pool is taken into consideration when assigning ratings. The above mentioned approach "Alt-A RMBS Loss Projection Update: February 2010" is adjusted slightly when estimating losses on pools left with a small number of loans. To project losses on pools with fewer than 100 loans, Moody's first estimates a "baseline" average rate of new delinquencies for the pool that is dependent on the vintage of loan origination (10%, 19% and 21% for the 2005, 2006 and 2007 vintage respectively). This baseline rate is higher than the average rate of new delinquencies for the vintage to account for the volatile nature of small pools. Even if a few loans in a small pool become delinquent, there could be a large increase in the overall pool delinquency level due to the concentration risk. Once the baseline rate is set, further adjustments are made based on 1) the number of loans remaining in the pool and 2) the level of current delinquencies in the pool. The fewer the number of loans remaining in the pool, the higher the volatility and hence the stress applied. Once the loan count in a pool falls below 75, the rate of delinquency is increased by 1% for every loan less than 75. For example, for a pool with 74 loans from the 2005 vintage, the adjusted rate of new delinquency would be 10.10%. If current delinquency levels in a small pool is low, future delinquencies are expected to reflect this trend. To account for that, the rate calculated above is multiplied by a factor ranging from 0.2 to 2.0 for current delinquencies ranging from less than 2.5% to greater than 50% respectively. Delinquencies for subsequent years and ultimate expected losses are projected using the approach described in the methodology publication. The primary source of assumption uncertainty is the current macroeconomic environment, in which unemployment remains at high levels, and weakness persists in the housing market. Moody's notes an increasing potential for a double-dip recession, which could cause a further 20% decline in home prices (versus its baseline assumption of roughly 5% further decline). Overall, Moody's assumes a further 5% decline in home prices with stabilization in early 2011, accompanied by continued stress in national employment levels through that timeframe. Moody's Investors Service received and took into account one or more third party due diligence reports on the underlying assets or financial instruments in this transaction and the due diligence reports had a neutral impact on the rating. Complete rating actions are: Issuer: CWMBS, Inc. Mortgage Pass-Through Certificates, Series 2006-7 -- Cl. 1-A-1, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-2, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-3, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-4, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-5, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-X, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. PO, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-1, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-2, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-3, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-4, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-X, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade DILLON READ: Fitch Takes Rating Actions on Various Classes ---------------------------------------------------------- Fitch Ratings has affirmed eight and downgraded one class of notes issued by Dillon Read CMBS CDO 2006-1 Ltd./Corp. The actions are a result of continued negative credit migration within the reference portfolio. The transaction entered an Event of Default on Sept. 2, 2010, when the ratio of the net outstanding portfolio balance over the sum of the class A-1SVF notes (funded amount plus remaining unfunded facility commitment) and the outstanding amount of the class A-1 notes failed the 100% threshold. The test failure was due to downgrades to the underlying collateral and the application of the documented overcollateralization haircuts to assets rated below 'BBB-'. Since Fitch's last rating action in December 2009, approximately 44.4% of the portfolio has been downgraded, and 9.9% is currently on Rating Watch Negative. Approximately 91.3% of the portfolio has a Fitch derived rating below investment grade and 66.6% has a rating in the 'CCC' rating category or lower, compared to 86.8% and 26.7%, respectively, at last review. This transaction was analyzed under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using the Portfolio Credit Model for projecting future default levels for the underlying portfolio. Based on this analysis, all PCM rating loss rates exceed the credit enhancement available to all classes. For all classes, Fitch compared the respective credit enhancement levels to the amount of distressed assets ('CC' and below). Given the high probability of default of these assets and the expected low recoveries upon default, all classes have been assigned a 'C' rating, indicating default is inevitable. The class A-S1VF through A-2 notes are currently receiving timely interest distributions. Classes A-3 through B-4 are not receiving any interest distributions due to the A-2 OC test failure. All interest and principal proceeds are being diverted to defease the unfunded A-S1VF notes by depositing proceeds into the Reserve Account and writing down the unfunded portion by the corresponding amount. The proceeds of the Reserve Account will then be used to make loss protection payments. Fitch does not expect classes A-3 through B-4 to receive any further payments due to the expectation of further collateral deterioration. Dillon Read CMBS CDO 2006-1 is a hybrid revolving collateralized debt obligation transaction that combines the use of synthetic and cash assets, as well as unfunded and funded liabilities. The transaction closed on Nov. 2, 2006. The portfolio is composed of 85.7% CMBS assets from the 2005 and 2006 vintage, 9.7% of real estate investments trusts, and the remaining 4.6% are commercial real estate CDOs. Fitch has taken these actions: -- $639,759,215 class A-S1VF notes downgraded to 'Csf' from 'CCCsf'; -- $150,000,000 class A-1 notes affirmed at 'Csf'; -- $60,000,000 class A-2 notes affirmed at 'Csf'; -- $41,250,000 class A-3 notes affirmed at 'Csf'; -- $12,500,000 class A-4 notes affirmed at 'Csf'; -- $28,750,000 class B-1 notes affirmed at 'Csf'; -- $11,250,000 class B-2 notes affirmed at 'Csf'; -- $8,750,000 class B-3 notes affirmed at 'Csf'; -- $10,000,000 class B-4 notes affirmed at 'Csf'. FEDERAL FAMILY: S&P Takes Various Rating Actions on 11 Loans ------------------------------------------------------------ Standard & Poor's Ratings Services took various rating actions on 11 student loan asset-backed securities trusts backed by Federal Family Education Loan Program student loan collateral. S&P lowered its ratings on nine subordinate classes of notes from four trusts and placed them on CreditWatch with negative implications, and affirmed its ratings on 34 senior classes from the same four trusts. Additionally, S&P affirmed its ratings on 81 senior and subordinate classes from the remaining seven trusts. S&P's analysis of each trust included an evaluation of: Current parity ratios (the ratios of total assets to total liabilities) and changes in parity levels over time. This included an examination of the assets of the trust compared to the amount of liabilities of the trust, a credit review of these assets, and an evaluation of how the assets and liabilities may change over time; The trusts' cost-of-funds structures, given the amount of auction-rate securities in each capital structure. Due to failed auctions, transaction-specific interest rates could rise and thereby reduce the trusts' levels of excess spread; The current credit enhancement available to support each class at its current rating level. S&P's analysis of both the senior and subordinate notes included a review of credit as well as liquidity risk factors. Liquidity issues may arise when the amount of loans in nonpaying status (e.g., delinquencies, deferment, forbearance, or claims) in a trust begins to erode excess spread. However, the U.S. government guarantee on the FFELP collateral, which caps the potential loss at 3% of the defaulted loan balance, significantly mitigates any credit issues for senior classes. Subordinate notes have the most exposure to any defaults that the government guarantee and available excess spread may not cover. As part of this review, S&P confirmed that the subordinate bonds in each trust all represent an amount greater than 3% of the capital structure of each trust. S&P also factored the quality of reporting and availability of data into its analysis. S&P believes the importance of granular data (at the asset and liability level) increases as collateral performance deteriorates. Rating Affirmations In aggregate, S&P affirmed its ratings on 115 classes from these 11 trusts. The affirmations reflect its view that the available credit enhancement levels, including excess spread, continue to be sufficient to cover remaining defaults (which the federal guarantee would cover for at least 97% of the defaulting loan balance) and support the related classes at their current rating levels. In some cases, total parity ratios, while currently below 100%, are steadily building toward 100% and/or are likely to reach their release thresholds soon. These trusts have been managing to build parity despite relatively large portions of loans in nonpaying status. S&P discuss each trust in further detail below. Access Group Inc. Series 2007-1 S&P affirmed its ratings on all six senior, subordinate, and junior subordinate classes from Access Group Inc.'s series 2007-1 trust. As of July 26, 2010, the total asset parity ratio was 99.23%, yet it is steadily building and is likely to reach the transaction's release threshold of 100.25% in the next couple of years. This growth in parity is occurring despite 35.9% in nonpaying loans in the pool, including 30-plus-day delinquencies (4.8%), loans in deferment (18.9%), loans in forbearance (11.9%), and current claims (0.3%). The senior asset parity ratio, at 106.60%, and the subordinate parity ratio, at 102.14%, both demonstrate that available credit enhancement is sufficient to fully support the class A and class B notes. This trust contains no auction-rate liabilities. ALG Student Loan Trust II Series 2007-1 S&P affirmed its ratings on all eight senior and subordinate classes from ALG Student Loan Trust II's series 2007-1. The senior asset parity ratio had reached 110.91% by Aug. 31, 2010. This value is higher than its original level of 109.12% in June of 2007. The subordinate asset parity ratio, while still below 100% (at 99.36%), has grown at a steady rate from its original value of 97.34%. This growth in parity has been occurring despite a relatively large percentage of nonpaying loans in the pool (54.1%), including 30-plus-day delinquencies (10.5%), loans in deferment (23.4%), loans in forbearance (19.3%), and current claims (1.0%). Approximately one-quarter of the liabilities are auction-rate notes, which pay according to a failed auction rate definition based on the lowest of LIBOR plus a rating-dependent margin, the commercial paper rate plus a rating-dependent margin, and a net loan rate. The issuer has been active in purchasing auction-rate notes at a discount. (S&P notes that Standard & Poor's does not give any credit to the issuer's potential ability to repurchase auction-rate securities at a discount in the future). The total asset parity ratio is likely to reach 100% in approximately the next year. College Loan Corporation Trust II Series 2007-1 S&P affirmed its ratings on all 16 senior and subordinate classes from College Loan Corporation Trust II's series 2007-1. As of June 30, 2010, the senior parity ratio, according to its calculations, was 107.04% and the total parity ratio was 98.46%. While total parity is currently below 100%, it has improved by almost 100 basis points since the deal's inception in 2007. Loans in nonpaying status total 41.7% of the outstanding pool balance and include 30-plus-day delinquencies (12.7%), loans in deferment (17.3%), loans in forbearance (10.6%), and current claims (1.2%). Approximately 38% of the liabilities are auction-rate notes, which, due to the continued failure of the auction-rate markets, are paying at a relatively low cost of funds based on the lesser of the Treasury-bill rate plus a rating-dependent margin and a net loan rate. This should help the trust generate excess spread. In addition, many loans in the pool are relatively new, and as they enter repayment, S&P expects to see the total parity ratio continue to grow to 100%. GCO Education Loan Funding Master Trust - II Series 2006-2 and 2007-1 S&P affirmed its ratings on 18 senior and subordinate classes from GCO Education Loan Funding Master Trust - II's series 2006-2 and 2007-1. The senior asset parity ratio had grown to 104.97% in August 2010 from 102.35% at the time of the most recent issuance in March 2007. The subordinate asset parity ratio has also grown, to 99.25% from 97.87%, and is likely to reach the subordinate release ratio of 100.50% over the next couple of years. Loans in nonpaying status total 42.6% of the outstanding pool balance and include 30-plus-day delinquencies (14.5%), loans in deferment (17.3%), loans in forbearance (9.9%), and current claims (0.8%). Auction-rate notes -- which pay at a failed-auction cost of funds based on the lesser of LIBOR plus a rating-dependent margin and a net loan rate -- account for approximately 23% of the liabilities, and the issuer has been active in purchasing these notes at a discount in an attempt to improve the parity levels. (Standard & Poor's does not give any credit to the issuer's potential ability to repurchase auction-rate securities at a discount in the future.) Nelnet Student Loan Trust 2007-2 S&P affirmed its ratings on six senior and subordinate classes from Nelnet Student Loan Trust 2007-2. By Aug. 30, 2010, the total parity ratio had risen to 99.52%, from 97.46% at issuance in December 2007. Parity has been growing at a steady rate and is likely to reach 100% in the next year. Loans in nonpaying status total 36.9% of the outstanding pool balance and include 30-plus- day delinquencies (8.8%), loans in deferment (14.7%), loans in forbearance (12.9%), and claims (0.5%). This transaction has a relatively small portion (15%) of auction-rate liabilities, which pay at a failed auction rate based on the lesser of LIBOR plus 1.25% and a net loan rate. Northstar Education Finance Inc. Series 2004-1, 2004-2, 2005-1, and 2007-1 S&P affirmed its ratings on 23 senior and subordinate classes from Northstar Education Finance Inc.'s series 2004-1, 2004-2, 2005-1, and 2007-1. The senior asset parity ratio had increased to 103.60% as of Aug. 31, 2010, from 101.89% at the time of the most recent issuance in March of 2007. The subordinate asset parity ratio has also trended up since then (to 99.21%) and is likely to reach the subordinate release ratio of 100.75% in the next couple of years. Loans in nonpaying status total 35.5% of the outstanding pool balance and include 30-plus-day delinquencies (1.8%), loans in deferment (10.5%), loans in forbearance (21.5%), and claims (0.2%). Approximately 22% of the liabilities are auction-rate notes and are paying at a relatively low failed- auction cost of funds based on the lowest of the T-bill rate plus a rating-dependent margin, LIBOR plus 1.00%, and a net loan rate. This should help the trust to generate excess spread. U.S. Education Loan Trust III LLC Series 2004 S&P affirmed its ratings on four senior and subordinate classes from U.S. Education Loan Trust III LLC's series 2004. As of Aug. 31, 2010, the senior asset parity ratio had risen to 108.26%, from 103.61% at issuance in June 2004. In addition, the subordinate asset parity ratio had grown to 99.49% from 97.54% over the same period. Loans in nonpaying status total 23.9% of the outstanding pool balance and include 30-plus-day delinquencies (6.2%), loans in deferment (7.1%), loans in forbearance (10.5%), and claims (0.2%). The liabilities are all auction-rate notes, which pay according to a failed auction-rate definition based on the lowest of LIBOR plus a rating-dependent margin, the CP rate plus a rating-dependent margin, and a net loan rate. The issuer has been active in purchasing these notes at a discount in an attempt to improve the parity levels. (Standard & Poor's does not give any credit to the issuer's potential ability to repurchase auction-rate securities at a discount in the future.) Downgrades And Creditwatch Negative Placements S&P lowered its ratings on nine subordinate classes from four trusts and placed them on CreditWatch negative to reflect S&P's view that the available credit enhancement levels are currently insufficient to support the related classes at their prior rating levels. Parity ratios for these trusts are currently below 100% and are either declining or stagnant. S&P generally believe that parity may not be building in these trusts due to several factors, including, most notably, the negative impact of nonpaying loans on the cost of funds and excess spread levels for these transactions. All but one of these trusts have significant amounts of auction- rate notes in their capital structures, which, due to the failed auctions of the past few years, could significantly increase the cost of funds over time and erode excess spread. S&P's view of the parity ratios for these trusts incorporates its opinion that the current credit enhancement available, given their recent trends, is insufficient to support the notes at their prior rating levels. Furthermore, given their position in the capital structure, the subordinate notes have the most exposure to any defaults that the government guarantee and available excess spread may not cover. Access Group Inc. Series 2002-1, 2003-1, and 2004-1 S&P lowered its ratings on the subordinate notes from Access Group Inc.'s series 2002-1, 2003-1, and 2004-1 and placed them on CreditWatch with negative implications. At the same time, S&P affirmed its ratings on the senior notes from this trust. The downgrades reflect S&P's view of the lack of growth in the total asset parity ratio, which has remained relatively unchanged (at 98.08% in August 2010) since the time of the last issuance from this trust in 2004 (when it was 98.10%). S&P's stressed cash flow analysis from the most recent issuance in 2004 indicated that the total asset percentage should have reached its release threshold of 101% by now. Loans in nonpaying status total 16.1% of the outstanding pool balance and include 30-plus-day delinquencies (3.6%), loans in deferment (5.7%), loans in forbearance (6.4%), and current claims (0.4%). Auction-rate notes make up 40% of the liabilities outstanding, and based on the auction-rate definition applicable for auction failures (the lowest of LIBOR plus 1.50%, a quarterly average T-bill rate plus a rating dependent margin, and a net loan rate), the cost of funds could increase and thereby further erode excess spread. The affirmations of S&P's ratings on the senior notes reflect S&P's view that available credit enhancement is sufficient to support the 'AAA (sf)' ratings on these classes. The senior asset parity ratio was 103.62% in August 2010, up from 101.60% in May 2004. Education Loans Inc. Series 2005-1A3 and 2005-1B S&P lowered its ratings on the subordinate LIBOR-based floating- rate notes from Education Loans Inc.'s series 2005-1B to 'BB (sf)' from 'A (sf)' and placed them on CreditWatch with negative implications. Concurrently, S&P affirmed its ratings on the series 2005-1A3 senior notes. The downgrades reflect S&P's view of declines in the total asset parity ratio, which had fallen to 96.40% as of Aug. 31, 2010, from 96.96% at issuance in August 2005. This trust experienced heavy prepayments due to loan consolidations within the deal shortly after the inception of the deal. Because the trust documents did not contain provisions for asset recycling, prepayment proceeds were used to pay principal on the notes; the principal balance of the notes now stands at approximately 37% of the original par amount of the notes outstanding. Consequently, the trust has not been able to generate the excess spread originally expected. Loans in nonpaying status total 42.2% of the outstanding pool balance and include 30-plus-day delinquencies (15.3%), loans in deferment (16.1%), loans in forbearance (8.0%), and current claims (1.5%). S&P downgraded these notes below investment-grade due to its view that this trust is significantly less likely than the other trusts S&P reviewed to be able to make full and timely payments of interest and the ultimate payment in full of principal on the subordinate notes. The affirmation of S&P's ratings on the senior notes indicates its view that available credit enhancement is sufficient to support the 'AAA (sf)' ratings on these classes. The senior asset parity ratio, according to S&P's calculation, now stands at over 115%, which is significantly higher than the original percentage, which S&P calculated at 103.28%. Educational Loan Company Trust I Series 2006-1 S&P lowered its ratings on the subordinate notes from Educational Loan Company Trust I's series 2006-1 and placed them on CreditWatch with negative implications. At the same time, S&P affirmed its ratings on the senior notes in this trust. The downgrades reflect S&P's view of declines in the subordinate asset parity ratio, which had fallen to 97.02% as of Aug. 31, 2010, from 98.59% at the date of the last issuance in June 2007. Nonpaying loans account for almost one-quarter (23.5%) of the outstanding pool balance, while loans in deferment and forbearance stand at 11.0% and 10.3%, respectively. Thirty-plus-day delinquencies, however, are relatively low, at 2.5% of the pool balance, and claims represent 0.3% of the pool. All of the liabilities are auction-rate notes, and based on the auction-rate definition applicable in auction failures (the lowest of LIBOR plus a rating-dependent margin, a quarterly average CP rate plus a rating-dependent margin, and a net loan rate), the cost of funds could increase and further erode excess spread. The affirmation of S&P's ratings on the senior notes reflects its view that available credit enhancement remains sufficient to support the 'AAA (sf)' ratings on these classes. The senior asset parity ratio has declined somewhat from its original level of 105.64% in June 2007 but remains well above par at 104.69%. U.S. Education Loan Trust IV LLC S&P lowered its ratings on the subordinate notes from U.S. Education Loan Trust IV LLC and placed them on CreditWatch with negative implications. At the same time, S&P affirmed its ratings on the senior notes from this trust. The downgrades reflect S&P's view of the marginal growth in the total parity ratio since the latest trust issuance in October 2007, when total parity stood at 97.46% (according to the December 2007 distribution report, which was the first quarterly distribution report after the October 2007 issuance). The master servicer has furnished information indicating that total parity has since risen to 98.08% as of September 2010. The levels of loans in forbearance and deferment are relatively high, at 20.3% and 15.0% of the outstanding pool balance, respectively. The total percent of nonpaying loans, which also includes 8.7% in 30- plus-day delinquencies and 0.2% in claims, totals 44.2% of the outstanding pool balance. Also, over half (approximately 55%) of the liabilities are auction-rate notes, and based on the auction- rate definition applicable in auction failures (the lowest of LIBOR plus a rating-dependent margin, the CP rate plus a rating- dependent margin, and a net loan rate), the cost of funds could increase and further erode excess spread. The affirmation of S&P's ratings on the senior notes reflects its opinion that available credit enhancement is sufficient to support the 'AAA (sf)' ratings on these classes. The senior note collateralization ratio has been trending up, and at 103.10%, now stands approximately 50 basis points above its level of 102.58% at the end of 2007. Ratings Lowered And Placed On Creditwatch Negative Access Group Inc. US$488.9 mil federal student loan asset-backed notes series 2002-1 Rating ------ Class CUSIP To From ----- ----- -- ---- B 00432CAP6 BBB (sf)/Watch Neg A (sf) Access Group Inc. US$669.154 mil federal student loan asset-backed notes series 2003-1 Rating ------ Class CUSIP To From ----- ----- -- ---- B 00432CBE0 BBB (sf)/Watch Neg A (sf) Access Group Inc. US$750 mil federal student loan asset-backed notes series 2004-1 Rating ------ Class CUSIP To From ----- ----- -- ---- B 00432CBT7 BBB (sf)/Watch Neg A (sf) Education Loans Inc. US$750 mil student loan asset-backed notes senior and subordinate series 2005-1 Rating ------ Class CUSIP To From ----- ----- -- ---- B 280907BX3 BB (sf)/Watch Neg A (sf) Educational Loan Company Trust I US$300 mil educational loan company trust I student loan backed notes series 2006-1 Rating ------ Class CUSIP To From ----- ----- -- ---- B 28148VAC9 BBB (sf)/Watch Neg A (sf) U.S. Education Loan Trust IV LLC US$1.106 bil student loan-backed notes series 2006-1 Rating ------ Class CUSIP To From ----- ----- -- ---- B-1 90342NAJ6 BBB (sf)/Watch Neg A (sf) B-2 90342NAK3 BBB (sf)/Watch Neg A (sf) U.S. Education Loan Trust IV LLC US$600 mil student loan-backed notes series 2006-2 Rating ------ Class CUSIP To From ----- ----- -- ---- B-1 90342NAT4 BBB (sf)/Watch Neg A (sf) U.S. Education Loan Trust IV LLC US$780 mil student loan-backed notes series 2007-1 Rating ------ Class CUSIP To From ----- ----- -- ---- B-1 90342NAZ0 BBB (sf)/Watch Neg A (sf) Ratings Affirmed Access Group Inc. US$488.9 mil federal student loan asset-backed notes series 2002-1 Class CUSIP Rating ----- ----- ------ A-2 00432CAL5 AAA (sf) A-3 00432CAM3 AAA (sf) A-4 00432CAN1 AAA (sf) Access Group Inc. US$669.154 mil federal student loan asset-backed notes series 2003-1 Class CUSIP Rating ----- ----- ------ A-2 00432CAY7 AAA (sf) A-3 00432CAZ4 AAA (sf) A-4 00432CBA8 AAA (sf) A-5 00432CBB6 AAA (sf) A-6 00432CBC4 AAA (sf) Access Group Inc. US$750 mil federal student loan asset-backed notes series 2004-1 Class CUSIP Rating ----- ----- ------ A-1 00432CBM2 AAA (sf) A-2 00432CBN0 AAA (sf) A-3 00432CBP5 AAA (sf) A-4 00432CBQ3 AAA (sf) A-5 00432CBR1 AAA (sf) Access Group Inc. US$1.18 bil federal student loan asset-backed floating rate notes series 2007-1 Class CUSIP Rating ----- ----- ------ A-2 00432CDM0 AAA (sf) A-3 00432CDN8 AAA (sf) A-4 00432CDP3 AAA (sf) A-5 00432CDQ1 AAA (sf) B 00432CDR9 AA+ (sf) C 00432CDS7 A (sf) ALG Student Loan Trust II US$1.3 bil student loan-backed notes series 2007-1 Class CUSIP Rating ----- ----- ------ A-1 001621AA9 AAA (sf) A-2 001621AB7 AAA (sf) A-3 001621AC5 AAA (sf) A-4 001621AD3 AAA (sf) A-5 001621AE1 AAA (sf) A-6 001621AF8 AAA (sf) B-1 001621AJ0 A (sf) B-2 001621AK7 A (sf) College Loan Corporation Trust II US$1.7 bil student loan asset-backed notes series 2007-1 Class CUSIP Rating ----- ----- ------ 1A-1 194268AA6 AAA (sf) 1A-2 194268AB4 AAA (sf) 1A-3 194268AC2 AAA (sf) 1A-4 194267AA8 AAA (sf) 1A-5 194267AB6 AAA (sf) 1A-6 194267AC4 AAA (sf) 1A-7 194267AD2 AAA (sf) 1A-8 194267AE0 AAA (sf) 1A-9 194267AF7 AAA (sf) 1A-10 194267AG5 AAA (sf) 1A-11 194267AH3 AAA (sf) 1A-14 194267AQ3 AAA (sf) 1B-1 194267AL4 A- (sf) 1B-3 194267AN0 A- (sf) 1B-2 194267AM2 A- (sf) 1B-4 194267AP5 A- (sf) Education Loans Inc. US$750 mil student loan asset-backed notes senior and subordinate series 2005-1 Class CUSIP Rating ----- ----- ------ A-3 280907BW5 AAA (sf) Educational Loan Company Trust I US$300 mil educational loan company trust I student loan backed notes series 2006-1 Class CUSIP Rating ----- ----- ------ A-1 28148VAA3 AAA (sf) A-2 28148VAB1 AAA (sf) A-3 28148VAD7 AAA (sf) GCO Education Loan Funding Master Trust - II CAD280 mil, US$1.25 bil GCO ELF student loan asset-backed notes series 2006-2 Class CUSIP Rating ----- ----- ------ A-1L 36156YAB7 AAA (sf) A-2L 36156YAC5 AAA (sf) A-3L 36156YAD3 AAA (sf) A-1RRN 36156YAA9 AAA (sf) A-1AR 36156YAE1 AAA (sf) A-2AR 36156YAF8 AAA (sf) A-3AR 36156YAG6 AAA (sf) A-4AR 36156YAL5 AAA (sf) B-1AR 36156YAH4 A (sf) B-2AR 36156YAJ0 A (sf) B-3AR 36156YAK7 A (sf) GCO Education Loan Funding Master Trust - II US$1.54 bil student loan asset-backed notes series 2007-1 Class CUSIP Rating ----- ----- ------ A-4L 36156YAM3 AAA (sf) A-5L 36156YAN1 AAA (sf) A-6L 36156YAP6 AAA (sf) A-7L 36156YAQ4 AAA (sf) A-5AR 36156YAR2 AAA (sf) A-6AR 36156YAS0 AAA (sf) A-7AR 36156YAT8 AAA (sf) Nelnet Student Loan Trust 2007-2 US$1.5 bil student loan asset-backed notes series 2007-2 Class CUSIP Rating ----- ----- ------ A-2L 64032FAD6 AAA (sf) A-3L 64032FAG9 AAA (sf) A-4AR-1 64032FAK0 AAA (sf) A-4AR-2 64032FAH7 AAA (sf) B-1 64032FAL8 A (sf) B-2 64032FAM6 A (sf) NorthStar Education Finance Inc. US$1 bil student loan asset-backed notes series 2004-1 Class CUSIP Rating ----- ----- ------ A-3 66704JAS7 AAA (sf) A-4 66704JAT5 AAA (sf) B-1 66704JAY4 A (sf) NorthStar Education Finance Inc. US$1 bil student loan asset-backed notes series 2004-2 Class CUSIP Rating ----- ----- ------ 2004-2A-1 66704JAZ1 AAA (sf) 2004-2A-2 66704JBA5 AAA (sf) 2004-2A-3 66704JBB3 AAA (sf) 2004-2A-4 66704JBC1 AAA (sf) 2004-2B 66704JBD9 A (sf) NorthStar Education Finance Inc. US$1.02 bil student loan asset-backed notes series 2005-1 Class CUSIP Rating ----- ----- ------ A-1 66704JBE7 AAA (sf) A-2 66704JBF4 AAA (sf) A-3 66704JBG2 AAA (sf) A-4 66704JBH0 AAA (sf) A-5 66704JBJ6 AAA (sf) B 66704JBK3 A (sf) NorthStar Education Finance Inc. US$1.07 bil student loan asset-backed notes series 2007-1 Class CUSIP Rating ----- ----- ------ 2007-1A-1 66704JBT4 AAA (sf) 2007-1A-2 66704JBU1 AAA (sf) 2007-1A-3 66704JBV9 AAA (sf) 2007-1A-4 66704JBW7 AAA (sf) 2007-1A-5 66704JBX5 AAA (sf) 2007-1A-6 66704JBY3 AAA (sf) 2007-1A-7 66704JBZ0 AAA (sf) 2007-1A-8 66704JCA4 AAA (sf) 2007-1B 66704JCB2 A (sf) U.S. Education Loan Trust III LLC US$341.2 mil student loan asset-backed notes series 2004 Class CUSIP Rating ----- ----- ------ A-1 91730EAA3 AAA (sf) A-2 91730EAB1 AAA (sf) A-3 91730EAC9 AAA (sf) B 91730EAD7 A (sf) U.S. Education Loan Trust IV LLC US$1.106 bil student loan-backed notes series 2006-1 Class CUSIP Rating ----- ----- ------ A-2 90342NAB3 AAA (sf) A-3 90342NAC1 AAA (sf) A-4 90342NAD9 AAA (sf) A-5 90342NAE7 AAA (sf) A-6 90342NAF4 AAA (sf) A-7 90342NAG2 AAA (sf) A-8 90342NAH0 AAA (sf) U.S. Education Loan Trust IV LLC US$600 mil student loan-backed notes series 2006-2 Class CUSIP Rating ----- ----- ------ A-1 90342NAL1 AAA (sf) A-2 90342NAM9 AAA (sf) A-3 90342NAN7 AAA (sf) A-4 90342NAP2 AAA (sf) A-5 90342NAQ0 AAA (sf) A-6 90342NAR8 AAA (sf) A-7 90342NAS6 AAA (sf) U.S. Education Loan Trust IV LLC US$780 mil student loan-backed notes series 2007-1 Class CUSIP Rating ----- ----- ------ A-2 90342NAW7 AAA (sf) A-3 90342NAX5 AAA (sf) A-4 90342NAY3 AAA (sf) FEP RECEIVABLES: Moody's Cuts Ratings on 4 Classes to C (sf) ------------------------------------------------------------ Moody's has downgraded the remaining outstanding tranches of the FEP Receivables Trust 2001-1, a transaction backed by interests in mutual fund fees. The complete rating action is: Issuer: FEP Receivables Trust 2001-1 -- Class A, Downgraded to C (sf); previously on May 25, 2006 Downgraded to Caa3 (sf) -- Class A-3L, Downgraded to C (sf); previously on May 25, 2006 Downgraded to Caa2 (sf) -- Class B, Downgraded to C (sf); previously on May 25, 2006 Downgraded to Ca (sf) -- Class BL, Downgraded to C (sf); previously on May 25, 2006 Downgraded to Ca (sf) Ratings Rationale The cash flows supporting these Notes are various future fees generated by equity and debt mutual funds. The credit quality of a security backed by mutual fund fees depends on the likely fees to be generated by the mutual funds during the life of the security, and the potential variability of such collections. Expected future fees are highly dependent upon forecast values of the mutual funds, which, in turn, are linked to current values and informed by historical performance. The future fee revenues also depend upon the fee schedules relating to the mutual fund pools from which fees are generated. Fees providing cash flows to these transactions include: CDSC fees, based on a 5-8 year declining scale and assessed upon redemption of mutual fund shares, and 12b-1 fees, charged for the first 6-12 years of share ownership. Both types of fees are linked to the Net Asset Values of mutual fund positions. The notes have received only immaterial amounts of cash -- interest or principal -- for several months. Apart from possible distributions from a small reserve account, Moody's anticipate minimal if any future distributions on these notes due to the age of the deal and finite life of the assets as described above. Moody's Investors Service did not receive or take into account a third party due diligence report on the underlying assets or financial instruments related to the monitoring of this transaction in the past six months. FFCA SECURED: Moody's Reviews Ratings on Various Classes of Notes ----------------------------------------------------------------- Moody's Investors Service has placed on review for possible upgrade the Class C-1 and D-1 fixed rate and the Class C-2 and D-2 floating rate notes from FFCA Secured Franchise Loan Owner Trust 1999-1. The fixed and floating rate notes are backed by fixed and floating rate franchise loans, respectively, made to fast-food and casual dining restaurants. The complete rating action is: Issuer: Franchise Secured Franchise Loan Grantor Trust 1999-1 -- Class D-1, Ba2 (sf) Placed Under Review for Possible Upgrade; previously on Aug. 25, 2004 Downgraded to Ba2 (sf) -- Class D-2, Ba2 (sf) Placed Under Review for Possible Upgrade; previously on Aug. 25, 2004 Downgraded to Ba2 (sf) -- Class C-1, Baa3 (sf) Placed Under Review for Possible Upgrade; previously on Aug. 25, 2004 Downgraded to Baa3 (sf) -- Class C-2, Baa3 (sf) Placed Under Review for Possible Upgrade; previously on Aug. 25, 2004 Downgraded to Baa3 (sf) The securities listed above were placed on review for possible upgrade due to the high levels of credit enhancement available to them. Total credit support for the notes consists of subordination and any available overcollateralization. The fixed and floating rate pools are cross-supported with losses allocated to both subpools in reverse alphabetical order. As of October 18th, 2010 the total subordination percentage for the Class C-1 fixed rate note and Class C-2 floating rate note is 76.3%. The total subordination percentage for the Class D-1 fixed rate note, and Class D-2 floating rate is 61.2%. The transaction has a low balance of specially serviced loans which comprise less than 1% of the current pool balance. However, there are significant obligor concentrations risks in Go-Mart (50%), United Dairy (17%), and Burger King (4%) as percentage of the current pool. During the review period, Moody's will estimate the recovery rates of foreclosed properties and assess any future stresses on the rest of the collateral pool. Moody's will also qualitatively assess the business challenges currently faced by the restaurant industry. In order to estimate losses on the collateral pool, Moody's calculates the expected loss given default of the obligors that have become nonperforming, and also estimates future losses on performing portion of the pool, all as a percentage of the outstanding pool. In evaluating the nonperforming loans, key factors include collateral valuations and expected recovery rates, volatility around those recovery rates, historical obligor performance, time until recovery or liquidation on defaulted obligors, concessions due to restructuring which may negatively impact the overall cash flow of the trust and the collateral, and future industry expectations. Net losses are then evaluated against the available credit enhancement provided by overcollateralization, subordination, and excess spread. Sufficiency of coverage is considered in light of remaining borrower concentrations and concepts, remaining bond maturities, and economic outlook. FIRST MARBLEHEAD: Fitch Downgrades Ratings on 2006-A Notes ---------------------------------------------------------- Fitch Ratings has downgraded the outstanding ratings on the notes issued by First Marblehead Corporation's National Collegiate Trust 2006-A. In addition, the class A notes have been removed from Rating Watch Negative and subsequently assigned a Negative Rating Outlook. No Outlook has been assigned to the class B notes as Fitch does not assign Rating Outlooks to classes rated 'CCC' or below. Fitch's U.S. Private Student Loan ABS Criteria and Global Structured Finance Rating Criteria were used to review the rating of the notes. The rating actions are detailed at the end of this press release. The downgrades reflect the default rate for CHELA loans (representing 34.3% of the current collateral pool) that continues to increase in excess of Fitch's initial expectation. Calculated loss multiples were indicative of the lower ratings for the remaining two classes in the trust. A Negative Outlook was assigned to reflect Fitch's concern that the collateral may continue to deteriorate and warrant further downgrades. It also corresponds with Fitch's Negative Outlook for the private student loan sector in general. The loss coverage multiples were determined by comparing the projected net loss amount to available credit enhancement levels. Fitch used historical vintage loss data provided by First Marblehead Inc. to form a loss timing curve representative of GATE loans, which accounts for 65.7% of the collateral pool, and CHELA loans, which accounts for 34.3% of the collateral pool. After giving credit for seasoning of loans in repayment, Fitch applied the current cumulative gross loss levels to the loss timing curves of GATE loans and CHELA loans to derive the expected gross losses of the pool over the remaining life. A recovery rate of 30% is applied based on updated recovery data provided by FMD. Credit enhancement consists of excess spread, a general reserve fund and cash collateralized guarantees. Credit enhancement for the class A notes also includes subordination of the class B notes. Fitch assumed excess spread to be the lesser of the average historical excess spread (earning on the assets minus interest payments to bondholders, swap payments and fees) and the most recent 12-month average excess spread, and applied that same rate over the stressed projection of remaining life. Given the high default forecasts relative to the remaining pool balance, the multiples were compressed to achieve through-the- cycle rating stability. However, despite the compression, multiples were indicative of lower ratings for both remaining classes. The class B rating is downgraded to the distressed category since the multiple is lower than one. As of the end of the October 2010 collection period, the cumulative default level for GATE portfolio is approximately 8.46% of the original loan balance and 17.48% for the CHELA portfolio. The performance of GATE loans are in line with the original expectations. However, the default rate for CHELA loans is substantially higher than what was expected and the trust has not been able to build parity up to 100%. Fitch had downgraded these classes of notes issued from National Collegiate Trust 2006-A: -- Class A2 'to 'A-sf' from 'AA+sf'; Outlook Negative; -- Class B 'to 'CCsf' from 'BBBsf'. FLORIDA KEYS: S&P Assigns 'BB+' Rating to Senior Revenue Bonds -------------------------------------------------------------- Standard & Poor's Rating Services assigned its 'BB+' long term rating to the Florida Keys College Campus Foundation, Inc., Fla.'s series 2010 senior leasehold industrial development revenue bonds, issued on behalf of the Florida Keys Community College Foundation. The outlook is stable. "The rating reflects S&P's view of the uncertain demand and rent- up risk as this is the first and only housing project for the Florida Keys Community College," said Standard & Poor's credit analyst Bianca Gaytan-Burrell. "Further affecting the rating is the college's large majority of students that attend part-time and are in state/in county, which could diminish the need for on campus housing." Management indicates proceeds from the approximately $8.3 million bonds will be used to construct a 100-bed dormitory facility on the Key West campus of FKCC, fund a debt service reserve, and provide capitalized interest for 12 months. Florida Keys Community College is a public, two-year institution established in 1965. It is the southernmost college in the United States and has three campuses in Coral Shores, Marathon, and the main campus in Key West, Fla. FKCC offers associate's and bachelor's degrees, and continued education and certificate programs in some subjects. The college's niche programs are marine sciences and diving. GE COMMERCIAL: S&P Raises Ratings on Various Classes of Notes ------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-2 and B notes issued by GE Commercial Loan Trust's series 2006-2 and removed them from CreditWatch with positive implications. S&P also affirmed its rating on the class C note and removed it from CreditWatch with positive implications. In addition, S&P affirmed its ratings on the class D and preferred trust notes. At the same time, S&P affirmed its ratings of the class A-2 and B notes issued by GE Commercial Loan Trust's series 2006-3 and removed them from CreditWatch with positive implications. S&P affirmed its ratings on the remaining notes from series 2006-3. Both transactions are cash flow collateralized loan obligation transactions collateralized in large part by middle market and syndicated corporate loans. The two transactions are in their amortization phase, and the class A-2 notes of both series continue to get paid down. Following their most recent payment date on Oct. 19, the class A-2 note balance of series 2006-2 is at 7.18% of its original amount, and the class A-2 note balance of series 2006-3 is at 12.41% of its original amount. As a result, the class A-2 note's overcollateralization ratio increased to 337.4% and 169.8% respectively (versus 149.3% and 124.0%, respectively, in March 2010, at the time of S&P's last rating action). The paydowns also improved the B notes' O/C ratios of the two series; they are currently at 201.0% and 111.6% respectively (versus 131.2% and 107.5% in March 2010). Because the classes failed to withstand the specified combination of underlying asset defaults above their current rating level in the largest obligor default test, the rating actions were limited to the levels that could be supported. Rating And Creditwatch Actions GE Commercial Loan Trust Series 2006-2 Rating ------ Class To From ----- -- ---- A-2 A+ (sf) BBB+ (sf)/Watch Pos B BBB+ (sf) BB+ (sf)/Watch Pos GE Commercial Loan Trust Series 2006-2 Rating ------ Class To From ----- -- ---- C CCC- (sf) CCC- (sf)/Watch Pos GE Commercial Loan Trust Series 2006-3 Rating ------ Class To From ----- -- ---- A-2 BB+ (sf) BB+ (sf)/Watch Pos B CCC- (sf) CCC- (sf)/Watch Pos Ratings Affirmed GE Commercial Loan Trust Series 2006-2 Class Rating ----- ------ D CC (sf) Pfd Tr Crt CC (sf) GE Commercial Loan Trust Series 2006-3 Class Rating ----- ------ C CC (sf) D CC (sf) Pfd Tr Crt CC (sf) GE COMMERCIAL: S&P Withdraws Ratings on Various Classes of Notes ---------------------------------------------------------------- Standard & Poor's Ratings Services withdrew its ratings on the class A-2, B, and C notes from GE Commercial Loan Trust Series 2006-1, a collateralized loan obligation transaction managed by GE Commercial Financial Services. At the same time, S&P lowered its rating on the preferred trust certificate to 'D (sf)'. The withdrawals follow the full repayment of the notes on the Oct. 19, 2010 distribution date. S&P lowered its rating on the preferred trust certificates to 'D (sf)' from 'CC (sf)' after the notes failed to receive a principal distribution in the amount of their remaining principal balance on the same distribution date. Ratings Withdrawn GE Commercial Loan Trust Series 2006-1 Rating ------ Class To From ----- -- ---- A-2 NR BBB+ (sf)/Watch Pos B NR CCC+ (sf)/Watch Pos C NR CCC- (sf)/Watch Pos NR - Not rated. Rating Lowered GE Commercial Loan Trust Series 2006-1 Rating ------ Class To From ----- -- ---- Pfd Tr Crt D (sf) CC (sf) Transaction Information ----------------------- Issuer: GE Commercial Loan Trust Series 2006-1 Collateral manager: GE Commercial Financial Services Arranger: Citigroup Global Structured Credit Group Trustee: Wells Fargo Bank N.A. Transaction type: Cash flow CLO GMAC COMMERCIAL: S&P Downgrades Ratings on Five 2000-C2 Notes ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on five classes of commercial mortgage-backed securities from GMAC Commercial Mortgage Securities Inc.'s series 2000-C2. S&P lowered its ratings on classes J and K to 'D (sf)' and raised its rating on class D to 'AAA (sf)'. Concurrently, S&P affirmed its ratings on three other classes. The downgrades follow S&P's analysis of interest shortfalls that have affected the trust. S&P also considered the susceptibility of the transaction to future interest shortfalls given the portion of the collateral that is with the special servicer (14 of the 20 remaining assets, representing 68.7% of the collateral pool). As of the October 2010 remittance report, the trust experienced monthly interest shortfalls totaling $86,052, primarily related to appraisal subordinate entitlement reduction amounts associated with eight of these 14 specially serviced assets. Seven of these assets had appraisal reduction amounts in effect totaling $10.9 million, which generated ASERs of $77,585. Further driving the interest shortfalls were monthly special servicing fees ($7,937). The monthly interest shortfalls affected class J, K, and L, and also reduced the liquidity support available to the remaining pooled classes. The upgrade and affirmation of the classes D and E, respectively, followed S&P's analysis of the remaining collateral in the pool, the transaction structure, and the liquidity available to the classes. S&P affirmed its 'D (sf)' rating for the class L certificates, which S&P previously downgraded to 'D (sf)' due to recurring interest shortfalls. Class L subsequently experienced a principal loss as of the Oct. 18, 2010, remittance report. The class lost 55% of its original balance. In addition, S&P affirmed its rating on the class X interest-only certificate based on its current criteria. Credit Considerations As of the Oct. 18, 2010, remittance report, 14 assets ($52.6 million; 68.7%) were with the special servicer, Berkadia Commercial Mortgage LLC. The payment status of these loans is: two of these assets are real estate owned ($9.5 million; 12.4%), three are in foreclosure ($13.3 million; 17.4%), four are 90-plus- days delinquent ($14.7 million, 19.2%), and five are late but within their grace periods ($15.1 million; 19.7%). Seven of the specially serviced assets have ARAs in effect totaling $10.9 million. Eight of the top 10 assets ($43.0 million; 56.1%) are with the special servicer. S&P describe the three largest assets with the special servicer below. Eastlake Commons, the second-largest asset and largest asset with the special servicer, has a total exposure of $8.6 million (10.5%), which includes $608,905 million of advancing and interest thereon. The property, which is REO, is a 99,155-sq.-ft. anchored shopping center in Sterling Heights, Michigan, built in 1988 and renovated in 1998. The asset was transferred to the special servicer on March 13, 2009, due to a payment default and an ARA of $3.4 million is in effect. The property is listed with a broker and is being marketed for sale. S&P expects a moderate loss upon the eventual resolution of this asset. The Lafayette Building loan, the fourth-largest asset and the second-largest asset with the special servicer, has a total exposure of $7.6 million (8.9%), which includes $828,162 of advancing and interest thereon. The property is an 162,564-sq.- ft. office building in Philadelphia, Pa., built in 1907 and renovated in 1990 and 2000. The asset was transferred to the special servicer on Jan. 7, 2010, due to a payment default. Berkadia has indicated that subsequent to the Oct. 19, 2010, remittance date, the loan was repaid in full. The Mountain View Shopping Center loan ($6.1 million; 7.9%), the fifth-largest asset and the third-largest asset with the special servicer, is secured by a 216,890-sq.-ft. anchored shopping center in Ardmore, Ok., built in 1980. The loan, which is in the process of being extended for two years, was transferred to the special servicer due to a maturity default as of April 1, 2010. An ARA of $1.5 million is in effect. For year-end 2008, the reported DSC and occupancy were 1.01x and 87%, respectively. The June 30, 2010, rent roll reflects a 62% occupancy, and after considering a new lease to Big Lots (26,432 sq. ft.; 12.2%), S&P estimates a current DSC of 0.58x. The 11 remaining specially serviced assets ($31.8 million, 41.5%) have balances that individually represent less than 7.0% of the total pool balance. S&P separately estimated losses for nine of these assets, resulting in a weighted average loss severity of 33.0%. The remaining two assets are matured loans. The borrower and special servicer are discussing a forbearance agreement for the larger loan ($5.3 million; 6.9%), and the special servicer recently executed a forbearance agreement on the small loan ($1.7 million; 2.2%). Transaction Summary As of the Oct. 12, 2010, remittance report, the transaction had an aggregate trust balance of $76.6 million (20 loans), compared with a $773.8 million trust balance (130 loans) at issuance. The master servicer, also Berkadia, provided either full-year 2008 or full-year 2009 financial information for 86.6% of the assets in the pool. S&P calculated a weighted average DSC of 1.20x based on the reported figures. The master servicer's watchlist consists of two loans (none of which are defeased) ($11.6 million; 15.1%). The trust has experienced $18.6 million of principal losses to date on 14 loans. Summary Of Top 10 Loans The top 10 assets have an aggregate outstanding trust balance of $59.1 million (77.2%). Using servicer-reported information, S&P calculated a weighted average DSC of 1.09x. In addition to the eight top 10 assets with the special servicer, one of the top 10 assets appears on the master servicer's watchlist and is discussed below. The O'Herron Portfolio loan ($9.1 million; 11.9%) is the largest asset and is secured by five cross-collateralized and cross- defaulted anchored retail properties totaling 239,324 sq. ft. The portfolio includes a 57,950-sq.-ft. property in Vinton, Va., built in 1988, a 49,110-sq.-ft. property in Wendell, N.C., built in 1992 and renovated in 1999; a 49,064-sq.-ft. property in Conover, N.C., built in 1986; a 43,320-sq.-ft. property in Laurinburg, N.C., built in 1988; and a 39,880-sq.-ft. property in Denver, N.C., built in 1990 and renovated in 1997. This loan appears on the master servicer's watchlist due to a low DSC. The reported DSC was 1.13x for year-end 2009, while the reported occupancy was 94% as of September 2010. Based on the current leasing status, S&P estimate a similar DSC. Standard & Poor's stressed the loans in the pool according to its U.S. conduit/fusion criteria. The resultant credit enhancement levels are consistent with S&P's rating actions. Ratings Lowered GMAC Commercial Mortgage Securities Inc. Commercial mortgage pass-through certificates series 2000-C2 Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- F BBB- (sf) BBB+ (sf) 61.62 G B- (sf) BB+ (sf) 28.79 H CCC- (sf) BB (sf) 21.21 J D (sf) B+ (sf) 13.63 K D (sf) CCC (sf) 2.26 Rating Raised GMAC Commercial Mortgage Securities Inc. Commercial mortgage pass-through certificates series 2000-C2 Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- D AAA(sf) AA (sf) 99.52 Ratings Affirmed GMAC Commercial Mortgage Securities Inc. Commercial mortgage pass-through certificates series 2000-C2 Class Rating Credit enhancement (%) ----- ------ ---------------------- E A-(sf) 74.25 L D (sf) 0.00 X AAA (sf) N/A N/A - Not applicable. GRAYSTON CLO: Moody's Upgrades Ratings on Various Classes --------------------------------------------------------- Moody's Investors Service announced that it has upgraded the ratings of these notes issued by Grayston CLO II 2004-1 Ltd.: -- US$283,750,000 Class A-1L Floating Rate Notes Due August 2016 (current outstanding balance of $162,116,605), Upgraded to Aaa (sf); previously on July 23, 2009 Downgraded to Aa2 (sf); -- US$20,000,000 Class A-2L Floating Rate Notes Due August 2016, Upgraded to Aa3 (sf); previously on July 23, 2009 Downgraded to A3 (sf); -- US$24,500,000 Class A-3L Floating Rate Notes Due August 2016, Upgraded to Baa3 (sf); previously on July 23, 2009 Confirmed at Ba1 (sf); -- US$16,750,000 Class B-1LA Floating Rate Notes Due August 2016, Upgraded to B2 (sf); previously on July 23, 2009 Downgraded to B3 (sf). Ratings Rationale According to Moody's, the rating actions taken on the notes result primarily from the delevering of the Class A Notes, which have been paid down by approximately 43% or $122 million since the last rating action in July 2009. As a result of the delevering, the overcollateralization ratios have increased. As of the latest trustee report dated October 14, 2010, the Senior Class A, Class A and Class B-1LA overcollateralization ratios are reported at 130.99%, 115.45% and 106.8%, respectively, versus July 2009 levels of 119.94%, 110.98% and 105.6%, respectively. Moody's also notes that the credit profile of the underlying portfolio has been relatively stable since the last rating action. Based on the October 2010 trustee report, the weighted average rating factor is 2917 compared to 2935 in July 2009. Moody's adjusted WARF has declined since the last rating action due to a decrease in the percentage of securities with ratings on "Review for Possible Downgrade" or with a "Negative Outlook." The deal also experienced a decrease in defaults. In particular, the dollar amount of defaulted securities has decreased to about $4 million from approximately $14.6 million in July 2009. Due to the impact of revised and updated key assumptions referenced in "Moody's Approach to Rating Collateralized Loan Obligations" and "Annual Sector Review (2009): Global CLOs," key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. In its base case, Moody's analyzed the underlying collateral pool to have a performing par and principal proceeds of $232.5 million, defaulted par of $9.3 million, weighted average default probability of 23.53% (implying a WARF of 3632), a weighted average recovery rate upon default of 44.31%, and a diversity score of 37. These default and recovery properties of the collateral pool are incorporated in cash flow model analysis where they are subject to stresses as a function of the target rating of each CLO liability being reviewed. The default probability is derived from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The average recovery rate to be realized on future defaults is based primarily on the seniority of the assets in the collateral pool. In each case, historical and market performance trends, and collateral manager latitude for trading the collateral are also factors. Grayston CLO II 2004-1 Ltd., issued in June 2004, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. The principal methodology used in this rating was the "Moody's Approach to Rating Collateralized Loan Obligations" rating methodology published in August 2009. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found on Moody's website. Moody's Investors Service did not receive or take into account a third party due diligence report on the underlying assets or financial instruments related to the monitoring of this transaction in the past six months. Moody's modeled the transaction using the Binomial Expansion Technique, as described in Section 2.3.2.1 of the "Moody's Approach to Rating Collateralized Loan Obligations" rating methodology published in August 2009. In addition to the base case analysis described above, Moody's also performed a number of sensitivity analyses to test the impact on all rated notes, including these: 1. Various default probabilities to capture potential defaults in the underlying portfolio. 2. A range of recovery rate assumptions for all assets to capture variability in recovery rates. Below is a summary of the impact of different default probabilities (expressed in terms of WARF levels) on all rated notes (shown in terms of the number of notches' difference versus the current model output, where a positive difference corresponds to lower expected losses), assuming that all other factors are held equal: Moody's Adjusted WARF -- 20% (2906) -- Class A-1L: 0 -- Class A-2L: +2 -- Class A-3L: +2 -- Class B-1LA: +2 Moody's Adjusted WARF + 20% (4358) -- Class A-1L: -1 -- Class A-2L: -2 -- Class A-3L: -1 -- Class B-1LA: -3 Below is a summary of the impact of different recovery rate levels on all rated notes (shown in terms of the number of notches' difference versus the current model output, where a positive difference corresponds to lower expected losses), assuming that all other factors are held equal: Moody's Adjusted WARR + 2% (46.31%) -- Class A-1L: 0 -- Class A-2L: 0 -- Class A-3L: 0 -- Class B-1LA: 0 Moody's Adjusted WARR - 2% (42.31%) -- Class A-1L: 0 -- Class A-2L: 0 -- Class A-3L: -1 -- Class B-1LA: 0 Moody's notes that this transaction is subject to a high level of macroeconomic uncertainty, as evidenced by 1) uncertainties of credit conditions in the general economy and 2) the large concentration of speculative-grade debt maturing between 2012 and 2014 which may create challenges for issuers to refinance. CDO notes' performance may also be impacted by 1) the managers' investment strategies and behavior and 2) divergence in legal interpretation of CDO documentation by different transactional parties due to embedded ambiguities. Sources of additional performance uncertainties are described below: 1) Delevering: The main source of uncertainty in this transaction is whether delevering from unscheduled principal proceeds will continue and at what pace. Delevering may accelerate due to high prepayment levels in the loan market and/or collateral sales by the manager, which may have significant impact on the notes' ratings. 2) Recovery of defaulted assets: Market value fluctuations in defaulted assets reported by the trustee and those assumed to be defaulted by Moody's may create volatility in the deals' overcollateralization levels. Further, the timing of recoveries and the manager's decision to work out versus selling defaulted assets create additional uncertainties. Moody's analyzed defaulted recoveries assuming the lower of the market price and the recovery rate in order to account for potential volatility in market prices. GREENPOINT HOME: Moody's Downgrades Ratings on 11 Tranches ---------------------------------------------------------- Moody's Investors Service has downgraded the ratings of 11 tranches and confirmed the ratings of five tranches from nine RMBS transactions issued by GreenPoint Home Equity Loan Trust and Greenpoint Mortgage Funding Trust. The collateral backing these deals primarily consists of closed end second lien loans and home equity lines of credit. Ratings Rationale The actions are a result of the continued performance deterioration in second lien pools in conjunction with home price and unemployment conditions that remain under duress. The actions reflect Moody's updated loss expectations on second lien pools. For securities insured by a financial guarantor, the rating on the securities is the higher of (i) the guarantor's financial strength rating and (ii) the current underlying rating (i.e., absent consideration of the guaranty) on the security. The principal methodology used in determining the underlying rating is the same methodology for rating securities that do not have a financial guaranty and is as described earlier. Class Ac issued by Greenpoint Mortgage Funding Trust 2006-HE1 is wrapped by CIFG Assurance North America, Inc. (Rating Withdrawn). RMBS securities wrapped by CIFG Assurance North America, Inc. are rated at their underlying rating without consideration of the respective guaranties. The primary source of assumption uncertainty is the current macroeconomic environment, in which unemployment remains at high levels, and weakness persists in the housing market. Moody's notes an increasing potential for a double-dip recession, which could cause a further 20% decline in home prices (versus its baseline assumption of roughly 5% further decline). Overall, Moody's assumes a further 5% decline in home prices with stabilization in early 2011, accompanied by continued stress in national employment levels through that timeframe. If expected losses on the each of the collateral pools were to increase by 10%, model implied results indicate that most of the deals' ratings would remain stable, with the exception of Class M- 1 and class M-2 from Greenpoint Mortgage Funding Trust 2005-HE2 and Class IA-1, IIA-1a, IIA-1b, IIA-3c, IIA-4c from Greenpoint Mortgage Funding Trust 2005-HE4, for each of which model implied results would be one notch lower (for example, Ba2 versus Ba1, or Ca versus Caa3). Moody's Investors Service received and took into account one or more third party due diligence reports on the underlying assets or financial instruments in this transaction and the due diligence reports had a neutral impact on the rating. Complete rating actions are: Issuer: GreenPoint Home Equity Loan Trust 2004-1 * Expected Losses (as a % of Original Balance): 3% -- Cl. A, Confirmed at Caa2 (sf); previously on April 16, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Financial Guarantor: Ambac Assurance Corporation (Segregated Account - Unrated) Issuer: GreenPoint Home Equity Loan Trust 2004-2 * Expected Losses (as a % of Original Balance): 4% -- Cl. A-1, Downgraded to Caa2 (sf); previously on March 18, 2010 B1 (sf) Placed Under Review for Possible Downgrade -- Financial Guarantor: Ambac Assurance Corporation (Segregated Account - Unrated) -- Cl. A-2, Downgraded to Caa2 (sf); previously on March 18, 2010 B1 (sf) Placed Under Review for Possible Downgrade -- Financial Guarantor: Ambac Assurance Corporation (Segregated Account - Unrated) Issuer: GreenPoint Home Equity Loan Trust 2004-3 * Expected Losses (as a % of Original Balance): 5% -- Cl. A, Confirmed at Caa3 (sf); previously on April 16, 2010 Downgraded to Caa3 (sf) and Placed Under Review for Possible Downgrade -- Financial Guarantor: Ambac Assurance Corporation (Segregated Account - Unrated) Issuer: GreenPoint Home Equity Loan Trust 2004-4 * Expected Losses (as a % of Original Balance): 5% -- Cl. A, Downgraded to Caa3 (sf); previously on March 18, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Financial Guarantor: Ambac Assurance Corporation (Segregated Account - Unrated) Issuer: Greenpoint Mortgage Funding Trust 2005-HE2 * Expected Losses (as a % of Original Balance): 14% -- Cl. M-1, Downgraded to Ba2 (sf); previously on March 18, 2010 Baa2 (sf) Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to Ca (sf); previously on March 18, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade Issuer: Greenpoint Mortgage Funding Trust 2005-HE3 * Expected Losses (as a % of Original Balance): 15% -- Cl. A, Downgraded to Ca (sf); previously on April 16, 2010 Downgraded to Caa3 (sf) and Placed Under Review for Possible Downgrade -- Underlying Rating: Downgraded to Ca (sf); previously on Mar 18, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade -- Financial Guarantor: Ambac Assurance Corporation (Segregated Account - Unrated) Issuer: Greenpoint Mortgage Funding Trust 2005-HE4 * Expected Losses (as a % of Original Balance): Group 1 25%, Group 2 24% -- Cl. IA-1, Downgraded to B1 (sf); previously on March 18, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade -- Cl. IIA-1a, Downgraded to B1 (sf); previously on March 18, 2010 Baa2 (sf) Placed Under Review for Possible Downgrade -- Cl. IIA-1b, Confirmed at Baa1 (sf); previously on March 18, 2010 Baa1 (sf) Placed Under Review for Possible Downgrade -- Cl. IIA-3c, Confirmed at Baa1 (sf); previously on March 18, 2010 Baa1 (sf) Placed Under Review for Possible Downgrade -- Cl. IIA-4c, Downgraded to B1 (sf); previously on March 18, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to Caa3 (sf); previously on March 18, 2010 Ba2 (sf) Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to C (sf); previously on March 18, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade Issuer: Greenpoint Mortgage Funding Trust 2006-HE1 * Expected Losses (as a % of Original Balance): 53% -- Cl. Ac, Confirmed at Ca (sf); previously on March 18, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Financial Guarantor: CIFG Assurance North America, Inc. (Insured Rating Withdrawn Nov 12, 2009) Issuer: Greenpoint Mortgage Funding Trust 2007-HE1, Mortgage- Backed Notes, Series 2007-HE1 * Expected Losses (as a % of Original Balance): 72% -- Cl. A-1, Current Rating at Ca (sf); previouslt on March 9, 2009 Downgraded to Ca (sf) -- Underlying Rating: Confirmed at Ca (sf); previously on March 18, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Financial Guarantor: Syncora Guarantee Inc. (Downgraded to Ca, Outlook Developing on March 9, 2009) GSC CAPITAL: Moody's Downgrades Ratings on Three Tranches --------------------------------------------------------- Moody's Investors Service has downgraded the ratings of 3 tranches from 2 RMBS transactions issued by GSC Capital Corp. The collateral backing these deals primarily consists of first-lien, adjustable rate Alt-A residential mortgages. Ratings Rationale The actions are a result of the continued performance deterioration in Alt-A pools in conjunction with home price and unemployment conditions that remain under duress. The actions reflect Moody's updated loss expectations on Alt-A pools issued from 2005 to 2007. To assess the rating implications of the updated loss levels on Alt-A RMBS, each individual pool was run through a variety of scenarios in the Structured Finance Workstation(R), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to small increments in losses on the underlying mortgage pool is taken into consideration when assigning ratings. The above mentioned approach "Alt-A RMBS Loss Projection Update: February 2010" is adjusted slightly when estimating losses on pools left with a small number of loans. To project losses on pools with fewer than 100 loans, Moody's first estimates a "baseline" average rate of new delinquencies for the pool that is dependent on the vintage of loan origination (10%, 19% and 21% for the 2005, 2006 and 2007 vintage respectively). This baseline rate is higher than the average rate of new delinquencies for the vintage to account for the volatile nature of small pools. Even if a few loans in a small pool become delinquent, there could be a large increase in the overall pool delinquency level due to the concentration risk. Once the baseline rate is set, further adjustments are made based on 1) the number of loans remaining in the pool and 2) the level of current delinquencies in the pool. The fewer the number of loans remaining in the pool, the higher the volatility and hence the stress applied. Once the loan count in a pool falls below 75, the rate of delinquency is increased by 1% for every loan less than 75. For example, for a pool with 74 loans from the 2005 vintage, the adjusted rate of new delinquency would be 10.10%. If current delinquency levels in a small pool is low, future delinquencies are expected to reflect this trend. To account for that, the rate calculated above is multiplied by a factor ranging from 0.2 to 2.0 for current delinquencies ranging from less than 2.5% to greater than 50% respectively. Delinquencies for subsequent years and ultimate expected losses are projected using the approach described in the methodology publication. The primary source of assumption uncertainty is the current macroeconomic environment, in which unemployment remains at high levels, and weakness persists in the housing market. Moody's notes an increasing potential for a double-dip recession, which could cause a further 20% decline in home prices (versus its baseline assumption of roughly 5% further decline). Overall, Moody's assumes a further 5% decline in home prices with stabilization in early 2011, accompanied by continued stress in national employment levels through that timeframe. Moody's Investors Service received and took into account one or more third party due diligence reports on the underlying assets or financial instruments in this transaction and the due diligence reports had a neutral impact on the rating. Complete rating actions are: Issuer: GSC Capital Corp. Mortgage Trust 2006-1 -- Cl. A-1, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. A-2, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade Issuer: GSC Capital Corp. Mortgage Trust 2006-2 -- Cl. A-1, Downgraded to Ca (sf); previously on Jan. 14, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade HSI ASSET: Moody's Downgrades Ratings on Six 2007-WF1 Tranches -------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of 6 tranches from HSI Asset Loan Obligation Trust 2007-WF1. The collateral backing this deal primarily consists of first-lien, fixed rate Alt-A residential mortgages. Ratings Rationale The actions are a result of the continued performance deterioration in Alt-A pools in conjunction with home price and unemployment conditions that remain under duress. The actions reflect Moody's updated loss expectations on Alt-A pools issued from 2005 to 2007. To assess the rating implications of the updated loss levels on Alt-A RMBS, each individual pool was run through a variety of scenarios in the Structured Finance Workstation(R), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to small increments in losses on the underlying mortgage pool is taken into consideration when assigning ratings. The above mentioned approach "Alt-A RMBS Loss Projection Update: February 2010" is adjusted slightly when estimating losses on pools left with a small number of loans. To project losses on pools with fewer than 100 loans, Moody's first estimates a "baseline" average rate of new delinquencies for the pool that is dependent on the vintage of loan origination (10%, 19% and 21% for the 2005, 2006 and 2007 vintage respectively). This baseline rate is higher than the average rate of new delinquencies for the vintage to account for the volatile nature of small pools. Even if a few loans in a small pool become delinquent, there could be a large increase in the overall pool delinquency level due to the concentration risk. Once the baseline rate is set, further adjustments are made based on 1) the number of loans remaining in the pool and 2) the level of current delinquencies in the pool. The fewer the number of loans remaining in the pool, the higher the volatility and hence the stress applied. Once the loan count in a pool falls below 75, the rate of delinquency is increased by 1% for every loan less than 75. For example, for a pool with 74 loans from the 2005 vintage, the adjusted rate of new delinquency would be 10.10%. If current delinquency levels in a small pool is low, future delinquencies are expected to reflect this trend. To account for that, the rate calculated above is multiplied by a factor ranging from 0.2 to 2.0 for current delinquencies ranging from less than 2.5% to greater than 50% respectively. Delinquencies for subsequent years and ultimate expected losses are projected using the approach described in the methodology publication. The primary source of assumption uncertainty is the current macroeconomic environment, in which unemployment remains at high levels, and weakness persists in the housing market. Moody's notes an increasing potential for a double-dip recession, which could cause a further 20% decline in home prices (versus its baseline assumption of roughly 5% further decline). Overall, Moody's assumes a further 5% decline in home prices with stabilization in early 2011, accompanied by continued stress in national employment levels through that timeframe. Moody's Investors Service received and took into account one or more third party due diligence reports on the underlying assets or financial instruments in this transaction and the due diligence reports had a neutral impact on the rating. Complete rating actions are: Issuer: HSI Asset Loan Obligation Trust 2007-WF1 -- Cl. A-1, Downgraded to Ba3 (sf); previously on Jan. 14, 2010 Aa2 (sf) Placed Under Review for Possible Downgrade -- Cl. A-2, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade -- Cl. A-3, Downgraded to Ca (sf); previously on Jan. 14, 2010 Baa2 (sf) Placed Under Review for Possible Downgrade -- Cl. A-4, Downgraded to Ca (sf); previously on Jan. 14, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade -- Cl. A-5, Downgraded to Ca (sf); previously on Jan. 14, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade -- Cl. A-6, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade JEFFERSON COUNTY: Moody's Affirms 'Ba3' Rating to Housing Bondss --------------------------------------------------------------- Moody's Investors Service has affirmed the Ba3 rating on $434,728.75 of outstanding Jefferson County Assisted Housing Corporation, First Mortgage Refunding Housing Revenue Bonds (Spring Gardens Project) Series 1999. The outlook on the bonds remains negative. Spring Gardens is a 100 - unit housing property located in Jefferson County, Alabama. The property contains 98 one-bedroom apartments and 2 two-bedroom apartments. It is intended for low- income elderly and disabled tenants. In October 2005, a fire destroyed the property's community center. It was rebuilt and opened in the first half of this year (2010). The funds for the rebuild came from insurance proceeds and $2 million from the Jefferson Affordable Housing Initiative. The Jefferson Affordable Housing Initiative also funds the full-time positions of a registered nurse and social worker for the benefit of Spring Gardens residents. Strengths * Fully funded debt service reserve fund as of October, 2010 * 90% occupancy rate as of March, 2010 * Relatively short time until bond maturity in 12/1/2011 * Rental rates are well below Fair Market Rent, making future increases in rental rates possible. Challenges * Debt service coverage levels continue to deteriorate. Audited financial statements show debt service coverage levels have declined from 1.00x (FY2006) to 0.82 (FY2007) to 0.69x (FY2008) to .65X(FY2009). The most recent debt service coverage level is in line with other Moody's rated properties in the Ba3 rating category. * Rents have not increased since 2008 and occupancy has dropped from 95% to 90%. These two factors show why there has been a further decline in debt service coverage levels. * HAP contract expires before bond maturity. Preserving the balance in the debt service reserve fund takes on additional importance when the HAP contract expires before maturity and the debt service coverage is below 1.00x. Though the HAP contract is expected to be renewed by HUD, the current HAP contract expires five months before bond maturity. The expiration of the current contract could reduce rental revenue if not renewed in a timely manner. What Could Move The Rating - Up * Significant increase in debt service coverage What Could Move The Rating - Down * A further decrease in debt service coverage Outlook The outlook on the bonds remains negative due to the continued decline in debt service coverage and the potential for draws on the debt service reserve fund. Key Statistics * Current Occupancy: 90% * Bond Maturity: 12/1/2011 * HAP Expiration: 6/30/2011 * Debt Service Coverage (FY2009): 0.65x * Average Rent as % of FMR: 66% JEFFERIES MILITARY: DBRS Assigns B Rating on Hunter Project Certs. ------------------------------------------------------------------ DBRS has assigned provisional ratings to the classes of Jefferies Military Housing Trust, Series 2010-XLII. The trend is Stable. HUNTER Project Certificates Series 2010A at B (sf) The collateral for the transaction consists of the residual cash flow interests from 12 U.S. military housing projects located at 11 bases, along with the property management and asset management fees from eight of the 12 projects. The loan is sponsored by Hunt Companies of El Paso, Texas, who is a leader in the military privatization market, having developed over 31,000 units for the Department of Defense under the Military Housing Privatization Initiative. In addition to the $90 million loan, which is being contributed to the trust, there is currently a total of $839 million in senior securitized loans and $344 million of government direct loans outstanding that are also secured by the leasehold interests in the 12 projects. The senior securitized loans and the government direct loans are senior in priority to the transaction's $90 million underlying loan. The loan benefits from sponsors and property management that have significant experience with the specialized nature of the collateral and a stable source of revenue provided by the basic allowance for housing (BAH) from servicmember occupants. While the loan's collateral is deeply subordinated within each of the subject property's payment priority waterfalls, DBRS assumed annual growth rates in BAH that are a fraction of the portfolio's actual historical BAH growth rate. In addition, the transaction's structure features trap cash both at the loan level and at the Grantor Trust level, which is designed to benefit the Series 2010A certificates. The Series 2010 I/0 certificate is fully subordinated to the Series 2010A note, and in the event that the loan's DSCR is less than 1.0x, funds otherwise payable to the Series 2010 I/O certificate will be trapped for the benefit of the Series 2010A certificates. JOHNSON CITY: Moody's Downgrades Ratings on Revenue Bonds to 'Ba3' ------------------------------------------------------------------ Moody's Investors Service has downgraded to Ba3 from Aaa the refunded Health and Educational Facilities Board of the Johnson City's (Tennessee) Hospital Revenue Refunding and Improvement Bonds (Johnson City Medical Center Hospital), Series 1991 and 1998C. The outlook is negative. The rating downgrade is based on the quality of investments and the escrow structure. The escrow funds are invested in these: 1. Investment agreement with MBIA Inc. (rated Ba3 with a negative outlook) 2. Health and Educational Facilities Board of the City of Johnson City's (Tennessee), Hospital First Mortgage Revenue Bonds, Series 2000C (insured rating of Baa1) 3. Mountain States Health Alliance's First Mortgage Bonds, Series 2000D (insured rating of Baa1) The Ba3 rating on the refunded bonds reflects the credit quality of the investment agreement provider. At the time the refunded bonds were rated, the investment agreement and insured rating on the investments were Aaa. This is a list of outstanding bonds affected: * The Health and Educational Facilities Board of the City of Johnson City, Tennessee, Hospital Revenue Refunding and Improvement Bonds, Series 1991 (Johnson City Medical Center Hospital), dated August 1, 1991, term bonds due July 1, 2016, escrowed to maturity. CUSIP#: 478271 FE4. Amount refunded: $12,020,000. * The Health and Educational Facilities Board of the City of Johnson City, Tennessee, Hospital Revenue Refunding and Improvement Bonds, Series 1998C (Johnson City Medical Center Hospital), dated December 1, 1998, term bonds due July 1, 2025, escrowed to maturity. CUSIP#: 478271 FG9. Amount refunded: $59,565,000. * The Health and Educational Facilities Board of the City of Johnson City, Tennessee, Hospital Revenue Refunding and Improvement Bonds, Series 1998C (Johnson City Medical Center Hospital), dated December 1, 1998, term bonds due July 1, 2028, escrowed to maturity. CUSIP#: 478271DC0. Amount refunded: $75,105,000. JP MORGAN: Moody's Downgrades Ratings on 17 Tranches ---------------------------------------------------- Moody's Investors Service has downgraded the ratings of 17 tranches and confirmed the rating of 1 tranche from 2 RMBS transactions, issued by J.P. Morgan Mortgage Acquisition Trust. The collateral backing these deals primarily consists of first- lien, fixed and adjustable-rate subprime residential mortgages. Issuer: J.P. Morgan Mortgage Acquisition Corp. 2006-CW1 -- Cl. A-1A, Downgraded to Aa3 (sf); previously on Jan 13, 2010 Aaa (sf) Placed Under Review for Possible Downgrade -- Cl. A-1B, Downgraded to B1 (sf); previously on Jan 13, 2010 A2 (sf) Placed Under Review for Possible Downgrade -- Cl. A-4, Downgraded to Ba3 (sf); previously on Jan 13, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade -- Cl. A-5, Downgraded to Caa1 (sf); previously on Jan 13, 2010 Ba2 (sf) Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to C (sf); previously on Jan 13, 2010 B1 (sf) Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to C (sf); previously on Jan 13, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade Issuer: J.P. Morgan Mortgage Acquisition Trust 2006-CW2 -- Cl. AF-2, Downgraded to Ba1 (sf); previously on Jan 13, 2010 A2 (sf) Placed Under Review for Possible Downgrade -- Cl. AF-3, Downgraded to Caa3 (sf); previously on Jan 13, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. AF-4, Downgraded to Ca (sf); previously on Jan 13, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. AF-5, Downgraded to Ca (sf); previously on Jan 13, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. AF-6, Downgraded to Ca (sf); previously on Jan 13, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. MV-1, Downgraded to Ca (sf); previously on Jan 13, 2010 Ba3 (sf) Placed Under Review for Possible Downgrade -- Cl. MV-2, Downgraded to C (sf); previously on Jan 13, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. MV-3, Downgraded to C (sf); previously on Jan 13, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. AV-1, Downgraded to B1 (sf); previously on Jan 13, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade -- Cl. AV-3, Confirmed at Aaa (sf); previously on Jan 13, 2010 Aaa (sf) Placed Under Review for Possible Downgrade -- Cl. AV-4, Downgraded to B1 (sf); previously on Jan 13, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade -- Cl. AV-5, Downgraded to Caa2 (sf); previously on Jan 13, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade Ratings Rationale The actions are a result of the continued performance deterioration in Subprime pools in conjunction with home price and unemployment conditions that remain under duress. The actions reflect Moody's updated loss expectations on subprime pools issued from 2005 to 2007. To assess the rating implications of the updated loss levels on subprime RMBS, each individual pool was run through a variety of scenarios in the Structured Finance Workstation(R), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to small increments in losses on the underlying mortgage pool is taken into consideration when assigning ratings. The primary source of assumption uncertainty is the current macroeconomic environment, in which unemployment remains at high levels, and weakness persists in the housing market. Moody's notes an increasing potential for a double-dip recession, which could cause a further 20% decline in home prices (versus its baseline assumption of roughly 5% further decline). Overall, Moody's assumes a further 5% decline in home prices with stabilization in early 2011, accompanied by continued stress in national employment levels through that timeframe. Moody's Investors Service received and took into account one or more third party due diligence reports on the underlying assets or financial instruments in this transaction and the due diligence reports had a neutral impact on the rating. JP MORGAN: Moody's Reviews Ratings on Nine 2003-LN1 Certificates ---------------------------------------------------------------- Moody's Investors Service placed nine classes of JP Morgan Chase Commercial Mortgage Securities Corp., Commercial Mortgage Pass- Through Certificates, Series 2003-LN1 on review for possible downgrade: -- Cl. F, A3 (sf) Placed Under Review for Possible Downgrade; previously on July 26, 2007 Upgraded to A3 (sf) -- Cl. G, Baa2 (sf) Placed Under Review for Possible Downgrade; previously on Oct. 9, 2003 Definitive Rating Assigned Baa2 (sf) -- Cl. H, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Oct. 9, 2003 Definitive Rating Assigned Baa3 (sf) -- Cl. J, Ba1 (sf) Placed Under Review for Possible Downgrade; previously on Oct. 9, 2003 Definitive Rating Assigned Ba1 (sf) -- Cl. K, Ba2 (sf) Placed Under Review for Possible Downgrade; previously on Oct. 9, 2003 Definitive Rating Assigned Ba2 (sf) -- Cl. L, Ba3 (sf) Placed Under Review for Possible Downgrade; previously on Oct. 9, 2003 Definitive Rating Assigned Ba3 (sf) -- Cl. M, B1 (sf) Placed Under Review for Possible Downgrade; previously on Oct. 9, 2003 Definitive Rating Assigned B1 (sf) -- Cl. N, B2 (sf) Placed Under Review for Possible Downgrade; previously on Oct. 9, 2003 Definitive Rating Assigned B2 (sf) -- Cl. P, B3 (sf) Placed Under Review for Possible Downgrade; previously on Oct. 9, 2003 Definitive Rating Assigned B3 (sf) The classes were placed on review for possible downgrade due to higher expected losses for the pool resulting from realized and anticipated losses from specially serviced and troubled loans. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated July 26, 2007. Please see the ratings tab on the issuer / entity page on moodys.com for the last rating action and the ratings history. Deal And Performance Summary As of the October 15, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 21.8% to $983 million from $1.3 billion at securitization. The Certificates are collateralized by 165 mortgage loans ranging in size from less than 1% to 10% of the pool, with the top ten loans representing 26% of the pool. Twenty-one loans, representing 17% of the pool have defeased and collateralized with U.S. Government securities. Defeasance at last was represented by 18 loans, or 14% of the pool. Forty-one loans, representing 25% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Three loans have been liquidated from the pool since securitization resulting in a $23.3 million aggregate loss. Currently two loans, representing 0.4% of the pool, are in special servicing. The master servicer has recognized an aggregate $2.6 million appraisal reduction for two specially serviced loans. Moody's review will focus on potential losses from specially serviced and troubled loans and the performance of the overall pool. JP MORGAN: Moody's Reviews Ratings on 15 2004-LN2 Certificates -------------------------------------------------------------- Moody's Investors Service placed 15 classes of J.P. Morgan Chase Commercial Mortgage Securities Corp., Commercial Mortgage Pass- Through Certificates, Series 2004-LN2, on review for possible downgrade: -- Cl. A-2, Aaa (sf) Placed Under Review for Possible Downgrade; previously on Aug. 23, 2004 Definitive Rating Assigned Aaa (sf) -- Cl. A-1A, Aaa (sf) Placed Under Review for Possible Downgrade; previously on Aug. 23, 2004 Definitive Rating Assigned Aaa (sf) -- Cl. B, Aa2 (sf) Placed Under Review for Possible Downgrade; previously on Aug. 23, 2004 Definitive Rating Assigned Aa2 (sf) -- Cl. C, Aa3 (sf) Placed Under Review for Possible Downgrade; previously on Aug. 23, 2004 Definitive Rating Assigned Aa3 (sf) -- Cl. D, A2 (sf) Placed Under Review for Possible Downgrade; previously on Aug. 23, 2004 Definitive Rating Assigned A2 (sf) -- Cl. E, A3 (sf) Placed Under Review for Possible Downgrade; previously on Aug. 23, 2004 Definitive Rating Assigned A3 (sf) -- Cl. F, Baa1 (sf) Placed Under Review for Possible Downgrade; previously on Aug. 23, 2004 Definitive Rating Assigned Baa1 (sf) -- Cl. G, Ba1 (sf) Placed Under Review for Possible Downgrade; previously on Jan. 8, 2009 Downgraded to Ba1 (sf) -- Cl. H, Ba2 (sf) Placed Under Review for Possible Downgrade; previously on Jan. 8, 2009 Downgraded to Ba2 (sf) -- Cl. J, B1 (sf) Placed Under Review for Possible Downgrade; previously on Jan. 8, 2009 Downgraded to B1 (sf) -- Cl. K, B2 (sf) Placed Under Review for Possible Downgrade; previously on Jan. 8, 2009 Downgraded to B2 (sf) -- Cl. L, B3 (sf) Placed Under Review for Possible Downgrade; previously on Jan. 8, 2009 Downgraded to B3 (sf) -- Cl. M, Caa1 (sf) Placed Under Review for Possible Downgrade; previously on Jan. 8, 2009 Downgraded to Caa1 (sf) -- Cl. N, Caa2 (sf) Placed Under Review for Possible Downgrade; previously on Jan. 8, 2009 Downgraded to Caa2 (sf) -- Cl. P, Caa3 (sf) Placed Under Review for Possible Downgrade; previously on Jan. 8, 2009 Downgraded to Caa3 (sf) The classes were placed on review for possible downgrade due to higher expected losses for the pool resulting from realized and anticipated losses from specially serviced and troubled loans. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated January 8, 2009. Deal And Performance Summary As of the October 15, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 19% to $1.01 billion from $1.25 billion at securitization. The Certificates are collateralized by 156 mortgage loans ranging in size from less than 1% to 7% of the pool. Forty loans, representing 31% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Eight loans have been liquidated from the trust since securitization, resulting in a $11.5 million loss (65% loss severity). Currently 14 loans, representing 13% of the pool, are in special servicing. The largest specially serviced loan is the Countryside Apartments loan ($22.7 million -- 2.2%), which was transferred to special servicing in January 2010. The master servicer has recognized an aggregate $26.7 million appraisal reduction for eight of the specially serviced loans. Moody's review will focus on potential losses from specially serviced and troubled loans and the performance of the overall pool. JP MORGAN: Moody's Reviews Ratings on 15 2005-CIBC12 Certs. ----------------------------------------------------------- Moody's Investors Service placed 15 classes of J.P. Morgan Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2005-CIBC12 on review for possible downgrade: -- Cl. A-M, Aaa (sf) Placed Under Review for Possible Downgrade; previously on July 29, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. A-J, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on July 16, 2009 Downgraded to Aa1 (sf) -- Cl. B, Aa3 (sf) Placed Under Review for Possible Downgrade; previously on July 16, 2009 Downgraded to Aa3 (sf) -- Cl. C, A1 (sf) Placed Under Review for Possible Downgrade; previously on July 16, 2009 Downgraded to A1 (sf) -- Cl. D, A3 (sf) Placed Under Review for Possible Downgrade; previously on July 16, 2009 Downgraded to A3 (sf) -- Cl. E, Baa1 (sf) Placed Under Review for Possible Downgrade; previously on July 16, 2009 Downgraded to Baa1 (sf) -- Cl. F, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on July 16, 2009 Downgraded to Baa3 (sf) -- Cl. G, Ba2 (sf) Placed Under Review for Possible Downgrade; previously on July 16, 2009 Downgraded to Ba2 (sf) -- Cl. H, Ba3 (sf) Placed Under Review for Possible Downgrade; previously on July 16, 2009 Downgraded to Ba3 (sf) -- Cl. J, B1 (sf) Placed Under Review for Possible Downgrade; previously on July 16, 2009 Downgraded to B1 (sf) -- Cl. K, B2 (sf) Placed Under Review for Possible Downgrade; previously on July 16, 2009 Downgraded to B2 (sf) -- Cl. L, Caa1 (sf) Placed Under Review for Possible Downgrade; previously on July 16, 2009 Downgraded to Caa1 (sf) -- Cl. M, Caa2 (sf) Placed Under Review for Possible Downgrade; previously on July 16, 2009 Downgraded to Caa2 (sf) -- Cl. N, Caa3 (sf) Placed Under Review for Possible Downgrade; previously on July 16, 2009 Downgraded to Caa3 (sf) -- Cl. P, Caa3 (sf) Placed Under Review for Possible Downgrade; previously on July 16, 2009 Downgraded to Caa3 (sf) The classes were placed on review due to higher expected losses for the pool resulting from actual and anticipated losses from specially serviced and troubled loans. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated July 16, 2009. Deal And Performance Summary As of the October 12, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 10% to $2.00 billion from $2.22 billion at securitization. The Certificates are collateralized by 185 mortgage loans ranging in size from less than 1% to 5% of the pool, with the top ten loans representing 26% of the pool. Thirty-three loans, representing 13% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council (formerly the Commercial Mortgage Securities Association) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Seven loans have been liquidated from the pool, resulting in an aggregate realized loss of $21.5 million (45% loss severity overall). Twenty-five loans, representing 15% of the pool, are currently in special servicing. The specially serviced loans are secured by a mix of multifamily, office, retail, industrial and mixed use property types. The servicer has recognized appraisal reductions totaling $82.7 million from 18 of the specially serviced loans. Moody's review will focus on potential losses from specially serviced and troubled loans and the performance of the overall pool. JP MORGAN: Moody's Reviews Ratings on 18 2005-LDP2 Certificates --------------------------------------------------------------- Moody's Investors Service placed 18 classes of J.P. Morgan Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2005-LDP2, on review for possible downgrade: -- Cl. A-M, Aaa (sf) Placed Under Review for Possible Downgrade; previously on July 5, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. A-MFL, Aaa (sf) Placed Under Review for Possible Downgrade; previously on July 5, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. A-J, Aaa (sf) Placed Under Review for Possible Downgrade; previously on July 5, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. B, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on July 5, 2005 Definitive Rating Assigned Aa1 (sf) -- Cl. C, Aa2 (sf) Placed Under Review for Possible Downgrade; previously on July 5, 2005 Definitive Rating Assigned Aa2 (sf) -- Cl. D, Aa3 (sf) Placed Under Review for Possible Downgrade; previously on July 5, 2005 Definitive Rating Assigned Aa3 (sf) -- Cl. E, A1 (sf) Placed Under Review for Possible Downgrade; previously on July 5, 2005 Definitive Rating Assigned A1 (sf) -- Cl. F, A2 (sf) Placed Under Review for Possible Downgrade; previously on July 5, 2005 Definitive Rating Assigned A2 (sf) -- Cl. G, A3 (sf) Placed Under Review for Possible Downgrade; previously on July 5, 2005 Definitive Rating Assigned A3 (sf) -- Cl. H, Baa1 (sf) Placed Under Review for Possible Downgrade; previously on July 5, 2005 Definitive Rating Assigned Baa1 (sf) -- Cl. J, Ba1 (sf) Placed Under Review for Possible Downgrade; previously on June 5, 2009 Downgraded to Ba1 (sf) -- Cl. K, Ba3 (sf) Placed Under Review for Possible Downgrade; previously on June 5, 2009 Downgraded to Ba3 (sf) -- Cl. L, B2 (sf) Placed Under Review for Possible Downgrade; previously on June 5, 2009 Downgraded to B2 (sf) -- Cl. M, B3 (sf) Placed Under Review for Possible Downgrade; previously on June 5, 2009 Downgraded to B3 (sf) -- Cl. N, Caa1 (sf) Placed Under Review for Possible Downgrade; previously on June 5, 2009 Downgraded to Caa1 (sf) -- Cl. O, Caa2 (sf) Placed Under Review for Possible Downgrade; previously on June 5, 2009 Downgraded to Caa2 (sf) -- Cl. P, Caa3 (sf) Placed Under Review for Possible Downgrade; previously on June 5, 2009 Downgraded to Caa3 (sf) -- Cl. Q, Caa3 (sf) Placed Under Review for Possible Downgrade; previously on June 5, 2009 Downgraded to Caa3 (sf) The classes were placed on review for possible downgrade due to higher expected losses for the pool resulting from realized and anticipated losses from specially serviced and troubled loans. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated February 25, 2010. Deal And Performance Summary As of the October 15, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 14% to $2.57 billion from $2.98 billion at securitization. The Certificates are collateralized by 268 mortgage loans ranging in size from less than 1% to 5% of the pool. Seventy loans, representing 21% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Fourteen loans have been liquidated from the trust since securitization, resulting in a $25.3 million loss (37% loss severity). Currently 25 loans, representing 13% of the pool, are in special servicing. The largest specially serviced loan is the Cross Creek Crossing Center loan ($45.8 million -- 1.8%), which was transferred to special servicing in January 2010. The master servicer has recognized an appraisal reduction of $32.6 million for this loan and an aggregate $78.2 million appraisal reduction for nine of the specially serviced loans. Based on the most recent remittance statement, Classes K through Q have cumulative interest shortfalls totaling $2.6 million. Moody's anticipates that the pool will continue to experience interest shortfalls because of the high exposure to specially serviced loans. Interest shortfalls are caused by special servicing fees, including workout and liquidation fees, appraisal subordinate entitlement reductions and extraordinary trust expenses. Moody's review will focus on potential losses from specially serviced and troubled loans and the performance of the overall pool. JP MORGAN: Moody's Reviews Ratings on 2006-CIBC15 Certificates -------------------------------------------------------------- Moody's Investors Service placed 15 classes of J.P. Morgan Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2006-CIBC15 on review for possible downgrade: -- Cl. A-M, Aaa (sf) Placed Under Review for Possible Downgrade; previously on July 12, 2006 Definitive Rating Assigned Aaa (sf) -- Cl. A-J, A2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 12, 2009 Downgraded to A2 (sf) -- Cl. B, Baa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 12, 2009 Downgraded to Baa1 (sf) -- Cl. C, Baa2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 12, 2009 Downgraded to Baa2 (sf) -- Cl. D, Ba1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 12, 2009 Downgraded to Ba1 (sf) -- Cl. E, Ba2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 12, 2009 Downgraded to Ba2 (sf) -- Cl. F, B1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 12, 2009 Downgraded to B1 (sf) -- Cl. G, B2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 12, 2009 Downgraded to B2 (sf) -- Cl. H, B3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 12, 2009 Downgraded to B3 (sf) -- Cl. J, Caa2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 12, 2009 Downgraded to Caa2 (sf) -- Cl. K, Caa2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 12, 2009 Downgraded to Caa2 (sf) -- Cl. L, Caa3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 12, 2009 Downgraded to Caa3 (sf) -- Cl. M, Caa3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 12, 2009 Downgraded to Caa3 (sf) -- Cl. N, Ca (sf) Placed Under Review for Possible Downgrade; previously on Feb. 12, 2009 Downgraded to Ca (sf) -- Cl. P, Ca (sf) Placed Under Review for Possible Downgrade; previously on Feb. 12, 2009 Downgraded to Ca (sf) The classes were placed on review due to higher expected losses for the pool resulting from actual and anticipated losses from specially serviced and troubled loans. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated February 12, 2009. Deal And Performance Summary As of the October 12, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 4% to $2.03 billion from $2.12 billion at securitization. The Certificates are collateralized by 121 mortgage loans ranging in size from less than 1% to 15% of the pool, with the top ten loans representing 43% of the pool. Thirty-nine loans, representing 19% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council (formerly the Commercial Mortgage Securities Association) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. One loan has been liquidated from the pool, resulting in a realized loss of $14.4 million (98% loss severity). Nine loans, representing 16% of the pool, are currently in special servicing. The specially serviced loans are secured by a mix of multifamily, office, retail and industrial property types. The servicer has recognized appraisal reductions totaling $111.3 million from eight of the specially serviced loans. Moody's review will focus on potential losses from specially serviced and troubled loans and the performance of the overall pool. JP MORGAN: Moody's Reviews Ratings on 15 2006-CIBC17 Certs. ----------------------------------------------------------- Moody's Investors Service placed 15 classes of J.P. Morgan Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2006-CIBC17 on review for possible downgrade: -- Cl. A-M, Aaa (sf) Placed Under Review for Possible Downgrade; previously on Feb. 20, 2007 Definitive Rating Assigned Aaa (sf) -- Cl. A-J, Aa3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Aa3 (sf) -- Cl. B, A2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to A2 (sf) -- Cl. C, A3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to A3 (sf) -- Cl. D, Baa2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Baa2 (sf) -- Cl. E, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Baa3 (sf) -- Cl. F, Ba2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Ba2 (sf) -- Cl. G, B1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to B1 (sf) -- Cl. H, B3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to B3 (sf) -- Cl. J, Caa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Caa1 (sf) -- Cl. K, Caa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Caa1 (sf) -- Cl. L, Caa2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Caa2 (sf) -- Cl. M, Caa2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Caa2 (sf) -- Cl. N, Caa3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Caa3 (sf) -- Cl. P, Caa3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Caa3 (sf) The classes were placed on review due to higher expected losses for the pool resulting from actual and anticipated losses from specially serviced and troubled loans. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated February 11, 2009. Deal And Performance Summary As of the October 12, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 2% to $2.50 billion from $2.54 billion at securitization. The Certificates are collateralized by 150 mortgage loans ranging in size from less than 1% to 11% of the pool, with the top ten loans representing 46% of the pool. Thirty-eight loans, representing 28% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC; formerly the Commercial Mortgage Securities Association) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact deal performance. One loan has been liquidated from the pool, resulting in a realized loss of $1.3 million (26% loss severity). Fourteen loans, representing 9% of the pool, are currently in special servicing. The specially serviced loans are secured by a mix of multifamily, office, retail and hotel property types. The servicer has recognized an aggregate $69.1 million appraisal reduction for 12 of the specially serviced loans. Moody's review will focus on potential losses from specially serviced and troubled loans and the performance of the overall pool. KATONAH IV: S&P Raises Ratings on Various Classes of Notes ---------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A, B, C, D-1, and D-2 notes from Katonah IV Ltd., a collateralized loan obligation transaction managed by Sankaty Advisors LLC. At the same time, S&P removed its rating on the class A notes from CreditWatch with positive implications. The upgrades reflect the improved performance S&P has observed in the underlying portfolio since January 2010 when S&P lowered the ratings on all the notes following a review of the transaction under S&P's updated criteria for rating corporate collateralized debt obligations. According to the Dec. 18, 2009, trustee report, the transaction was holding approximately $26.4 million in defaulted obligations and $55.8 million in underlying obligors with a rating, either by Standard & Poor's or another rating agency, in the 'CCC+' or lower range. As of the Sept. 12, 2010, trustee report, those values were significantly lower at $8.9 million and $40.3 million, respectively. With the strengthening of the corporate market, many of the defaulted obligors were sold at prices much higher than the recovery values assigned based on the transaction documents. To date, the Katonah IV Ltd. transaction has paid down the class A notes to approximately 45% of its original outstanding balance, including $59.16 million since the beginning of the year. The reductions in the defaulted and 'CCC+' or lower assets, and the $59.16 million paydown on the class A notes has reduced the overall credit risk for the remaining outstanding notes. Moreover, S&P based its previous rating actions on the class C, D- 1, and D-2 notes on the largest-obligor default test. The supplemental test did not drive its current actions on these classes. Standard & Poor's will continue to review whether, in its view, the ratings currently assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as S&P deem necessary. Rating Actions Katonah IV Ltd. Ratings ------- Class To From ----- -- ---- A AAA(sf) AA+(sf)/Watch Pos B AA-(sf) BBB+(sf) C BBB(sf) B+(sf) D-1 BB+(sf) CCC+(sf) D-2 BB+(sf) CCC+(sf) KIMBERLITE CDO: Fitch Affirms Ratings on Eight Classes of Notes --------------------------------------------------------------- Fitch Ratings has affirmed eight classes of notes issued by Kimberlite CDO I Ltd./LLC. The notes are affirmed at 'C' as a result of continued negative credit migration within the reference portfolio. Since Fitch's last rating action in December 2009, approximately 34.5% of the portfolio has been downgraded, and 6% is currently on Rating Watch Negative. Approximately 93.3% of the portfolio has a Fitch derived rating below investment grade and 55.9% has a rating in the 'CCC' rating category or lower, compared to 89.3% and 26.8%, respectively, at last review. Defaulted securities, as defined in the transaction's governing documents, now comprise 13.8% of the portfolio, compared to 4.7% at last review. The transaction entered an Event of Default on Nov. 13, 2009 when the ratio of the net outstanding portfolio balance over the sum of the super senior notional amount and the outstanding amount of the class A notes failed the 100% threshold. The test failure was due to downgrades to the underlying collateral and the application of the documented overcollateralization haircuts to assets rated 'BB-' and below. This transaction was analyzed under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using the Portfolio Credit Model for projecting future default levels for the underlying portfolio. Based on this analysis, all PCM rating loss rates exceed the credit enhancement available to all classes. For all classes, Fitch compared the respective credit enhancement levels to the amount of distressed assets ('CC' and below). Given the high probability of default of these assets and the expected low recoveries upon default, all classes have been affirmed at 'C'. While the classes A and B notes are receiving timely interest distributions, the notional balance of the super senior notes relative to the performing portion of the portfolio makes it unlikely for the class A notes to receive any principal repayment. The class C through H notes are receiving interest paid in kind whereby the principal amount of the notes is written up by the amount of interest due. Fitch does not expect these classes to receive any future payments. Kimberlite CDO I is a hybrid commercial real estate collateralized debt obligation that closed on Sept. 28, 2006. Kimberlite CDO I combines the use of synthetic and cash assets, as well as unfunded and funded liabilities. The unfunded super senior class is senior to the funded liabilities and is not rated by Fitch. Fitch has affirmed these classes: -- $79,375,000 Class A at 'Csf'; -- $40,125,000 Class B at 'Csf'; -- $46,583,518 Class C at 'Csf'; -- $10,317,264 Class D at 'Csf'; -- $9,950,174 Class E at 'Csf'; -- $11,935,579 Class F at 'Csf'; -- $12,432,646 Class G at 'Csf'; -- $23,113,287 Class H at 'Csf'. KINGSLAND II: Moody's Upgrades Ratings on Three Classes of Notes ---------------------------------------------------------------- Moody's Investors Service announced that it has upgraded the ratings of these notes issued by Kingsland II, Ltd: -- US$8,000,000 Class A-2 Senior Secured Floating Rate Notes due 2021, Upgraded to A3 (sf); previously on October 1, 2009 Downgraded to Baa1 (sf); -- US$29,200,000 Class B Senior Secured Deferrable Floating Rate Notes due 2021, Upgraded to Ba1 (sf); previously on October 1, 2009 Downgraded to Ba2 (sf); -- US$27,525,000 Class C Senior Secured Deferrable Floating Rate Notes due 2021, Upgraded to Caa1 (sf); previously on October 1, 2009 Downgraded to Caa2 (sf). Ratings Rationale According to Moody's, the rating actions taken on the notes result primarily from improvement in the credit quality of the underlying portfolio and an increase in the overcollateralization ratios of the notes since the last rating action in October 2009. In Moody's view, these positive developments coincide with reinvestment of principal proceeds (including higher than previously anticipated recoveries realized on defaulted securities) into substitute assets with higher par amounts and/or higher ratings. Improvement in the credit quality is observed through an improvement in the average credit rating (as measured by the weighted average rating factor) and a decrease in the proportion of securities from issuers rated Caa1 and below. In particular, as of the latest trustee report dated October 11, 2010, the weighted average rating factor is currently 2342 compared to 2679 in the September 2009 report, and securities rated Caa1 or lower make up approximately 6.45% of the underlying portfolio versus 11.44% in September 2009. Additionally, defaulted securities total about $6.5 million of the underlying portfolio compared to $20.8 million in September 2009. The overcollateralization ratios of the rated notes have also improved since the last rating action. The Class A, Class B, Class C and Class D overcollateralization ratios are reported at 126.24%, 115.78%, 107.40% and 105.73%, respectively, versus September 2009 levels of 120.59%, 110.61%, 102.60% and 101.01%, respectively, and all related overcollateralization tests are currently in compliance. Due to the impact of revised and updated key assumptions referenced in "Moody's Approach to Rating Collateralized Loan Obligations" and "Annual Sector Review (2009): Global CLOs," key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. In its base case, Moody's analyzed the underlying collateral pool to have a performing par balance, including principal proceeds, of $406 million, defaulted par of $6.7 million, weighted average default probability of 29.49% (implying a WARF of 3723), a weighted average recovery rate upon default of 41.07%, and a diversity score of 45. These default and recovery properties of the collateral pool are incorporated in cash flow model analysis where they are subject to stresses as a function of the target rating of each CLO liability being reviewed. The default probability is derived from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The average recovery rate to be realized on future defaults is based primarily on the seniority of the assets in the collateral pool. In each case, historical and market performance trends, and collateral manager latitude for trading the collateral are also factors. Kingsland II, Ltd., issued in April 2006, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. Moody's Investors Service did not receive or take into account a third party due diligence report on the underlying assets or financial instruments related to the monitoring of this transaction in the past 6 months. Moody's modeled the transaction using the Binomial Expansion Technique, as described in Section 2.3.2.1 of the "Moody's Approach to Rating Collateralized Loan Obligations" rating methodology published in August 2009. In addition to the base case analysis described above, Moody's also performed a number of sensitivity analyses to test the impact on all rated notes, including these: 1. Various default probabilities to capture potential defaults in the underlying portfolio. 2. A range of recovery rate assumptions for all assets to capture variability in recovery rates. A summary of the impact of different default probabilities (expressed in terms of WARF levels) on all rated notes (shown in terms of the number of notches' difference versus the current model output, whereby a positive difference corresponds to lower expected losses), assuming that all other factors are held equal: Moody's Adjusted WARF -- 20% (2978) -- Class A1: +2 -- Class A2: +2 -- Class B: +2 -- Class C: +3 -- Class D: +1 Moody's Adjusted WARF + 20% (4468) -- Class A1: -1 -- Class A2: -2 -- Class B: -2 -- Class C: -3 -- Class D: -1 A summary of the impact of different recovery rate levels on all rated notes (shown in terms of the number of notches' difference versus the current model output, whereby a positive difference corresponds to lower expected losses), assuming that all other factors are held equal: Moody's Adjusted WARR + 2% (43.07%) -- Class A1: +1 -- Class A2: 0 -- Class B: 0 -- Class C: 0 -- Class D: 0 Moody's Adjusted WARR - 2% (39.07%) -- Class A1: 0 -- Class A2: -1 -- Class B: -1 -- Class C: -1 -- Class D: 0 Moody's notes that this transaction is subject to a high level of macroeconomic uncertainty, as evidenced by 1) uncertainties of credit conditions in the general economy and 2) the large concentration of speculative-grade debt maturing between 2012 and 2014 which may create challenges for issuers to refinance. CDO notes' performance may also be impacted by 1) the managers' investment strategies and behavior, 2) divergence in legal interpretation of CDO documentation by different transactional parties due to embedded ambiguities and 3) potential additional expected loss associated with swap agreements in CDOs as a result of recent U.S. bankruptcy court ruling on Lehman swap termination in the Dante case. Sources of additional performance uncertainties are described below: 1) Weighted average life: The notes' ratings are sensitive to the weighted average life assumption of the portfolio, which may be extended due to the manager's decision to reinvest into new issue loans or other loans with longer maturities and/or participate in amend-to-extend offerings. Moody's tested for a possible extension of the actual weighted average life in its analysis. 2) Recovery of defaulted assets: Market value fluctuations in defaulted assets reported by the trustee and those assumed to be defaulted by Moody's may create volatility in the deal's overcollateralization levels. Further, the timing of recoveries and the manager's decision to work out versus selling defaulted assets create additional uncertainties. Moody's analyzed defaulted recoveries assuming the lower of the market price and the recovery rate in order to account for potential volatility in market prices. 3) Other collateral quality metrics: The deal is allowed to reinvest and the manager has the ability to deteriorate the collateral quality metrics' existing cushions against the covenant levels. Moody's analyzed the impact of assuming worse of reported and covenanted values for weighted average rating factor, weighted average spread, weighted average coupon, and diversity score. Additionally, in light of the large positive difference between the reported and covenant levels for the weighted average rating factor, Moody's considered the impact of assuming the actual Moody's calculated weighted average rating factor in its analysis. LB-UBS COMMERCIAL: Moody's Downgrades Ratings on 2002-C2 Certs. --------------------------------------------------------------- Moody's Investors Service downgraded the ratings of six classes and affirmed fourteen classes of LB-UBS Commercial Mortgage Trust 2002-C2, Commercial Mortgage Pass-Through Certificates, Series 2002-C2: -- Cl. A-3, Affirmed at Aaa (sf); previously on July 9, 2002 Definitive Rating Assigned Aaa (sf) -- Cl. A-4, Affirmed at Aaa (sf); previously on July 9, 2002 Definitive Rating Assigned Aaa (sf) -- Cl. X-CL, Affirmed at Aaa (sf); previously on July 9, 2002 Definitive Rating Assigned Aaa (sf) -- Cl. X-D, Affirmed at Aaa (sf); previously on July 9, 2002 Definitive Rating Assigned Aaa (sf) -- Cl. B, Affirmed Aaa (sf); previously on March 9, 2006 Upgraded to Aaa (sf) -- Cl. C, Affirmed Aaa (sf); previously on March 9, 2006 Upgraded to Aaa (sf) -- Cl. D, Affirmed Aaa (sf); previously on May 2, 2007 Upgraded to Aaa (sf) -- Cl. E, Affirmed Aaa (sf); previously on Nov. 8, 2007 Upgraded to Aaa (sf) -- Cl. F, Affirmed Aa3 (sf); previously on Nov. 8, 2007 Upgraded to Aa3 (sf) -- Cl. G, Affirmed A1 (sf); previously on Nov. 8, 2007 Upgraded to A1 (sf) -- Cl. H, Affirmed A2 (sf); previously on Nov. 8, 2007 Upgraded to A2 (sf) -- Cl. J, Affirmed Baa1 (sf); previously on Nov. 8, 2007 Upgraded to Baa1 (sf) -- Cl. K, Affirmed Baa3 (sf); previously on July 9, 2002 Definitive Rating Assigned Baa3 (sf) -- Cl. L, Affirmed Ba1 (sf); previously on July 9, 2002 Definitive Rating Assigned Ba1 (sf) -- Cl. M, Downgraded to Ba3 (sf); previously on Nov. 8, 2007 Upgraded to Ba2 (sf) -- Cl. N, Downgraded to B2 (sf); previously on Nov. 8, 2007 Upgraded to Ba3 (sf) -- Cl. P, Downgraded to B3 (sf); previously on Nov. 8, 2007 Upgraded to B1 (sf) -- Cl. Q, Downgraded to Caa2 (sf); previously on Nov. 8, 2007 Upgraded to B2 (sf) -- Cl. S, Downgraded to C (sf); previously on Nov. 8, 2007 Upgraded to B3 (sf) -- Cl. T, Downgraded to C (sf); previously on Nov. 8, 2007 Upgraded to Caa2 (sf) Ratings Rationale The downgrades are due to higher expected losses for the pool resulting from realized and anticipated losses from specially serviced and troubled loans. The affirmations are due to key parameters, including Moody's loan to value ratio, Moody's stressed debt service coverage ratio and the Herfindahl Index, remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. Moody's rating action reflects a cumulative base expected loss of 2.3% of the current balance. At last review, Moody's cumulative base expected loss was 1.2%. Moody's stressed scenario loss is 5.1% of the current balance. Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes. Moody's analysis reflects a forward-looking view of the likely range of collateral performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside an acceptable range of the key parameters may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated during the current review. Even so, deviation from the expected range will not necessarily result in a rating action. There may be mitigating or offsetting factors to an improvement or decline in collateral performance, such as increased subordination levels due to amortization and loan payoffs or a decline in subordination due to realized losses. Primary sources of assumption uncertainty are the current stressed macroeconomic environment and continuing weakness in the commercial real estate and lending markets. Moody's currently views the commercial real estate market as stressed with further performance declines expected in the industrial, office, and retail sectors. Hotel performance has begun to rebound, albeit off a very weak base. Multifamily has also begun to rebound reflecting an improved supply / demand relationship. The availability of debt capital is improving with terms returning towards market norms. Job growth and housing price stability will be necessary precursors to commercial real estate recovery. Overall, Moody's central global scenario remains "hook-shaped" for 2010 and 2011; Moody's expect overall a sluggish recovery in most of the world's largest economies, returning to trend growth rate with elevated fiscal deficits and persistent unemployment levels. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.50 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score , a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in Moody's analysis. Based on the model pooled credit enhancement levels at Aa2 and B2, the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade credit estimates is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit estimate of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the credit estimate level, is incorporated for loans with similar credit estimates in the same transaction. Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 11 compared to 14 at Moody's prior review. In cases where the Herf falls below 20, Moody's also employs the large loan/single borrower methodology. This methodology uses the excel-based Large Loan Model v 8.0 and then reconciles and weights the results from the two models in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan level proceeds derived from Moody's loan level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type, and sponsorship. These aggregated proceeds are then further adjusted for any pooling benefits associated with loan level diversity, other concentrations and correlations. Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated November 8, 2007. Moody's Investors Service did not receive or take into account a third party due diligence report on the underlying assets or financial instruments related to the monitoring of this transaction in the past six months. Deal Performance As of the October 17, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 31% to $830.0 million from $1.21 billion at securitization. The Certificates are collateralized by 76 mortgage loans ranging in size from less than 1% to 17% of the pool, with the top ten non- defeased loans representing 58% of the pool. The pool includes four loans with investment grade credit estimates, representing 40% of the pool. Eighteen loans, representing 19% of the pool, have defeased and are collateralized with U.S. Government securities. Nineteen loans, representing 25% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Seven loans have been liquidated from the pool, resulting in an aggregate realized loss of $4.1 million (8% loss severity overall). Four loans, representing 2.5% of the pool, are currently in special servicing. The master servicer has recognized an aggregate $8.5 million appraisal reduction for the specially serviced loans. Moody's has estimated an aggregate $10.4 million loss (50% expected loss on average) for the specially serviced loans. Moody's has assumed a high default probability for four poorly performing loans representing 1% of the pool and has estimated a $2.1 million loss (25% expected loss based on a 50% probability default) from these troubled loans. Moody's was provided with full year 2009 and partial year 2010 operating results for 94% and 69% of the pool, respectively. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 82% compared to 83% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 13% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.7%. Excluding specially serviced and troubled loans, Moody's actual and stressed DSCRs are 1.27X and 1.31X, respectively, compared to 1.5X and 1.36X at last review. Moody's actual DSCR is based on Moody's net cash flow and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. The largest loan with a credit estimate is the Dadeland Mall Loan ($153.6 million -- 18.5%), which is secured by the borrower's interest in a 1.4 million square foot super regional mall located in Miami, Florida. The property is the dominant mall in the region and is anchored by Macy's, Macy's Home Gallery & Kids, J.C. Penney, Nordstrom and Saks Fifth Avenue. The overall occupancy is 98% essentially the same as at last review and securitization. Performance has been very strong since securitization. The loan has amortized 6% since last review. Moody's current credit estimate and stressed DSCR are Aaa and 2.14X, respectively, compared to Aaa and 1.61X at last review. The second loan with a credit estimate is the Square One Mall Loan ($84.7 million -- 10.2%), which is secured by the borrower's interest in a 865,400 square foot regional mall located approximately 8 miles northeast of Boston in Saugus, Massachusetts. The property is anchored by Sears, Macy's, T.J.Maxx and Filene's Basement. The overall occupancy is 92% compared to 95% at last review. Performance has been stable. The loan has amortized 5% since last review. Moody's current credit estimate and stressed DSCR are Baa1 and 1.64X, respectively, compared to Baa1 and 1.54X at last review. The third loan with a credit estimate is the 250 Park Avenue Loan ($65.9 million -- 7.9%), which is secured by a 448,000 square foot Class A office building located in New York City. The property was 77% leased as of June 2010 compared to 95% at last review. The loan is on the servicer watchlist due to low occupancy. The loan has amortized 8% since last review. Moody's current credit estimate and stressed DSCR are Aaa and 1.86X, respectively, compared to Aaa and 1.91X at last review. The fourth loan with a credit estimate is the 21 Chelsea Loan ($31.3 million -- 3.8%), which is secured by a 209-unit multifamily complex located in New York City. The property is 98% leased compared to 100.0% at last review. Performance has been stable. The loan has amortized 5% since last review. Moody's current credit estimate and stressed DSCR are A1 and 1.64X, respectively, compared to A1 and 1.57X at last review. The top three conduit loans represent 12% of the pool balance. The largest loan is the 1750 Pennsylvania Avenue Loan ($45.2 million -- 5.5%), which is secured by a 259,000 square foot Class A office building located in Washington, D.C. The property is 96% leased compared to 98% at last review. The loan is on the servicer's watchlist due major upcoming lease rollovers. The property's net operating income has declined 14% since last review. Moody's LTV and stressed DSCR are 87% and 1.15X, respectively, compared to 80% and 1.24X at last review. The second largest loan is the Bank of America Tower Loan ($31.1 million -- 3.7%), which is secured by a 299,700 square foot office building located in St. Petersburg, Florida. The property is 82% leased, the same as at last review. Although occupancy has been stable, performance has declined since last review due to lower revenues. NOI has declined by 13% since last review. Moody's LTV and stressed DSCR are 99% and 1.04X, respectively, compared to 96% and 1.07X at last review. The third largest loan is the White Flint Plaza Loan ($25.2 million -- 3.0%), which is secured by a 194,975 square foot community shopping center located in Rockville, Maryland. The property is 83% leased compared to 97% at last review. Performance has declined due to lower occupancy and revenues. NOI has declined by 22% since last review. Moody's LTV and stressed DSCR are 92% and 1.17X, respectively, compared to 79% and 1.37X at last review. LCM I: S&P Corrects Press Release; Raises Ratings on Various Notes ------------------------------------------------------------------ Standard & Poor's Ratings Services reports that in the press release published Oct. 28, 2010, the manager of the transaction was misstated in the first paragraph. A corrected version is: S&P raised its ratings on the class B, C, D-1, and D-2 notes from LCM I Ltd. Partnership, a collateralized loan obligation transaction, which LCM Asset Management LLC manages. At the same time, S&P removed its ratings on the class D-1 and D-2 notes from CreditWatch with positive implications. S&P also affirmed its ratings on the class A-1 and A-2 notes. The upgrades reflect the improved performance S&P has observed in the underlying portfolio since January 2010, when S&P lowered its ratings on the D-1 and D-2 notes following a review of the transactions under S&P's updated criteria for rating corporate collateralized debt obligations published in September 2009. According to the Dec. 8, 2009, trustee report, the transaction was holding approximately $3.9 million in defaulted obligations and $10.7 million in underlying obligors with a rating, either by Standard & Poor's or another rating agency, in the 'CCC+' or lower range. As of Sept. 8, 2010, the transaction was holding $0 in defaulted obligations and $8.4 million in underlying obligors with ratings in the 'CCC+' or lower range. To date, the LCM I Ltd. Partnership transaction has paid down the class A-1 and A-2 notes to approximately 72% of their original outstanding balances, including $39.7 million since the beginning of the year. The reductions in the defaulted and 'CCC+' or lower assets, and the $39.7 million paydown on the class A-1 and A-2 notes has reduced the overall credit risk for the remaining outstanding notes. However, the class D-1 and D-2 notes pass the largest- obligor default test, one of the supplemental stress tests S&P introduced as part of its criteria update published in September 2009, at the 'B (sf)' rating category. S&P partially base its ratings on the class D-1 and D-2 notes on the application of the largest-obligor default test. Standard & Poor's will continue to review whether, in its view, the ratings currently assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as S&P deem necessary. Rating And Creditwatch Actions LCM I Ltd. Partnership Rating ------ Class To From ----- -- ---- B AA+ (sf) AA (sf) C AA (sf) A+ (sf) D-1 B+ (sf) CCC+ (sf)/Watch Pos D-2 B+ (sf) CCC+ (sf)/Watch Pos Ratings Affirmed LCM I Ltd. Partnership Class Rating ----- ------ A-1 AAA (sf) A-2 AAA (sf) LEHMAN BROTHERS: Moody's Confirms Ratings on 14 2006-C3 Certs. -------------------------------------------------------------- Moody's Investors Service confirmed the ratings of two classes, affirmed ten classes and downgraded 14 classes of Lehman Brothers- UBS Commercial Mortgage Inc., Commercial Pass-Through Certificates, Series 2006-C3: -- Cl. A-1, Affirmed at Aaa (sf); previously on April 13, 2006 Definitive Rating Assigned Aaa (sf) -- Cl. A-2, Affirmed at Aaa (sf); previously on April 13, 2006 Definitive Rating Assigned Aaa (sf) -- Cl. A-3, Affirmed at Aaa (sf); previously on April 13, 2006 Definitive Rating Assigned Aaa (sf) -- Cl. A-AB, Affirmed at Aaa (sf); previously on April 13, 2006 Definitive Rating Assigned Aaa (sf) -- Cl. A-4, Confirmed at Aaa (sf); previously on Sept. 29, 2010 Aaa (sf) Placed Under Review for Possible Downgrade -- Cl. A-1A, Confirmed at Aaa (sf); previously on Sept. 29, 2010 Aaa (sf) Placed Under Review for Possible Downgrade -- Cl. A-M, Downgraded to A1 (sf); previously on Sept. 29, 2010 Aaa (sf) Placed Under Review for Possible Downgrade -- Cl. A-J, Downgraded to Ba2 (sf); previously on Sept. 29, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade -- Cl. B, Downgraded to Ba3 (sf); previously on Sept. 29, 2010 A1 (sf) Placed Under Review for Possible Downgrade -- Cl. C, Downgraded to B1 (sf); previously on Sept. 29, 2010 A2 (sf) Placed Under Review for Possible Downgrade -- Cl. D, Downgraded to B3 (sf); previously on Sept. 29, 2010 A3 (sf) Placed Under Review for Possible Downgrade -- Cl. E, Downgraded to Caa1 (sf); previously on Sept. 29, 2010 Baa1 (sf) Placed Under Review for Possible Downgrade -- Cl. F, Downgraded to Caa2 (sf); previously on Sept. 29, 2010 Baa2 (sf) Placed Under Review for Possible Downgrade -- Cl. G, Downgraded to Ca (sf); previously on Sept. 29, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade -- Cl. H, Downgraded to C (sf); previously on Sept. 29, 2010 Ba3 (sf) Placed Under Review for Possible Downgrade -- Cl. J, Downgraded to C (sf); previously on Sept. 29, 2010 B2 (sf) Placed Under Review for Possible Downgrade -- Cl. K, Downgraded to C (sf); previously on Sept. 29, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. L, Downgraded to C (sf); previously on Sept. 29, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. M, Downgraded to C (sf); previously on Sept. 29, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. N, Downgraded to C (sf); previously on Sept. 29, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. FTH-1, Affirmed at Baa3 (sf); previously on Feb. 11, 2009 Downgraded to Baa3 (sf) -- Cl. FTH-2, Affirmed at Ba3 (sf); previously on Feb. 11, 2009 Downgraded to Ba3 (sf) -- Cl. FTH-3, Affirmed at B3 (sf); previously on Feb. 11, 2009 Downgraded to B3 (sf) -- Cl. FTH-4, Affirmed at Caa1 (sf); previously on Feb. 11, 2009 Downgraded to Caa1 (sf) -- Cl. X-CL, Affirmed at Aaa (sf); previously on April 13, 2006 Definitive Rating Assigned Aaa (sf) -- Cl. X-CP, Affirmed at Aaa (sf); previously on April 13, 2006 Definitive Rating Assigned Aaa (sf) Ratings Rationale The downgrades are due to higher expected losses for the pool resulting from realized and anticipated losses from specially serviced and troubled loans and concerns about refinance risk associated with loans approaching maturity in an adverse environment. Ten loans, representing 14% of the pool, mature within the next six months and have a Moody's stressed debt service coverage ratio less than 1.0X. The confirmations and affirmations are due to key parameters, including Moody's loan to value ratio, Moody's stressed DSCR and the Herfindahl Index , remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. On September 29, 2010, Moody's placed 16 classes on review for possible downgrade. This action concludes Moody's review. Moody's rating action reflects a cumulative base expected loss of 11.0% of the current balance. At last full review, Moody's cumulative base expected loss was 2.2%. Moody's stressed scenario loss is 23.9% of the current balance. Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes. Moody's analysis reflects a forward-looking view of the likely range of collateral performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside an acceptable range of the key parameters may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated during the current review. Even so, deviation from the expected range will not necessarily result in a rating action. There may be mitigating or offsetting factors to an improvement or decline in collateral performance, such as increased subordination levels due to amortization and loan payoffs or a decline in subordination due to realized losses. Primary sources of assumption uncertainty are the current stressed macroeconomic environment and continuing weakness in the commercial real estate and lending markets. Moody's currently views the commercial real estate market as stressed with further performance declines expected in the industrial, office, and retail sectors. Hotel performance has begun to rebound, albeit off a very weak base. Multifamily has also begun to rebound reflecting an improved supply / demand relationship. The availability of debt capital is improving with terms returning towards market norms. Job growth and housing price stability will be necessary precursors to commercial real estate recovery. Overall, Moody's central global scenario remains "hook-shaped" for 2010 and 2011; Moody's expect overall a sluggish recovery in most of the world's largest economies, returning to trend growth rate with elevated fiscal deficits and persistent unemployment levels. Moody's review incorporated the use of the Excel-based CMBS Conduit Model v 2.50 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score, a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in Moody's analysis. Based on the model pooled credit enhancement levels at Aa2 and B2, the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade credit estimates is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the underlying rating of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the underlying rating level, is incorporated for loans with similar credit estimates in the same transaction. Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated December 12, 2007. Moody's Investors Service did not receive or take into account a third party due diligence report on the underlying assets or financial instruments related to the monitoring of this transaction in the past six months. Deal Performance As of the October 18, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 4% to $1.68 billion from $1.74 billion at securitization. The Certificates are collateralized by 123 mortgage loans ranging in size from less than 1% to 9% of the pool, with the top ten loans representing 46% of the pool. The pool does not contain any defeased loans. Two loans, representing 9% of the pool, have investment grade credit estimates. Forty-eight loans, representing 23% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Three loans have been liquidated from the pool since securitization, resulting in an aggregate $14.8 million loss (75% loss severity on average). Currently 12 loans, representing 21% of the pool, are in special servicing. The largest specially serviced loan is the 200 South Wacker Drive Loan ($95.5 million -- 5.8% of the pool), which is secured by a 743,133 square foot office property located in Chicago, Illinois. The loan was transferred to special servicing in May 2010 due to imminent default is currently 30 days delinquent. A major tenant vacated the building in January 2010 and the property's cashflow is no longer sufficient to cover debt service and operating expenses. The remaining 11 specially serviced loans are secured by a mix of property types. Moody's has estimated an aggregate $134.6 million loss (38.6% expected loss on average). Moody's has assumed a high default probability for nine poorly performing loans representing 5% of the pool and has estimated a $12.5 million loss (15% expected loss based on a 30% probability default) from these troubled loans. Moody's was provided with full year 2009 and partial year 2010 operating results for 99% and 68% of the performing pool, respectively. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 104% compared to 110% at last full review. Moody's net cash flow reflects a weighted average haircut of 13% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 8.9%. Excluding specially serviced and troubled loans, Moody's actual and stressed DSCRs are 1.30X and 0.97X, respectively, compared to 1.18X and 0.91X at last full review. Moody's actual DSCR is based on Moody's net cash flow and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 30 compared to 36 at Moody's prior full review. The largest loan with a credit estimate is the Station Place II Loan ($100.7 million -- 6.2%), which is secured by a built-to-suit office building built in 2005 with a total of 362,000 square feet located in the Capitol Hill submarket of Washington, DC. The property is 100% leased to the U.S. Securities and Exchange Commission through January 2020. The loan matures in February 2016. Moody's current credit estimate and stressed DSCR are A3 and 1.04X, respectively, compared to A3 and 1.00X at Moody's last full review. The second largest loan with a credit estimate is the 623 Fifth Avenue Loan ($54.5 million -- 3.3%), which is secured by a 351,000 square foot Class A office building located in New York City. The loan had a 36-month interest only period and matures in June 2015. The property is also encumbered by a $37.4 million subordinate non-pooled B-Note which is held in the trust and secures rake classes FTH-1, FTH-2, FTH-3 and FTH-4. Moody's current credit estimate and stressed DSCR are A3 and 1.97X, respectively, compared to A3 and 1.73X at Moody's last full review. Based on the stable performance of the property, the ratings of the rake classes are affirmed. The top three performing conduit loans represent 16% of the pool balance. The largest loan is the 888 Seventh Avenue Loan ($145.9 million -- 8.9%), which is a pari-passu interest in a $291.8 million first mortgage loan. The property is also encumbered by a $26.8 million subordinate note. The loan is secured by a 908,000 square foot office building located in New York City. The property was 96% leased as of July 2010 compared to 99% at last review. Despite a slight drop in occupancy, the property has performed better than at last full review due to increased base rental income. The loan is interest only for the entire term and matures in January 2016. Moody's LTV and stressed DSCR are 92% and 1.00X, respectively, compared to 121% and 0.74X at Moody's last full review. The second largest loan is the Marriott Hotel - Orlando Airport Loan ($59.0 million -- 3.6%), which is secured by a 486-room full service hotel built in 1983 and located in Orlando, Florida. Property performance has declined since last review as the hotel has been impacted by the downturn in the tourism industry. The loan has three months remaining of a 60-month interest only period and will amortize on a 360-month schedule maturing in January 2016. Moody's LTV and stressed DSCR are 122% and 0.96X, respectively, compared to 108% and 1.08X at Moody's last full review. The third largest loan is the 1 Allen Bradley Drive Loan ($52.7 million -- 3.2%), which is secured by a 462,000 square foot single-tenant office building located in Mayfield Heights, Ohio. The property serves the headquarters facility for a division of Rockwell Automation, Inc. (Moody's senior unsecured rating A3, stable outlook) and is leased through November 2020. The loan is interest-only for its entire ten-year term maturing in March 2016. Moody's LTV and stressed DSCR are 125% and 0.78X, respectively, compared to 119% and 0.82X at Moody's last full review. LNR CDO: Fitch Affirms Ratings on 12 Classes of Notes ----------------------------------------------------- Fitch Ratings has affirmed 12 classes of notes issued by LNR CDO 2007-1 Ltd./LLC. The notes are affirmed at 'C' and 'D' as a result of continued negative credit migration within the underlying collateral. A complete list of rating actions follows at the end of this release. Since Fitch's last rating action in December 2009, approximately 57.9% of the portfolio has been downgraded, and 18.1% is currently on Rating Watch Negative. The entire collateral pool is rated below investment grade and 89.3% has a rating in the 'CCC' rating category or lower, compared to 100% and 47.4%, respectively, at last review. This transaction was analyzed under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using the Portfolio Credit Model for projecting future default levels for the underlying portfolio. Based on this analysis, all PCM rating loss rates exceed the credit enhancement available to all classes. For all classes, Fitch compared the respective credit enhancement levels to the amount of distressed assets ('CC' and below). Given the high probability of default of the underlying assets and the expected limited recovery prospects upon default, classes C through L have been affirmed at 'C', indicating that default is inevitable at maturity. On the Nov. 27, 2009 payment date, the classes A and B notes did not receive interest distributions as a result of the partial payment of the interest rate hedge termination amount that is senior in priority to the class A notes. On Dec. 3, 2009, the trustee declared an event of default due to non-payment of full and timely accrued interest to the class A and B notes. According to the Oct. 21, 2010 payment date, the classes A and B notes are not receiving any interest distributions, therefore the notes have been affirmed at 'D'. LNR CDO V is currently collateralized by all or a portion of 108 classes of fixed-rate 2006 vintage CMBS in 21 separate underlying transactions. Approximately 35% of the collateral currently is not rated and represents the first loss position of the respective underlying CMBS transaction. All underlying classes are thin, junior tranches that are susceptible to losses in the near term. Fitch has affirmed these classes: -- $170,484,000 Class A Notes at 'Dsf'; -- $89,826,000 Class B Notes at 'Dsf'; -- $15,000,000 Class C-FX Notes at 'Csf'; -- $51,989,000 Class C-FL Notes at 'Csf'; -- $35,778,000 Class D Notes at 'Csf'; -- $35,017,000 Class E Notes at 'Csf'; -- $35,017,000 Class F Notes at 'Csf'; -- $15,224,000 Class G Notes at 'Csf'; -- $35,017,000 Class H Notes at 'Csf'; -- $56,332,000 Class J Notes at 'Csf'; -- $25,121,000 Class K Notes at 'Csf'; -- $20,553,000 Class L Notes at 'Csf'. MAGNOLIA FINANCE: S&P Puts 'CCC-' Rating on CreditWatch Positive ---------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'CCC- (sf)' rating on Magnolia Finance I PLC's $9 million collateralized debt obligation referenced fixed-rate notes from series 2005-19 on CreditWatch with positive implications. The rating on the fixed-rate notes is dependent on the lower of S&P's ratings on (i) the rate and credit default swap counterparty, Credit Suisse International ('A+'), and (ii) the reference obligation, CSAM Funding II's class D notes due Oct. 15, 2016 ('CCC- (sf)/Watch Pos'). The rating action follows the Nov. 8, 2010, placement of the 'CCC- (sf)' rating on the reference obligation on CreditWatch with positive implications. S&P may take subsequent rating actions on Magnolia Finance I PLC's fixed-rate notes due to the changes in S&P's ratings assigned to the reference obligation or Credit Suisse International. MERRILL LYNCH: DBRS Upgrades Class G Rating to BB (High) From BB ---------------------------------------------------------------- DBRS has upgraded these ratings of eight classes of Merrill Lynch Financial Assets Inc., Series 2005-Canada 16 Commercial Mortgage Pass-Through Certificates: Class B to AA from AAA Class C to AA from A Class D1 to A from BBB Class D2 to A from BBB Class E1 to A (low) from BBB (low) Class E2 to A (low) from BBB (low) Class F to BBB from BB (high) Class G to BB (high) from BB DBRS has also confirmed the ratings of nine classes as follows: Class A-1 at AAA Class A-2 at AAA Class XP1 at AAA Class XP2 at AAA Class XC at AAA Class H at BB (low) Class J at B (high) Class K at B Class L at B (low) All trends for the rated classes of the transaction remain Stable. The ratings upgrades reflect the increased credit enhancement to the bonds from a collateral reduction of approximately 27% since issuance. Additionally, as of the October 2010 remittance, the weighted-average debt service coverage ratio remains strong at 1.93x. There is currently one loan, representing 0.99% of the transaction, on the servicer's watchlist; DBRS has placed this loan on the DBRS HotList. Prospectus ID#27, 165 Saint Madeleine, is secured by a 117,833 sf anchored retail property located in Cap-de-la-Madeleine, Quebec, approximately 100 kilometers northeast of Montreal. The loan is on the servicer's watchlist because of a low DSCR due to higher than anticipated vacancy rates, with the YE2009 showing an occupancy rate of 77%. The corresponding YE2009 DSCR was 0.66x with a debt yield of 6%. Despite the declining performance, the loan per square foot of $24 is reasonable. DBRS will keep this loan on the DBRS HotList to monitor leasing updates as they become available. DBRS has applied a net cash flow stress of 20% across all loans in the pool and when comparing the DBRS required credit enhancement levels to the current credit enhancement to the bond classes, the ratings upgrades are appropriate. DBRS continues to monitor this transaction on a monthly basis in the Global CMBS Monthly Surveillance report, which can provide more detailed information on the individual loans in the pool. MERRILL LYNCH: DBRS Confirms 'B' Rating on Class K Certs. --------------------------------------------------------- DBRS has confirmed these ratings of all 18 classes of Merrill Lynch Financial Assets Inc. Commercial Mortgage Pass-Through Certificates, Series 2005-Canada 15: Class A-1 at AAA Class A-2 at AAA Class B at AA (high) Class C at A (high) Class D-1 at BBB (high) Class D-2 at BBB (high) Class E-1 at BBB Class E-2 at BBB Class F at BB (high) Class G at BB Class H at BB (low) Class J at B (high) Class K at B Class L at B (low) Class XC-1 at AAA Class XC-2 at AAA Class XP-1 at AAA Class XP-2 at AAA All classes were confirmed with a Stable trend. The ratings reflect the increased credit enhancement to the bonds from a collateral reduction of approximately 37.3% since issuance, the healthy weighted-average debt service coverage ratio (DSCR) of 1.68x for the pool and the strong performance of the ten largest loans in the pool, which had a straight-average debt yield of 15.1% for 2009. Furthermore, there are two defeased loans in the pool, both of which are in the top ten loans, comprising 10.06% of the pool. One loan has been liquidated since issuance, Prospectus ID#48, Snowdown Professional Building. This loan was transferred to the special servicer in 2009 after failing to payoff at the October 1, 2009 maturity. The property was sold via a receivership sale in July 2010, with proceeds of $914,965, the Trust experienced a realized loss to the unrated Class M certificates of $625,390 for this $1.54 million loan. There are no other loans in special servicing currently in the pool. There are five loans on the servicer's watchlist, representing a combined 5.92% of the pool. The largest of the watch-listed loans is Prospectus ID#20, Royal Windsor, with 2.59% of the transaction. The loan is collateralized by a 204,136 sf industrial property located in a largely industrial section of Mississauga, Ontario. The loan is on the servicer's watchlist for a low DSCR at YE2009 of 1.02x due to the space reduction for the largest tenant at the property in 2009, which left the property at 75% occupancy. The property is exposed to significant rollover between August 2010 and February 2011, with over 40% of the NRA scheduled for expiry during those months. DBRS has requested a leasing update from the servicer and will continue to monitor the loan by placing it on the DBRS HotList for further review. The loan remains current, with no payment issues throughout this period of reduced occupancy as compared to historical levels. The second largest watchlisted loan is Prospectus ID#27, Armdale Place, with 2.11% of the transaction. This loan is collateralized by a high-rise multifamily property located in Halifax. The property was constructed in 1976 and has undergone renovations to the common areas and unit interiors over the past three years. The borrower invested $250,000 in 2009 and intends to invest that much or more in 2010, according to the servicer. The loan is on the servicer's watchlist for a low DSCR at YE2009 of 0.98x. The occupancy has steadily improved throughout the past two years, with the property at 85% occupied in August 2010 as compared with 73% occupied at YE2008. The reduction in DSCR from issuance is primarily due to an increase in expenses at the property, which have climbed by 35% overall from the underwritten figures at YE2009. The city of Halifax has fared well in the current economic climate; the unemployment rate at August 2010 was 6.1% per StatCan, as compared to approximately 8% for the country overall. DBRS will continue to monitor the loan's performance. There are three smaller loans on the servicer's watchlist, comprising a combined 1.21% of the pool; two of those loans are Prospectus ID#55 and ID#58, both of which are part of a crossed pool of eight loans backed by smaller retail properties scattered throughout British Columbia and anchored by Prospera Credit Union. These two loans comprise a small portion of the crossed pool, which combines for 4.91% of the transaction and has a straight- average DSCR of 1.39x and 99% occupancy. These properties also had sublease space that was not renewed; both properties are primarily occupied by Prospera Credit Union on a master lease through 2019, five years after the loans' maturity. The other six loans in the crossed pool are 100% master leased to Prospera Credit Union through 2019. This pool of loans should continue to perform well in the aggregate. There is one shadow rated loan in the transaction, Prospectus ID#1, EPR Pooled Senior Interest. The shadow rating was also confirmed, as the loan, which represents 12.98% of the current pool balance, continues to perform well with a DSCR of 2.10x at YE2009 and a debt yield of 24% for the whole loan. The whole loan balance is $103.8 million and includes a pari passu A-note balance of $78.3 million and a $25.5 million subordinate B-note. This trust holds the controlling piece of the pari passu senior interest, with a current balance of $39.1 million. The whole loan is collateralized by four retail/entertainment properties, each anchored by a 16- or 24-screen AMC theatre, located in Misssissauga, Whitby, Oakville, and Kanata, all in Ontario. The loan sponsor is Entertainment Properties Trust, a publicly traded REIT with assets exceeding $2 billion as of November 3, 2010. DBRS applied a net cash flow stress of 20% across all loans in the pool and when comparing the DBRS required credit enhancement levels to the current credit enhancement for all classes, the confirmations as outlined were appropriate. DBRS continues to monitor this transaction on a monthly basis in the Global CMBS Monthly Surveillance report, which can provide more detailed information on the individual loans in the pool. MERRILL LYNCH: Moody's Takes Rating Actions on 2004-MKB1 Certs. --------------------------------------------------------------- Moody's Investors Service upgraded the rating of one class, downgraded six classes and affirmed 12 classes of Merrill Lynch Mortgage Trust 2004-MKB1, Commercial Mortgage Pass-Through Certificates, Series 2004-MKB1: -- Cl. A-2, Affirmed at Aaa (sf); previously on May 14, 2004 Definitive Rating Assigned Aaa (sf) -- Cl. A-3, Affirmed at Aaa (sf); previously on May 14, 2004 Definitive Rating Assigned Aaa (sf) -- Cl. A-4, Affirmed at Aaa (sf); previously on May 14, 2004 Definitive Rating Assigned Aaa (sf) -- Cl. A-1A, Affirmed at Aaa (sf); previously on May 14, 2004 Definitive Rating Assigned Aaa (sf) -- Cl. XP, Affirmed at Aaa (sf); previously on May 14, 2004 Definitive Rating Assigned Aaa (sf) -- Cl. XC, Affirmed at Aaa (sf); previously on May 14, 2004 Definitive Rating Assigned Aaa (sf) -- Cl. B, Affirmed at Aaa (sf); previously on April 23, 2007 Upgraded to Aaa (sf) -- Cl. C, Upgraded to Aaa (sf); previously on April 23, 2007 Upgraded to Aa2 (sf) -- Cl. D, Affirmed at A2 (sf); previously on May 14, 2004 Definitive Rating Assigned A2 (sf) -- Cl. E, Affirmed at A3 (sf); previously on May 14, 2004 Definitive Rating Assigned A3 (sf) -- Cl. F, Affirmed at Baa1 (sf); previously on May 14, 2004 Definitive Rating Assigned Baa1 (sf) -- Cl. G, Affirmed at Baa2 (sf); previously on May 14, 2004 Definitive Rating Assigned Baa2 (sf) -- Cl. H, Affirmed at Baa3 (sf); previously on May 14, 2004 Definitive Rating Assigned Baa3 (sf) -- Cl. J, Downgraded to Ba2 (sf); previously on May 14, 2004 Definitive Rating Assigned Ba1 (sf) -- Cl. K, Downgraded to B1 (sf); previously on May 14, 2004 Definitive Rating Assigned Ba2 (sf) -- Cl. L, Downgraded to B3 (sf); previously on May 14, 2004 Definitive Rating Assigned Ba3 (sf) -- Cl. M, Downgraded to Caa1 (sf); previously on May 14, 2004 Definitive Rating Assigned B1 (sf) -- Cl. N, Downgraded to C (sf); previously on May 14, 2004 Definitive Rating Assigned B2 (sf) -- Cl. P, Downgraded to C (sf); previously on May 14, 2004 Definitive Rating Assigned B3 (sf) Ratings Rationale The upgrade is due to the significant increase in subordination due to loan payoffs and amortization and stable overall performance. The pool has paid down by 39% since Moody's last review. In addition, the pool benefits from 30% defeasance. The downgrades are due to higher expected losses for the pool resulting from realized and anticipated losses from specially serviced and troubled loans. The affirmations are due to key parameters, including Moody's loan to value ratio, Moody's stressed debt service coverage ratio and the Herfindahl Index, remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain the current ratings. Moody's rating action reflects a cumulative base expected loss of 3.2% of the current balance. At last review, Moody's cumulative base expected loss was 2.1%. Moody's stressed scenario loss is 5.8% of the current balance. Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes. Moody's analysis reflects a forward-looking view of the likely range of collateral performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside an acceptable range of the key parameters may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated during the current review. Even so, deviation from the expected range will not necessarily result in a rating action. There may be mitigating or offsetting factors to an improvement or decline in collateral performance, such as increased subordination levels due to amortization and loan payoffs or a decline in subordination due to realized losses. Primary sources of assumption uncertainty are the current stressed macroeconomic environment and continuing weakness in the commercial real estate and lending markets. Moody's currently views the commercial real estate market as stressed with further performance declines expected in the industrial, office, and retail sectors. Hotel performance has begun to rebound, albeit off a very weak base. Multifamily has also begun to rebound reflecting an improved supply / demand relationship. The availability of debt capital is improving with terms returning towards market norms. Job growth and housing price stability will be necessary precursors to commercial real estate recovery. Overall, Moody's central global scenario remains "hook-shaped" for 2010 and 2011; Moody's expect overall a sluggish recovery in most of the world's largest economies, returning to trend growth rate with elevated fiscal deficits and persistent unemployment levels. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.50 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score, a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in Moody's analysis. Based on the model pooled credit enhancement levels at Aa2 and B2, the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade credit estimates is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the underlying rating of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the underlying rating level, is incorporated for loans with similar credit estimates in the same transaction. Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 8 compared to 14 at Moody's prior review. In cases where the Herf falls below 20, Moody's also employs the large loan/single borrower methodology. This methodology uses the excel-based Large Loan Model v 8.0 and then reconciles and weights the results from the two models in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan level proceeds derived from Moody's loan level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type, and sponsorship. These aggregated proceeds are then further adjusted for any pooling benefits associated with loan level diversity, other concentrations and correlations. Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated March 17, 2008. Moody's Investors Service did not receive or take into account a third-party due diligence report on the underlying assets or financial instruments related to the monitoring of this transaction during the previous six months. Deal Performance As of the October 12, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 42% to $569.3 million from $979.9 million at securitization. The Certificates are collateralized by 56 mortgage loans ranging in size from less than 1% to 9% of the pool, with the top ten loans representing 33% of the pool. The pool includes one loan with an investment grade credit estimate, representing 10% of the pool. Eight loans, representing 30% of the pool, have defeased and are collateralized with U.S. Government securities. Defeasance at last review represented 23% of the pool. Five loans, representing 14% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Five loans have been liquidated from the pool since securitization, resulting in an aggregate $3.6 million loss (10% loss severity on average). Currently, two loans, representing 3% of the pool, are in special servicing. The master servicer has recognized an aggregate $5.0 million appraisal reduction for all of the specially serviced loans. Moody's has estimated an aggregate $8.2 million loss (50% expected loss on average) for the specially serviced loans. Moody's has assumed a high default probability for three poorly performing loans representing 3% of the pool. Moody's has estimated a $4.6 million loss (24% expected loss based on a 75% probability default) from the troubled loans. Moody's was provided with full year 2009 operating results for 86% of the pool. Excluding specially serviced and troubled loans, Moody's weighted average LTV for the conduit component is 82% compared to 91% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 11.1% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.7%. Excluding specially serviced and troubled loans, Moody's actual and stressed DSCRs for the conduit component are 1.51X and 1.34X, respectively, compared to 1.49X and 1.16X at last review. Moody's actual DSCR is based on Moody's net cash flow and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. The loan with an investment grade credit estimate is the Galileo Pool #2 Loan ($54.0 million -- 9.5% of the pool), which is secured by nine anchored retail properties totaling 993,000 square feet located in eight states. As of June 2010, the portfolio was 92% leased compared to 95% in December 2009. The loan's sponsor is Centro Properties Group. This loan is currently on the master servicer's watchlist due to its upcoming maturity in November 2010. The borrower is currently seeking replacement financing. Per the Pooling and Servicing Agreement (PSA), the special servicer is able to extend this loan by 12 months if it is not repaid by its maturity date. Moody's underlying rating and stressed DSCR are A2 and 1.58X, respectively, compared to A2 and 1.61X at last review. The top three performing conduit loans represent 11% of the pool. The largest loan is the WestPoint Crossing Shopping Center Loan ($25.3 million -- 4.4% of the pool), which is secured by a 241,000 square foot retail center located in Tucson, Arizona. The center is shadow anchored by Target and Home Depot. As of June 2010, the property was 96% leased compared to 100% at last review. Moody's LTV and stressed DSCR are 94% and 1.07 X, respectively, compared to 91% and 1.10X, at last review. The second largest loan is the GFS Marketplace Portfolio Loan ($18.9 million -- 3.3% of the pool), which is secured by 17 single-tenant retail properties with a total of 272,000 square feet located in Ohio (6), Michigan (5) Indiana (4), and Illinois (2). All the properties are leased to GFS Holdings, Inc., a foodservice distributor, under leases expiring in September 2028. Moody's LTV and stressed DSCR 51% and 2.02X, respectively, compared to 59% and 1.70X at last review. The third largest loan is the MHC Portfolio - Mariner's Cove Loan ($15.7 million -- 2.8% of the pool), which is secured by a 374-pad manufactured housing community located in Millsboro, Delaware. As of December, the property was 97% leased, the same as at last review. Moody's LTV and stressed DSCR 72% and 1.28X, respectively, compared to 85% and 1.08X at last review. MEZZ CAP: S&P Downgrades Ratings on 13 Classes of Certs. -------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 13 classes of certificates from Mezz Cap Commercial Mortgage Trust's series 2004-C1, 2004-C2, 2005-C3, and 2007-C5. S&P lowered its ratings on 10 classes to 'D (sf)' because these classes are experiencing interest shortfalls that S&P expects will continue. Concurrently, S&P lowered its ratings on three other classes due to a significant reduction in the amount of available interest to the respective trusts resulting from poor collateral performance. S&P believes these classes may be susceptible to future interest shortfalls. There are 71 loans ($49.3 million) classified as 30 or more days delinquent across the four securitizations, with total delinquencies ranging from 18.50% to 31.9% of the respective pool balances. The master servicer, Wachovia Bank N.A., has declared future payment advances nonrecoverable for all of the 30-plus-day delinquent loans in each transaction. The collateral for each transaction consists of subordinate B notes secured by commercial real estate properties. It is S&P's understanding that Wachovia, which is the master and special servicer for all four transactions, has stopped advancing on all loans that are 30-plus-days delinquent. In addition, numerous A notes that are senior to the B-note collateral in the Mezz Cap Commercial Mortgage Trust transactions are current in their payments. In certain instances, the special servicers of the delinquent A notes have asked Wachovia to remit any debt service payments on the related B notes to the respective special servicers. As a result, S&P believes interest shortfalls to the respective Mezz Cap Commercial Mortgage Trust transactions are likely to increase. Details of the four Mezz Cap Commercial Mortgage Trusts series as of the Oct. 18, 2010, remittance report are: The collateral pool for series 2004-C1 consisted of 69 loans with an aggregate trust balance of $38.0 million, and 13 loans are 30 or more days delinquent ($9.9 million, 26.05% of the pool). S&P lowered its rating on the class A certificates to 'CCC- (sf)' from 'BB+ (sf)' because S&P believes this class is susceptible to future interest shortfalls. As of the Oct. 18, 2010, remittance report, interest shortfalls totaled $99,097 and have affected all of the classes subordinate to and including class B. As of the Oct. 18, 2010, remittance report, 12 loans totaling $9.9 million were with the special servicer. The payment status of these loans is: two are in foreclosure (2.2 million, 0.80%), eight loans ($6.4 million, 16.8%) are 90-plus-days delinquent, one is 30-plus- days delinquent ($2.3 million, 2.3%), and one is a nonperforming matured balloon ($413,339, 1.1%). In addition, five loans ($2.9 million, 0.80%) are categorized as late but less than 30 days delinquent. To date, the trust has experienced seven losses totaling $4.2 million. Each loan experienced a 100% loss severity. The collateral pool for series 2004-C2 consisted of 76 loans with an aggregate trust balance of $48.9 million, and 14 loans are 30 or more days delinquent ($9.04 million, 18.5%). S&P lowered its ratings on the class A, B, C, D, and E certificates due to interest shortfalls resulting from interest not advanced by the master servicer for 14 loans that are 30-plus days delinquent, as well as special servicing fees. S&P lowered its rating on the class A and B certificates to 'CCC-(sf)' because S&P believes the classes are susceptible to future interest shortfalls. S&P lowered its ratings on class C, D, and E certificates to 'D (sf)' due to interest shortfalls S&P expects to continue. The transaction's reported interest shortfalls totaled $95,508 and have affected all of the classes subordinate to and including class C. As of the Oct. 18, 2010, remittance report, 19 assets totaling $11.4 million (23.4%) are with the special servicer. The payment status of these assets is: seven loans are 90-plus-days delinquent ($5.9 million, 12.1%), three are in foreclosure ($1.8 million, 3.7%), three are real estate owned ($1.04 million, 2.1%) and six are late but less than 30 days ($2.7 million, 0.55%). To date, the trust has experienced three losses totaling $2.1 million. Each loan experienced a 100% loss severity. The collateral pool for series 2005-C3 consisted of 100 loans with an aggregate trust balance of $58.9 million, and 26 loans are 30 or more days delinquent ($18.8 million, 31.9%). S&P lowered its ratings on the class A, B, C, D, and E certificates to 'D (sf)' due to interest shortfalls that S&P expects to continue. The interest shortfalls resulted from interest not advanced by the master servicer for 30 loans that are 30-plus days delinquent ($19.1 million, 32.4%), as well as special servicing fees. The transaction's reported interest shortfalls totaled $178,568 and have affected all of the classes subordinate to and including class A. As of the Oct. 18, 2010, remittance report, 30 assets totaling $19.1 million (32.3%) are with the special servicer. The payment status of these assets is: 15 are 90-plus-days delinquent ($10.6 million, 18.0%), three are in foreclosure ($1.04 million, 1.8%), six are REO ($5.3 million, 8.9%), four are nonperforming matured balloons ($1.3 million, 2.2%), one is 60-plus days delinquent ($263,589, 0.45%), and one is 30-plus days delinquent (451,423, 0.80%). To date, the trust has experienced six losses totaling $2.8 million. Each loan experienced a 100% loss severity. The collateral pool for series 2007-C5 consisted of 77 loans with an aggregate trust balance of $52.4 million, and 18 of these loans are 30 or more days delinquent ($11.6 million, 22.2%). S&P lowered its ratings on the class A and B certificates to 'D (sf)' due to interest shortfalls S&P expects to continue. The interest shortfalls resulted from interest not advanced by the master servicer for the 18 loans that are 30-plus days delinquent, as well as special servicing fees. The transaction's reported interest shortfalls totaled $114,380 and have affected all of the classes subordinate to and including class A. As of the Oct. 18, 2010, remittance report, 17 loans totaling $14.1 million (26.9%) are with the special servicer. The payment status of these loans is: 10 are 90-plus-days delinquent ($5.2 million, 9.9%), four are in foreclosure ($2.2 million, 4.3%), and three are REO ($4.1 million, 7.8%). To date, the trust has experienced six losses totaling $3.4 million, with a weighted average loss severity of 89%. Ratings Lowered Mezz Cap Commercial Mortgage Trust Commercial mortgage pass-through certificates series 2004-C1 Rating ------ Class To From Current credit enhancement (%) ----- -- ---- ------------------------------ A CCC- (sf) BB+ (sf) 41.16 Mezz Cap Commercial Mortgage Trust Commercial mortgage pass-through certificates series 2004-C2 Rating ------ Class To From Current credit enhancement (%) ----- -- ------------------------------------ A CCC- (sf) BBB- (sf) 30.61 B CCC- (sf) BB (sf) 26.32 C D (sf) B+ (sf) 22.97 D D (sf) B- (sf) 17.74 E D (sf) CCC- (sf) 15.60 Mezz Cap Commercial Mortgage Trust Commercial mortgage pass-through certificates series 2005-C3 Rating ------ Class To From Current credit enhancement (%) ----- -- ------------------------------------ A D (sf) BB+ (sf) 30.78 B D (sf) BB (sf) 27.68 C D (sf) B+ (sf) 24.45 D D (sf) B- (sf) 19.07 E D (sf) CCC (sf) 15.97 Mezz Cap Commercial Mortgage Trust Commercial mortgage pass-through certificates series 2007-C5 Rating ------ Class To From Current credit enhancement (%) ----- -- ------------------------------------ A D (sf) B+ (sf) 24.49 B D (sf) CCC+ (sf) 22.21 MORGAN STANLEY: Moody's Reviews Ratings on 18 2007-HQ11 Certs. -------------------------------------------------------------- Moody's Investors Service placed 18 classes of Morgan Stanley Capital I Trust, Commercial Mortgage Pass-Through Certificates, Series 2007-HQ11 on review for possible downgrade: -- Cl. A-M, Aaa (sf) Placed Under Review for Possible Downgrade; previously on Feb. 28, 2007 Definitive Rating Assigned Aaa (sf) -- Cl. A-MFL, Aaa (sf) Placed Under Review for Possible Downgrade; previously on Feb. 28, 2007 Assigned Aaa (sf) -- Cl. A-J, A1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to A1 (sf) -- Cl. B, A2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to A2 (sf) -- Cl. C, A3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to A3 (sf) -- Cl. D, Baa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Baa1 (sf) -- Cl. E, Baa2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Baa2 (sf) -- Cl. F, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Baa3 (sf) -- Cl. G, Ba2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Ba2 (sf) -- Cl. H, Ba3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Ba3 (sf) -- Cl. J, B1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to B1 (sf) -- Cl. K, B3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to B3 (sf) -- Cl. L, Caa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Caa1 (sf) -- Cl. M, Caa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Caa1 (sf) -- Cl. N, Caa2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Caa2 (sf) -- Cl. O, Caa2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Caa2 (sf) -- Cl. P, Caa3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Caa3 (sf) -- Cl. Q, Caa3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Caa3 (sf) The classes were placed on review for possible downgrade due to higher expected losses for the pool resulting from realized and anticipated losses from specially serviced and troubled loans. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated February 11, 2009. Deal And Performance Summary As of the October 15, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 1.4% to $2.383 billion from $2.418 billion at securitization. The Certificates are collateralized by 171 mortgage loans ranging in size from less than 1% to 10% of the pool, with the top ten loans representing 48% of the pool. No loans have defeased. Forty-eight loans, representing 27% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. There have no realized losses from the pool since securitization. Currently 19 loans, representing 13% of the pool, are in special servicing. The master servicer has recognized an aggregate $58.4 million appraisal reduction for 14 of the specially serviced loans. Based on the most recent remittance statement, Classes N through S have experienced cumulative interest shortfalls totaling $2.2 million. Moody's anticipates that the pool will continue to experience future interest shortfalls because of the high exposure to specially serviced loans. Interest shortfalls are caused by special servicing fees, including workout and liquidation fees, appraisal subordinate entitlement reductions and extraordinary trust expenses. Moody's review will focus on potential losses from specially serviced and troubled loans and the performance of the overall pool. MORGAN STANLEY: Moody's Reviews Ratings on 15 2007-TOP25 Certs. --------------------------------------------------------------- Moody's Investors Service placed 15 classes of Morgan Stanley Capital I Trust, Commercial Mortgage Pass-Through Certificates, Series 2007-TOP25 on review for possible downgrade: -- Cl. A-M, Aaa (sf) Placed Under Review for Possible Downgrade; previously on Feb. 2, 2007 Definitive Rating Assigned Aaa (sf) -- Cl. A-J, A1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to A1 (sf) -- Cl. B, A3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to A3 (sf) -- Cl. C, Baa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Baa1 (sf) -- Cl. D, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Baa3 (sf) -- Cl. E, Ba1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Ba1 (sf) -- Cl. F, Ba2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Ba2 (sf) -- Cl. G, Ba3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Ba3 (sf) -- Cl. H, B2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to B2 (sf) -- Cl. J, Caa2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Caa2 (sf) -- Cl. K, Caa2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Caa2 (sf) -- Cl. L, Caa2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Caa2 (sf) -- Cl. M, Caa3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Caa3 (sf) -- Cl. N, Caa3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Caa3 (sf) -- Cl. O, Caa3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2009 Downgraded to Caa3 (sf) The classes were placed on review for possible downgrade due to higher expected losses for the pool resulting from realized and anticipated losses from specially serviced and troubled loans. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated February 11, 2009. Deal And Performance Summary As of the October 12, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 2.3% to $1.518 billion from $1.555 billion at securitization. The Certificates are collateralized by 202 mortgage loans ranging in size from less than 1% to 10% of the pool, with the top ten loans representing 37% of the pool. No loans have defeased. Forty-seven loans, representing 22% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Realized losses total $1.1 million from one loan with a loss severity of 80%. Currently seven loans, representing 7% of the pool, are in special servicing. The master servicer has recognized an aggregate $54.8 million appraisal reduction for six of the specially serviced loans. Moody's review will focus on potential losses from specially serviced and troubled loans and the performance of the overall pool. MORGAN STANLEY: S&P Raises Rating on Class H 1998-HF1 Certs. ------------------------------------------------------------ Standard & Poor's Ratings Services raised its rating on the class H commercial mortgage pass-through certificates from Morgan Stanley Capital I Inc.'s series 1998-HF1, a U.S. commercial mortgage-backed securities transaction, to 'BBB+ (sf)' from 'BBB- (sf)'. At the same time, S&P affirmed its ratings on the class J and K certificates from the same transaction. S&P's upgrade of the class H certificates and affirmation of its rating on the class J certificates reflect increased credit enhancement, the liquidity available to the rated securities, and S&P's analysis of the transaction structure and the remaining collateral. S&P also affirmed its 'D (sf)' rating on the class K certificates, which S&P lowered on July 19, 2010, due to principal losses sustained by the class at that time. S&P's analysis included a review of the credit characteristics of all of the remaining assets in the transaction. Using servicer- provided financial information, Standard & Poor's calculated an adjusted debt service coverage of 1.42x and a loan-to-value ratio of 59.0%. S&P further stressed the loans' cash flows under its 'AAA' scenario to yield a weighted average DSC of 1.26x and an LTV of 70.0%. Transaction Summary As of the Oct. 15, 2010, remittance report, the aggregate trust balance was $44.6 million, which represents 3.5% of the aggregate trust balance at issuance. There are 20 loans remaining, down from 349 at issuance. The master servicer for the transaction, Berkadia Commercial Mortgage LLC, provided financial information for 98.5% of the pool. All of the servicer-provided financial information was full-year 2008 data (1.5%), full-year 2009 (93.6%) data, or interim 2010 data (3.4%). S&P calculated a weighted average DSC of 1.58x for the loans in the pool based on the reported figures. S&P's adjusted DSC and LTV were 1.42x and 59.0%, respectively. As of the October 2010 remittance report, no assets were reported to be with the special servicer, LNR Partners Inc. Four loans ($5.5 million, 12.3%) are on the master servicer's watchlist. Two loans ($2.4 million, 5.3%) have a reported DSC between 1.0x and 1.1x, and three loans ($4.8 million, 10.8%) have reported DSCs of less than 1.0x. The trust has experienced $22.7 million of principal losses on 13 loans to date. Credit Considerations The Stone Creek Plaza loan ($1.8 million, 4.2%) is the sixth- largest loan in the transaction and the largest loan on the master servicer's watchlist. The loan is secured by a 44,517-sq.-ft. retail property built in 1995 in Flower Mound, Texas. The loan is on the watchlist due to low DSC and its payment status is current. As of Dec. 31, 2009, the reported DSC was 0.65x, and occupancy was 53%. According to Berkadia, the borrower stated that the occupancy has increased to 69% as of Sept. 9, 2010. The Valencia Gardens loan ($1.5 million, 3.4%) is the seventh- largest loan in the transaction and the second-largest loan on the master servicer's watchlist. The loan is secured by a 160-unit multifamily property built in 1984 in Tucson. The loan appears on the watchlist due to low DSC, and its payment status is current. As of Dec. 31, 2009, the reported DSC was 0.79x, and occupancy was 71%. The property was last inspected on Nov. 20, 2009, and received a rating of good. The Westminster Garden loan ($1.4 million, 3.2%) is the eighth- largest loan in the transaction and the third-largest loan on the master servicer's watchlist. The loan is secured by a 144-unit multifamily property built in 1971 in Vestal, N.Y. The loan is on the watchlist due to low DSC, and its payment status is current. For the six months ended June 30, 2010, the reported DSC was 0.67x and occupancy was 90%, compared with 0.52x and 88% as of year-end 2009. Four loans ($13.3 million, 29.7%) have balloon maturities within the next 24 months. As of year-end 2009, the weighted average reported DSC was 1.94x. Summary of Top 10 Loans The top 10 loans have an aggregate outstanding balance of $37.4 million (83.8%). Using servicer-reported numbers, S&P calculated a weighted average DSC of 1.58x for the top 10 loans. S&P's adjusted DSC and LTV for the top 10 loans were 1.41x and 62.9%, respectively. Three of the top 10 loans are on the master servicer's watchlist and are discussed above. Details regarding the top three loans in the transaction: The A&P Food Market loan ($10.8 million, 24.2%) is the largest loan in the transaction. The loan is secured by a 70,000-sq.-ft. single-tenant grocery anchored retail property in Woodcliff Lake, N.J. As of Dec. 31, 2009, the reported DSC and occupancy were 1.56x and 100%, respectively. A&P, which occupies 100% of the net rentable area, has a lease that expires in February 2021. The Sunset Mall loan ($6.2 million, 13.9%) is the second-largest loan in the transaction. The loan is secured by a 133,145-sq.-ft. grocery anchored retail property located in Portland, Ore. The tenants include Safeway (42.4% NRA), Sherwin-Williams, and Dollar Tree. As of Dec. 31, 2009, the reported DSC was 2.17x, and occupancy was 96%. Safeway, which occupies 42.4% of the NRA, has a lease that expires in August 2017. The loan matures on Oct. 1, 2012. The Cedar Ridge Apartments loan ($5.2 million, 11.7%) is the third-largest loan in the transaction. The loan is secured by a 180-unit multifamily property in Minnetonka, Minn. As of Dec. 31, 2009, the reported DSC was 1.26x, and occupancy was 89%. Standard & Poor's stressed the collateral in the pool according to S&P's criteria. The resultant credit enhancement levels are consistent with the raised and affirmed ratings. Rating Raised Morgan Stanley Capital I Inc. Commercial mortgage pass-through certificates series 1998-HF1 Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- H BBB+ (sf) BBB- (sf) 78.54 Ratings Affirmed Morgan Stanley Capital I Inc. Commercial mortgage pass-through certificates series 1998-HF1 Class Rating Credit enhancement (%) ----- ------ ---------------------- J B+ (sf) 21.00 K D (sf) 0.00 N/A - Not applicable. MORGAN STANLEY: S&P Downgrades Ratings on Eight 2002-IQ3 Certs. --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on eight classes of commercial mortgage-backed securities from Morgan Stanley Dean Witter Capital I Trust 2002-IQ3. In addition, S&P affirmed its ratings on 10 other classes from the same transaction, including three classes that are rated 'D (sf)'. The rating actions reflect S&P's analysis of the interest shortfalls that have affected the trust, as well as the potential for future interest shortfalls. As of the October 2010 remittance report, the trust experienced monthly interest shortfalls totaling $99,718 primarily related to an appraisal subordinate entitlement reduction amount associated with the Northwestern Corporate Center loan ($26.5 million, 4.2%, discussed below). This loan had a $14.3 million appraisal reduction amount in effect, which generated an ASER of $92,786. The monthly interest shortfalls affected all of the classes subordinate to and including class H. The recurring interest shortfalls have also reduced liquidity support available to the remaining pooled classes. The affirmations of the ratings on classes A-2, A-3, A-4, and B reflect subordination levels and liquidity that are consistent with the outstanding ratings. S&P affirmed its 'D (sf)' ratings on classes L, M, and N. S&P lowered the ratings to 'D (sf)' in February 2007 due to interest shortfalls S&P determined were recurring at that time. According to the October 2010 remittance report, classes M and N have both lost 100% of their original principal balance, while class L has lost 49% of its original principal balance. S&P affirmed its ratings on the class X-1, X- 2, and X-Y interest-only certificates based on S&P's current criteria. Credit Considerations As of the October 2010 remittance report, two ($29.6 million, 4.7%) loans in the pool were with the special servicer, CWCapital Asset Management LLC. The Northwestern Corporate Center loan ($27.8 million total exposure, 4.5%) is the largest loan with the special servicer. The loan is classified as 90-plus-days delinquent in its payments. The loan is secured by a 250,322-sq.- ft. office property in Southfield, Mich. The loan was transferred to the special servicer in August 2009. According to the special servicer, a deed-in-lieu agreement is being finalized. There is a $14.3 million ARA in effect against the loan. Standard & Poor's expects a significant loss upon the eventual resolution of this loan. The Highland Gardens Apartments loan ($3.3 million total exposure, 0.5%) is the second-largest loan with the special servicer. The loan is classified as 90-plus-days delinquent in its payments. The loan is secured by a 100-unit multifamily property in Chamblee, Ga. The loan was transferred to the special servicer in November 2009. The special servicer is in the process of obtaining the title to the property. Standard & Poor's expects a moderate loss upon the eventual resolution of this asset. In addition to the specially serviced loans, S&P determined two ($2.2 million; 0.4%) loans to be credit-impaired. The larger of these is the 7100 Pines Plaza loan ($1.8 million, 0.3%). The loan is secured by a 48,498-sq.-ft. retail property in Pembroke Pines, Fla. The loan appears on the master servicer's watchlist due to a low DSC of 0.52x and 67.0% occupancy as of December 2009. This compares to 1.53x DSC and 93.0% occupancy at issuance. Given the property's performance decline, S&P considers this loan to be at an increased risk of default and loss. The Westway Plaza loan ($383,615, 0.1%) is secured by a 14,850- sq.-ft. retail property in Westland, Mich. The loan appears on the master servicer's watchlist due to a low DSC of 0.77x and 61.0% occupancy as of June 2010. This compares to a DSC of 1.22x and 100.0% occupancy at issuance. S&P considers this loan to be at an increased risk of default and loss given the property's performance decline. Transaction Summary As of the October 2010 remittance report, the collateral pool had an aggregate trust balance of $624.9 million, down from $909.6 million at issuance. The pool includes 175 loans, down from 239 at issuance. The master servicer, Berkadia Commercial Mortgage, provided full-year 2008, full-year 2009, or interim-2010 financial information for 94.0% of the nondefeased loans and nonCOOP loans in the pool (NCB FSB is the master servicer for the COOP loans). S&P calculated a weighted average DSC of 1.59x for the pool based on the reported figures. S&P's adjusted DSC and LTV ratio were 1.44x and 70.2%, respectively. S&P's adjusted DSC and LTV figures exclude the transaction's defeased loans ($95.3 million, 15.3%), COOP loans ($71.1 million, 13.4%), specially serviced loans, and the two loans that S&P determined to be credit-impaired. S&P separately estimated losses for the specially serviced and credit-impaired loans. S&P excluded the COOP loans because they did not default under S&P's stress scenario due to extremely low leverage. The master servicers reported a watchlist of 49 loans ($190.1 million, 30.4%), including three of the top 10 loan exposures. Twenty-six ($73.4 million, 11.7%) loans in the pool have a reported DSC of less than 1.10x, and 17 ($47.0 million, 7.5%) loans have a reported DSC of less than 1.00x. Summary of Top 10 Loan Exposures The top 10 exposures secured by real estate have an aggregate outstanding trust balance of $218.3 million (34.9%). Using servicer-reported numbers, S&P calculated a weighted average DSC of 1.76x for the top 10 real estate loans. S&P's adjusted DSC and LTV ratio for the top 10 loans are 1.40x and 79.9%, respectively. The 77 P Street Office loan is the largest loan in the pool and on the master servicer's watchlist. The loan has a balance of $59.7 million (9.6%) and is secured by a 341,701-sq.-ft. office property in Washington, D.C. As of December 2009, reported DSC was 1.73x and occupancy was 100.0% as of June 2010. According to the master servicer, the loan appears on their watchlist due to rollover risk associated with the District of Columbia, which occupies 99.5% of the property's net rentable area (NRA). In addition, 30.8% of the total space the tenant leases is set to expire in June 2011, and the remainder of their leased space is set to expire in November 2011. The Richards Building loan is the second-largest loan in the pool and on the master servicer's watchlist. The loan has a balance of $29.5 million (4.7%) and is secured by a 126,065-sq.-ft. office property in Cambridge, Mass. As of January 2010, reported DSC was 1.64x, while occupancy was 100.0% as of March 2010. According to the master servicer, the loan appears on its watchlist due to rollover risk associated with Genzyme Corp., which occupies 41.7% of the property's NRA. The tenant's lease is set to expire in February 2011. The Village Greens Shopping Center loan is the eighth-largest loan in the pool and the third-largest loan on the master servicer's watchlist. The loan has a balance of $13.5 million (2.2%) and is secured by a 75,356-sq.-ft. retail property in Staten Island, N.Y. As of December 2009, reported DSC and occupancy were 1.10x and 100.0%, respectively. According to the master servicer, the loan appears on its watchlist due to rollover risk associated with King Kullen, which occupies 47.4% of the property's NRA. The tenant's lease is set to expire in February 2011. Standard & Poor's analyzed the transaction according to its current criteria and the rating actions are consistent with S&P's analysis. Ratings Lowered Morgan Stanley Dean Witter Capital I Trust 2002-IQ3 Commercial mortgage pass-through certificates Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- C A- (sf) A (sf) 9.66 D BBB+ (sf) A- (sf) 9.29 E BB+ (sf) BBB (sf) 7.11 F B+ (sf) BBB- (sf) 5.47 G CCC+ (sf) BB+ (sf) 4.38 H CCC- (sf) BB- (sf) 2.74 J CCC- (sf) B- (sf) 1.29 K CCC- (sf) CCC (sf) 0.56 Ratings Affirmed Morgan Stanley Dean Witter Capital I Trust 2002-IQ3 Commercial mortgage pass-through certificates Class Rating Credit enhancement (%) ----- ------ ---------------------- A-2 AAA (sf) 18.21 A-3 AAA (sf) 18.21 A-4 AAA (sf) 18.21 B AA+ (sf) 14.03 L D (sf) 0.00 M D (sf) 0.00 N D (sf) 0.00 X-1 AAA (sf) N/A X-2 AAA (sf) N/A X-Y AAA (sf) N/A N/A - Not applicable. MORGAN STANLEY: S&8P Downgrades Ratings on 12 2007-XLF9 Certs. -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 12 classes of commercial mortgage pass-through certificates from Morgan Stanley Capital I Inc.'s series 2007-XLF9, a U.S. commercial mortgage-backed securities transaction. Concurrently, S&P affirmed its ratings on four other classes from the same transaction. The downgrades and affirmations follow S&P's analysis of the transaction, which included the revaluation of the collateral securing the remaining 12 floating-rate loans in the pool, two of which are currently in special servicing. All of the loans are indexed to one-month LIBOR. The primary reason for the downgrades was downward revisions to S&P's lodging property valuations. The valuations declined, on average, by 23.6% from S&P's last review in May 2009. S&P lowered its ratings to 'CCC- (sf)' on the class M-635 and N- 635 raked certificates. These certificates derive 100% of their cash flow from a subordinate nonpooled component of the 635 Madison loan. In addition, S&P affirmed the 'BB (sf)' rating on the class M-BEL raked certificate, which derives 100% of its cash flow from a subordinate nonpooled component of the Belltel Lofts loan. The lowered and affirmed ratings follow S&P's analysis of the respective loans and are described further below. The class X certificate is an interest-only certificate with a balance that references the aggregate certificate balances of the pooled principal and interest certificates in the transaction. S&P affirmed its rating on class X based on its current criteria. S&P previously downgraded class L to 'D (sf)' on Oct. 7, 2010, due to ongoing interest shortfalls. According to the Oct. 15, 2010, trustee remittance report, class L has accumulated outstanding interest shortfalls of $32,903. The trust contains 12 loans that are secured by these asset types: lodging ($433.5 million, 39.6% of the pooled trust balance), office ($485.8 million, 44.4%); a ground lease ($61.7 million, 5.6%), casino/hotel ($53.1 million, 4.9%), residential condominium conversion ($37.4 million, 3.4%), and a land parcel ($22.5 million, 2.1%). Lodging Collateral Lodging properties secure three loans in the pool totaling $433.5 million (39.6% of the pooled trust balance). These properties are in Orlando, Fla. (20.1% of the pooled trust balance), Phoenix (14.8%), Tarrytown, N.Y. (2.7%), and Texas (2.0%). S&P based its hotel analyses, in part, on a review of the borrowers' operating statements for full-year 2009, operating statements for year-to-date 2010 (where available), the borrowers' 2010 budgets, and Smith Travel Research reports. S&P noted that reduced business and leisure travel, in its opinion, significantly affected the performance of lodging properties in 2009 compared with 2008. S&P's analysis also considered current conditions in the local lodging markets that have occurred for year-to-date 2010. According to STR, the Orlando and Phoenix lodging markets posted a 1.0% increase and a 0.5% decrease, respectively, in revenue per available room for the first nine months of 2010 compared with 2009. In comparison, the general U.S. hotel industry reported a 4.5% increase in RevPAR for the same period. S&P's lodging property valuations have declined, on average, by 23.6% from the levels S&P assessed in its last review dated May 27, 2009. The Largest Lodging Loan The MSREF Resort Portfolio loan, the largest loan in the pool, is secured by three full-service luxury resort hotels totaling 2,532 rooms in Orlando and Phoenix. The loan has a whole loan balance of $729.9 million that consists of a $545.0 million senior participation interest and two non-trust junior participation interests totaling $184.9 million. The senior participation interest is further divided into three pari passu pieces, of which one piece totaling $381.5 million makes up 34.9% of the pooled trust balance. In addition, the equity interests in the borrower of the whole loan secure four mezzanine loans totaling $265.4 million. The master servicer, Midland Loan Services Inc., reported a combined in-trust debt service coverage of 7.01x for year-end 2009 and occupancy of 68.2% for the 12 months ended June 30, 2010. S&P's adjusted valuation, which yielded a stressed in-trust loan-to-value ratio of 98.7%, has fallen 23.6% since S&P's last review. The valuation decline is primarily due to a drop in average daily rate and occupancy. The loan matures on May 9, 2011, and has one 12-month extension option remaining. Lodging Loan With The Special Servicer There is one lodging loan in the pool with the special servicer. The Hyatt Place Portfolio loan, the smallest loan in the pool, has a trust balance of $22.0 million (2.0% of the pooled trust balance) and a whole-loan balance of $49.0 million. The loan is secured by four limited service, Hyatt Place flagged hotels totaling 512 rooms in Austin, Grand Prairie, Houston, and San Antonio, Texas. The loan was transferred to the special servicer, Berkadia Commercial Mortgage LLC, on Feb. 18, 2010, due to imminent default after the borrower indicated that it was unable to payoff the loan by its April 9, 2010, maturity. Berkadia has indicated that the resolution timing for this loan is uncertain as the borrower has filed for bankruptcy protection. Berkadia has stated that under the direction of the bankruptcy court, the borrower will make adequate protection payments starting in September 2010. Berkadia is waiting to review the borrower's plan of organization. The updated July 1, 2010, appraisals value the properties at $38.3 million. The master servicer reported an in-trust combined DSC of 2.18x for year-end 2009 and occupancy of 65.8% for the 12 months ended May 31, 2010. S&P's adjusted valuation, which yielded a stressed in-trust LTV ratio of 114.6%, is down 12.9% since its last review. The valuation decline is mainly due to increased operating expenses. Office Collateral Office properties secure five loans totaling $485.8 million (44.4% of the pooled trust balance). The office properties are located in Manhattan (19.4% of the pooled trust balance), Chicago (12.8%), Denver (10.1%), and Sacramento (2.1%). S&P based its analysis of the office properties on its review of the borrowers' operating statements for full-year 2009 and year-to-date 2010 (where available), the borrowers' 2010 budgets, as well as the borrowers' 2010 rent rolls. Based on S&P's analysis, its office property valuations have declined, on average, by 2.4% since its last review. The Largest Office Loan The 14 Wall Street loan, the second-largest loan in the pool, has a trust and whole-loan balance of $145.0 million (13.3% of the pooled trust balance). In addition, the equity interests in the borrower of the whole loan secure mezzanine debt with a maximum balance of $175.0 million. The loan is secured by a 1.0 million-sq.-ft. 37-story office building in downtown Manhattan. Midland reported an in-trust DSC of 2.07x for year-end 2009 and 74.2% occupancy as of June 2010. S&P's adjusted valuation, which yielded a stressed in-trust LTV ratio of 82.9%, is comparable to the levels S&P assessed in its last review. The loan matures on May 9, 2011, and has one 12- month extension option remaining. Office Loan With Maturity Within The Next Three Months The Herakles Data Center loan, the 10th-largest loan in the pool, has a trust balance of $23.6 million (2.1% of the pooled trust balance) and a whole-loan balance of $34.3 million. The loan is secured by a 92,200-sq.-ft. telecommunications facility containing 52,500 sq. ft. of raised floor area in Sacramento. Midland reported an in-trust DSC of 1.89x for year-end 2009 and 100% occupancy as of August 2010. S&P's adjusted valuation, which yielded a stressed in-trust LTV ratio of 47.3%, is down 12.9% since its last review. The loan matures on Dec. 9, 2010. Midland has stated that the borrower has given notice to exercise one of its two one-year extension options. Other Specially Serviced Loan The Reunion Development loan has a trust and whole-loan balance of $35.0 million, which consists of a $22.5 million senior pooled component (2.1% of the pooled trust balance) and a $12.5 million subordinate nonpooled component raked to the class M-RND and N-RND certificates. Both of these classes are not rated by Standard & Poor's. The loan is secured by 419 acres of undeveloped land that are part of a 2,300-acre master planned community in Reunion, Fla. (near Orlando). The loan was transferred to the special servicer, KeyBank Real Estate Capital, on Aug. 14, 2009, after the borrower did not pay off the loan at its Aug. 9, 2009, maturity. According to KeyBank, the borrower has been operating under a forbearance agreement that expired on Oct. 10, 2010. KeyBank stated that it is in the process of amending the forbearance period to Dec. 31, 2010, to provide the borrower additional time to market and sell the property. The updated Oct. 5, 2009, appraisal valued the property at $4.2 million. S&P expects a severe loss upon the eventual resolution of this asset. Other Loans With Rated Raked Certificates Standard & Poor's rates the class M-BEL, M-635, and N-635 raked certificates. Details are: The 635 Madison loan, the sixth-largest loan in the pool, has a trust and whole loan balance of $69.1 million, which consists of a $61.7 million senior pooled component (5.6% of the pooled trust balance) and a $7.4 million subordinate nonpooled component that supports the class M-635 and N-635 raked certificates. In addition, the equity interests in the borrower of the whole loan secure $15.0 million of mezzanine debt. The loan is secured by the fee interest in land subject to a ground lease underneath 635 Madison Avenue, a 143,800-sq.-ft., 19-story class B office and ground floor retail property in midtown Manhattan. According to the transaction's documents, the $1.0 million ground rent amount was scheduled to be adjusted in May 2009 to a percentage of the fair market value of the land, as unimproved and vacant. At origination and in S&P's last review, using the June 2007 appraisal value, the borrower had expected a substantial increase in the ground rent amount to $6.8 million. However, the ground rent amount was in arbitration, and the arbiter has recently ruled on a new ground rent amount of $3.7 million which is significantly below expectations. Accordingly, S&P lowered its ratings to 'CCC- (sf)' on both raked classes. Midland reported a 2.89x DSC for the 12 months ended June 30, 2010.The 635 Madison loan was transferred to the special servicer, Berkadia, on April 1, 2010, due to imminent maturity default. The loan matured on Aug. 9, 2010. Berkadia has indicated that the loan has since been modified (on June 28, 2010) and returned to the master servicer on Aug. 12, 2010. The modification terms included, among other items, a partial paydown of the principal balance and a maturity date extension to August 9, 2012. As of the Oct. 15, 2010, trustee remittance report, class N-635 incurred $29,292 of principal losses due to additional trust expenses. The Belltel Lofts loan, the eighth-largest loan in the pool, has a current whole-loan balance of $63.3 million that consists of a $37.4 million senior pooled component (3.4% of the pooled trust balance), a $1.6 million subordinate nonpooled component that is raked to the class M-BEL certificate, and a $24.3 million non- trust subordinate junior participation. The loan is secured by 122 unsold units in a 249-unit for-sale residential condominium conversion project in Brooklyn, N.Y. S&P's adjusted valuation, yielding a stressed in-trust LTV ratio of 74.9%, is comparable to the levels S&P assessed in its last review. Accordingly, S&P affirmed its 'BB (sf)' rating on class M-BEL. The loan matures on Feb. 9, 2011, and has no extension options remaining. Ratings Lowered (Pooled Certificates) Morgan Stanley Capital I Inc. Commercial mortgage pass-through certificates series 2007-XLF9 Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- A-2 A+ (sf) AA (sf) 33.98 B BBB+ (sf) A+ (sf) 29.95 C BBB- (sf) A (sf) 26.49 D BB+ (sf) BBB+ (sf) 23.04 E BB (sf) BBB (sf) 19.58 F B+ (sf) BB+ (sf) 16.13 G B- (sf) BB- (sf) 12.67 H CCC (sf) B+ (sf) 9.21 J CCC- (sf) CCC+ (sf) 5.76 K CCC- (sf) CCC (sf) 2.88 Ratings Lowered (Nonpooled Certificates) Morgan Stanley Capital I Inc. Commercial mortgage pass-through certificates series 2007-XLF9 Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- M-635 CCC- (sf) BBB+ (sf) N/A N-635 CCC- (sf) BBB- (sf) N/A Ratings Affirmed (Pooled Certificates) Morgan Stanley Capital I Inc. Commercial mortgage pass-through certificates series 2007-XLF9 Class Rating Credit enhancement (%) ----- ------ ---------------------- A-1 AAA (sf) 53.76 L D (sf) 0.00 X AAA (sf) N/A Rating Affirmed (Nonpooled Certificate) Morgan Stanley Capital I Inc. Commercial mortgage pass-through certificates series 2007-XLF9 Class Rating Credit enhancement (%) ----- ------ ---------------------- M-BEL BB (sf) N/A N/A - Not applicable. NEW CENTURY: Moody's Downgrades Ratings on 11 Tranches ------------------------------------------------------ Moody's Investors Service has downgraded the ratings of 11 tranches from 2 RMBS transactions issued by New Century Alternative Mortgage Loan Trust. The collateral backing these deals primarily consists of first-lien, fixed rate Alt-A residential mortgages. Ratings Rationale The actions are a result of the continued performance deterioration in Alt-A pools in conjunction with home price and unemployment conditions that remain under duress. The actions reflect Moody's updated loss expectations on Alt-A pools issued from 2005 to 2007. To assess the rating implications of the updated loss levels on Alt-A RMBS, each individual pool was run through a variety of scenarios in the Structured Finance Workstation(R), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to small increments in losses on the underlying mortgage pool is taken into consideration when assigning ratings. The above mentioned approach "Alt-A RMBS Loss Projection Update: February 2010" is adjusted slightly when estimating losses on pools left with a small number of loans. To project losses on pools with fewer than 100 loans, Moody's first estimates a "baseline" average rate of new delinquencies for the pool that is dependent on the vintage of loan origination (10%, 19% and 21% for the 2005, 2006 and 2007 vintage respectively). This baseline rate is higher than the average rate of new delinquencies for the vintage to account for the volatile nature of small pools. Even if a few loans in a small pool become delinquent, there could be a large increase in the overall pool delinquency level due to the concentration risk. Once the baseline rate is set, further adjustments are made based on 1) the number of loans remaining in the pool and 2) the level of current delinquencies in the pool. The fewer the number of loans remaining in the pool, the higher the volatility and hence the stress applied. Once the loan count in a pool falls below 75, the rate of delinquency is increased by 1% for every loan less than 75. For example, for a pool with 74 loans from the 2005 vintage, the adjusted rate of new delinquency would be 10.10%. If current delinquency levels in a small pool is low, future delinquencies are expected to reflect this trend. To account for that, the rate calculated above is multiplied by a factor ranging from 0.2 to 2.0 for current delinquencies ranging from less than 2.5% to greater than 50% respectively. Delinquencies for subsequent years and ultimate expected losses are projected using the approach described in the methodology publication. The primary source of assumption uncertainty is the current macroeconomic environment, in which unemployment remains at high levels, and weakness persists in the housing market. Moody's notes an increasing potential for a double-dip recession, which could cause a further 20% decline in home prices (versus its baseline assumption of roughly 5% further decline). Overall, Moody's assumes a further 5% decline in home prices with stabilization in early 2011, accompanied by continued stress in national employment levels through that timeframe. Moody's Investors Service received and took into account one or more third party due diligence reports on the underlying assets or financial instruments in this transaction and the due diligence reports had a neutral impact on the rating. Complete rating actions are: Issuer: New Century Alternative Mortgage Loan Trust 2006-ALT1 -- Cl. AF-2, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. AF-3, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. AF-4, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. AF-5, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. AF-6, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade Issuer: New Century Alternative Mortgage Loan Trust 2006-ALT2 -- Cl. AF-2, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. AF-3, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. AF-4, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. AF-5, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. AF-6A, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. AF-6B, Downgraded to C (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade NEWGATE FUNDING: Moody's Reviews Ratings on Various Classes ----------------------------------------------------------- Moody's Investors Service has placed under review for possible downgrade classes Ba, Bb, Cb, D and E issued by Newgate Funding PLC: Series 2007-3. The review was prompted by the worse-than- expected performance of the collateral backing the notes. According to Moody's analysis, the credit enhancement available under the affected notes is likely to be not fully sufficient to support the loss assumptions for the mortgage portfolio. Transaction Overview Newgate Funding PLC: Series 2007-3 closed in December 2007 and the current pool factor is approximately 82.6%. The assets supporting the notes are first-lien mortgage loans secured by residential properties located in England, Wales, Scotland and Northern Ireland. The transaction was already reviewed in March 2009 on the basis of the performance data as of December 2008. At that time, the expected loss for the mortgage portfolio was increased from 1.88% to 3.5% of the original portfolio balance. Since December 2008, 90+ arrears (including outstanding repossessions) have increased from 9.8% to 15.3% of the current portfolio balance. However, 90+ delinquencies have decreased by approximately GBP70 million since the peak of 23.6% reached in December 2009. Over the same time horizon, cumulative losses have increased from 0.01% to the current level of 1.43% of the original portfolio balance. In addition, mortgage loans for an amount of 7.5% of the current portfolio balance were previously delinquent by more than 90 days and have been subject to capitalization of arrears. According to the investor report as of September 2010, 550 loans, corresponding to approximately 10.7% of the current portfolio balance, have had arrears capitalized. The reserve fund is currently at its target level, equal to GBP23,799,400. Transaction Review According to the data from the latest investor report, approximately two-thirds of the decrease in the 90+ delinquencies since the arrears peak in December 2009 are associated with arrears capitalizations. Taking into account the performance of the collateral and the levels of arrears capitalization to date, the performance of the portfolio since the last review has been worse than initially expected. During its analysis, the rating agency has also taken into account the levels of credit enhancement available to absorb the future projected losses on the underlying mortgage portfolio. After performing cash flow sensitivities on the stability of the current ratings, the worse- than-expected performance of the collateral has prompted Moody's to review the ratings of the affected notes for possible downgrade. The full review of the ratings of the affected notes will take into account the current capital structure and credit enhancement levels. As part of its detailed transaction review, Moody's will fully reassess its lifetime loss expectation reflecting the collateral performance to date as well as the future macro- economic environment. Moody's will also test different distribution of losses, in order to quantify the potential rating impact of a more backloaded loss distribution, which could result from the re-default of loans previously in arrears. Moody's will also use updated loan-by-loan information to revise its MILAN Aaa credit enhancement. Loan-by-loan information will also allow Moody's to validate its assumptions with regards to which loans have a higher default propensity. The lifetime loss and the MILAN Aaa credit enhancement are the key parameters used by Moody's to calibrate its loss distribution curve, which is one of the core inputs in Moody's cash-flow model. Moody's has also factored into its analysis the negative sector outlook for UK non-conforming RMBS. The sector outlook reflects these expectations of key macro-economic indicators: GDP to increase by 1.6% in 2010 and by 2.3% in 2011, unemployment to stay at approximately 7.9% in 2010 and 2011, house prices to remain relatively flat over the next year. List Of Affected Notes The classes of notes affected by the rating review are detailed below. Issuer: Newgate Funding PLC: Series 2007-3 -- GBP31.2M Ba Notes, A3 (sf) Placed Under Review for Possible Downgrade; previously on March 25, 2009 Downgraded to A3 (sf) -- EUR42M Bb Notes, A3 (sf) Placed Under Review for Possible Downgrade; previously on March 25, 2009 Downgraded to A3 (sf) -- EUR44M Cb Notes, Ba1 (sf) Placed Under Review for Possible Downgrade; previously on March 25, 2009 Downgraded to Ba1 (sf) -- GBP12.75M D Notes, B2 (sf) Placed Under Review for Possible Downgrade; previously on March 25, 2009 Downgraded to B2 (sf) -- GBP11.5M E Notes, Caa2 (sf) Placed Under Review for Possible Downgrade; previously on March 25, 2009 Downgraded to Caa2 (sf) Moody's ratings address the expected loss posed to investors by the legal final maturity of the notes. Moody's ratings address only the credit risks associated with the transactions. Other non-credit risks have not been addressed, but may have a significant effect on yield to investors. PHH ALTERNATIVE: Moody's Downgrades Ratings on 17 Tranches ---------------------------------------------------------- Moody's Investors Service has downgraded the ratings of 17 tranches and confirmed the ratings of 4 tranches from 3 RMBS transactions issued by PHH Alternative Mortgage Trust. The collateral backing these deals primarily consists of first-lien, fixed and adjustable rate Alt-A residential mortgages. Ratings Rationale The actions are a result of the continued performance deterioration in Alt-A pools in conjunction with home price and unemployment conditions that remain under duress. The actions reflect Moody's updated loss expectations on Alt-A pools issued from 2005 to 2007. To assess the rating implications of the updated loss levels on Alt-A RMBS, each individual pool was run through a variety of scenarios in the Structured Finance Workstation(R), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to small increments in losses on the underlying mortgage pool is taken into consideration when assigning ratings. The above mentioned approach "Alt-A RMBS Loss Projection Update: February 2010" is adjusted slightly when estimating losses on pools left with a small number of loans. To project losses on pools with fewer than 100 loans, Moody's first estimates a "baseline" average rate of new delinquencies for the pool that is dependent on the vintage of loan origination (10%, 19% and 21% for the 2005, 2006 and 2007 vintage respectively). This baseline rate is higher than the average rate of new delinquencies for the vintage to account for the volatile nature of small pools. Even if a few loans in a small pool become delinquent, there could be a large increase in the overall pool delinquency level due to the concentration risk. Once the baseline rate is set, further adjustments are made based on 1) the number of loans remaining in the pool and 2) the level of current delinquencies in the pool. The fewer the number of loans remaining in the pool, the higher the volatility and hence the stress applied. Once the loan count in a pool falls below 75, the rate of delinquency is increased by 1% for every loan less than 75. For example, for a pool with 74 loans from the 2005 vintage, the adjusted rate of new delinquency would be 10.10%. If current delinquency levels in a small pool is low, future delinquencies are expected to reflect this trend. To account for that, the rate calculated above is multiplied by a factor ranging from 0.2 to 2.0 for current delinquencies ranging from less than 2.5% to greater than 50% respectively. Delinquencies for subsequent years and ultimate expected losses are projected using the approach described in the methodology publication. The primary source of assumption uncertainty is the current macroeconomic environment, in which unemployment remains at high levels, and weakness persists in the housing market. Moody's notes an increasing potential for a double-dip recession, which could cause a further 20% decline in home prices (versus its baseline assumption of roughly 5% further decline). Overall, Moody's assumes a further 5% decline in home prices with stabilization in early 2011, accompanied by continued stress in national employment levels through that timeframe. Moody's Investors Service received and took into account one or more third party due diligence reports on the underlying assets or financial instruments in this transaction and the due diligence reports had a neutral impact on the rating. Complete rating actions are: Issuer: PHH Alternative Mortgage Trust, Series 2007-1 -- Cl. I-A-1, Confirmed at B3 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. I-A-2, Confirmed at Caa1 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. I-A-3, Downgraded to C (sf); previously on Jan. 14, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade Issuer: PHH Alternative Mortgage Trust, Series 2007-2 -- Cl. 1-A-1, Downgraded to B2 (sf); previously on Jan. 14, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-2, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B2 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-3, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-4, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A-5, Downgraded to C (sf); previously on Jan. 14, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-1, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-2, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-3, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-4, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-5, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A-6, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 3-A-1, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 3-A-2, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. 4-A-1, Confirmed at B3 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade Issuer: PHH Alternative Mortgage Trust, Series 2007-3 -- Cl. A-1, Confirmed at B2 (sf); previously on Jan. 14, 2010 B2 (sf) Placed Under Review for Possible Downgrade -- Cl. A-2, Downgraded to Caa1 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. A-3, Downgraded to Caa1 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. A-4, Downgraded to C (sf); previously on Jan. 14, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade PHH WACHOVIA: Moody's Downgrades Ratings on Six Tranches -------------------------------------------------------- Moody's Investors Service has downgraded the ratings of 6 tranches from 2 RMBS transactions issued by PHH Wachovia Mortgage Loan Trust. The collateral backing these deals primarily consists of first-lien, fixed and adjustable rate Alt-A residential mortgages. Ratings Rationale The actions are a result of the continued performance deterioration in Alt-A pools in conjunction with home price and unemployment conditions that remain under duress. The actions reflect Moody's updated loss expectations on Alt-A pools issued from 2005 to 2007. To assess the rating implications of the updated loss levels on Alt-A RMBS, each individual pool was run through a variety of scenarios in the Structured Finance Workstation(R), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to small increments in losses on the underlying mortgage pool is taken into consideration when assigning ratings. The above mentioned approach "Alt-A RMBS Loss Projection Update: February 2010" is adjusted slightly when estimating losses on pools left with a small number of loans. To project losses on pools with fewer than 100 loans, Moody's first estimates a "baseline" average rate of new delinquencies for the pool that is dependent on the vintage of loan origination (10%, 19% and 21% for the 2005, 2006 and 2007 vintage respectively). This baseline rate is higher than the average rate of new delinquencies for the vintage to account for the volatile nature of small pools. Even if a few loans in a small pool become delinquent, there could be a large increase in the overall pool delinquency level due to the concentration risk. Once the baseline rate is set, further adjustments are made based on 1) the number of loans remaining in the pool and 2) the level of current delinquencies in the pool. The fewer the number of loans remaining in the pool, the higher the volatility and hence the stress applied. Once the loan count in a pool falls below 75, the rate of delinquency is increased by 1% for every loan less than 75. For example, for a pool with 74 loans from the 2005 vintage, the adjusted rate of new delinquency would be 10.10%. If current delinquency levels in a small pool is low, future delinquencies are expected to reflect this trend. To account for that, the rate calculated above is multiplied by a factor ranging from 0.2 to 2.0 for current delinquencies ranging from less than 2.5% to greater than 50% respectively. Delinquencies for subsequent years and ultimate expected losses are projected using the approach described in the methodology publication. The primary source of assumption uncertainty is the current macroeconomic environment, in which unemployment remains at high levels, and weakness persists in the housing market. Moody's notes an increasing potential for a double-dip recession, which could cause a further 20% decline in home prices (versus its baseline assumption of roughly 5% further decline). Overall, Moody's assumes a further 5% decline in home prices with stabilization in early 2011, accompanied by continued stress in national employment levels through that timeframe. Moody's Investors Service received and took into account one or more third party due diligence reports on the underlying assets or financial instruments in this transaction and the due diligence reports had a neutral impact on the rating. Complete rating actions are: Issuer: Wachovia Mortgage Loan Trust, Series 2006-ALT1 -- Cl. A-1, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. A-2, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. A-3, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade Issuer: Wachovia Mortgage Loan Trust, Series 2006-AMN1 -- Cl. A-1, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade -- Cl. A-2, Downgraded to Ca (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. A-3, Downgraded to Ca (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade PHOENIX CLO: S&P Raises Ratings on Various Classes of Notes ----------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A, B, and C notes issued by Phoenix CLO I Ltd., a collateralized loan obligation transaction managed by ING Alternative Asset Management LLC. In addition, S&P removed its rating on the class A notes from CreditWatch with positive implications and affirmed its ratings on the class X and D notes. The upgrades reflect the improved performance S&P has observed in the transaction's underlying asset portfolio since November 2009, when S&P lowered the ratings on all of the notes except for the class X notes. The November 2009 downgrades followed a review of the transaction under S&P's criteria for rating corporate collateralized debt obligations. According to the Sept. 28, 2009, trustee report, the transaction held approximately $34 million in defaulted obligations and $63 million in underlying obligors with a rating, either by Standard & Poor's or another rating agency, in the 'CCC' range. As a result, Phoenix CLO I was failing its class A, B, C, and D overcollateralization ratios, causing a deferral of the interest for the class B, C, and D notes. Since that time, a number of defaulted obligors held in the deal emerged from bankruptcy, while recoveries on some defaulted assets were higher than their carrying values in the O/C ratio test calculations. This, in combination with a reduction in the 'CCC' range assets and a $9 million paydown on the class A notes, benefited all O/C tests in the transaction. For example, the class A O/C ratio test had increased to 125.17% by Sept. 28, 2010, from 116.91% as of Sept. 28, 2009. As of Sept. 28, 2010, only the transaction's excess interest deflection test was failing, which diverts excess interest to purchase additional assets. To date, Phoenix CLO I Ltd. transaction has paid down approximately 4.85% of the class A notes' original outstanding balance. Standard & Poor's will continue to review whether, in its view, the ratings currently assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as S&P deems necessary. Rating And Creditwatch Actions Phoenix CLO I Ltd. Rating ------ Class To From ----- -- ---- A AA+ (sf) BBB- (sf)/Watch Pos B BBB+ (sf) CCC- (sf) C B+ (sf) CCC- (sf) Ratings Affirmed Phoenix CLO I Ltd. Class Rating ----- ------ X AAA (sf) D CC (sf) PROTECTIVE FINANCE: Moody's Upgrades Ratings on Six Classes ----------------------------------------------------------- Moody's Investors Service upgraded the ratings of six classes and affirmed three classes of Protective Finance Corporation II, Commercial Mortgage FASIT Certificates, Series I: -- Cl. C-1, Affirmed at Aaa (sf); previously on Jan. 4, 2008 Upgraded to Aaa (sf) -- Cl. C-2, Affirmed at Aaa (sf); previously on Jan. 4, 2008 Upgraded to Aaa (sf) -- Cl. C-3, Affirmed at Aaa (sf); previously on Jan. 4, 2008 Upgraded to Aaa (sf) -- Cl. D-1, Upgraded to Aa2 (sf); previously on Oct. 6, 2006 Upgraded to A1 (sf) -- Cl. D-2, Upgraded to Aa2 (sf); previously on Oct. 6, 2006 Upgraded to A1 (sf) -- Cl. D-3, Upgraded to Aa2 (sf); previously on Oct. 6, 2006 Upgraded to A1 (sf) -- Cl. E-1, Upgraded to Ba1 (sf); previously on Oct. 6, 2006 Upgraded to Ba2 (sf) -- Cl. E-2, Upgraded to Ba1 (sf); previously on Oct. 6, 2006 Upgraded to Ba2 (sf) -- Cl. E-3, Upgraded to Ba1 (sf); previously on Oct. 6, 2006 Upgraded to Ba2 (sf) Ratings Rationale The upgrades are due to increased credit subordination levels due to loan payoffs and amortization and overall stable pool performance. The pool has paid down by 61% since Moody's last review. The affirmations are due to key parameters, including Moody's loan to value ratio, Moody's stressed debt service coverage ratio and the Herfindahl Index , remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. Moody's rating action reflects a cumulative base expected loss of 1.7% of the current balance. Moody's stressed scenario loss is 4.7% of the current balance. Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes. Moody's analysis reflects a forward-looking view of the likely range of collateral performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside an acceptable range of the key parameters may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated during the current review. Even so, deviation from the expected range will not necessarily result in a rating action. There may be mitigating or offsetting factors to an improvement or decline in collateral performance, such as increased subordination levels due to amortization and loan payoffs or a decline in subordination due to realized losses. Primary sources of assumption uncertainty are the current stressed macroeconomic environment and continuing weakness in the commercial real estate and lending markets. Moody's currently views the commercial real estate market as stressed with further performance declines expected in the industrial, office, and retail sectors. Hotel performance has begun to rebound, albeit off a very weak base. Multifamily has also begun to rebound reflecting an improved supply / demand relationship. The availability of debt capital is improving with terms returning towards market norms. Job growth and housing price stability will be necessary precursors to commercial real estate recovery. Overall, Moody's central global scenario remains "hook-shaped" for 2010 and 2011; Moody's expect overall a sluggish recovery in most of the world's largest economies, returning to trend growth rate with elevated fiscal deficits and persistent unemployment levels. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.50 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score, a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in Moody's analysis. Based on the model pooled credit enhancement levels at Aa2 and B2, the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade credit estimates is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit estimate of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the credit estimate level, is incorporated for loans with similar credit estimates in the same transaction. Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities transactions. Moody's prior full review is summarized in a press release dated January 4, 2008. Moody's Investors Service did not receive or take into account a third party due diligence report on the underlying assets or financial instruments related to the monitoring of this transaction in the past six months. Deal Performance As of the October 25, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 90% to $83.4 million from $845.4 million at securitization. The Certificates are collateralized by 115 mortgage loans ranging in size from less than 1% to 4% of the pool, with the top ten loans representing 25% of the pool. Two loans have been liquidated from the pool, resulting in an aggregate realized loss of $752,907 (51% loss severity on an average). There are no loans currently on the watchlist or in special servicing. Moody's was provided with full year 2009 for 61% of the pool. Moody's weighted average LTV is 51% compared to 50% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 16% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 10.2%. Moody's actual and stressed DSCRs are 1.10X and 3.05X, respectively, compared to 2.40X and 2.39X at last review. Moody's actual DSCR is based on Moody's net cash flow and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 75 compared to 115 at Moody's prior review. Approximately 75% of the loans (65% of the pool balance) are secured by single tenant retail properties, many of which are owner occupied. The top exposures are Rite Aid Corporation (22% of the pool; Moody's senior unsecured rating Caa3, stable outlook) and CVS/Caremark Corp. (17%; Moody's senior unsecured rating Baa2, stable outlook). The top three conduit loans represent 10% of the pool balance. The largest loan is the Pearman Dairy Plaza Loan ($3.6 million -- 4.1%), which is secured by a 68,151 square foot shopping center located in Anderson, South Carolina. As of June 2010 the property was 75% leased. Performance has been stable since last review. Moody's LTV and stressed DSCR are 111% and 0.88X, respectively, compared to 115% and 0.85X at last review. The second largest loan is the Theodore Dawes Plaza Loan ($3.0 million -- 3.4%), which is secured by a 124,014 square foot shopping center located in Mobile, Alabama. As of June 2010 the property was 72% leased. Performance has declined since last review due to lower revenues. Moody's LTV and stressed DSCR are 68% and 1.49X, respectively, compared to 52% and 2.08X at last review. The third largest loan is the Bi-Lo Shopping Center Loan ($2.2 million -- 2.4%), which is secured by a 51,991 square foot grocery anchored retail center. As of June 2010 the property was 94% leased. Performance has declined since last review but the loan has benefited from amortization. The loan has amortized 22% since last review. Moody's LTV and stressed DSCR are 54% and 1.90X, respectively, compared to 52% and 1.92X at last review. PORTER SQUARE: Fitch Cuts Rating on CDO I Class B Notes to 'Csf' ---------------------------------------------------------------- Fitch Ratings has downgraded one class, affirmed two classes and revised Rating Outlooks of Porter Square CDO I, Ltd./Inc. notes as indicated: -- $3,263,735 class A-3 notes affirmed at 'AAsf/LS5'; Outlook to Stable from Negative; -- $24,000,000 class B notes downgraded to 'Csf' from 'CCsf'; -- $17,765,725 class C notes affirmed at 'Csf'. The Class A-2 notes have paid in full. The rating downgrade reflects the deterioration to the portfolio since the last rating action in November 2009. Approximately 42.7% of the portfolio has been downgraded since November 2009. The affirmation of the class A-3 notes is attributed to the increase in credit enhancement available to the notes resulting from principal amortizations. The class A-3 notes have paid off 87.4% since closing. It is likely that they will be paid off in 2011, as reflected by the Stable Rating Outlook assigned to the notes. Defaulted collateral as defined by the trustee totals $27,108,116 or 58.1% of the portfolio. Interest due to class B is being partially paid through the use of principal. This class is reliant on defaulted collateral to pay off, therefore, default is inevitable and it has been downgraded to 'Csf'. The class C notes continue to defer interest. Porter Square I is a structured finance collateralized debt obligation that closed on July 31, 2003. The portfolio is monitored by TCW Asset Management Company. The portfolio is composed of 55.5% residential mortgage-backed securities, 37.3% CDOs, 7% commercial mortgage-backed securities, and 0.2% corporate bonds. PORTER SQUARE: Fitch Cuts Rating on CDO II Class A-2 Notes to Csf ----------------------------------------------------------------- Fitch Ratings has downgraded one and affirmed three classes of Porter Square CDO II, Ltd./Inc. notes: -- $58,785,192 class A-2 notes downgraded to 'Csf' from 'CCsf'; -- $23,500,000 class B notes affirmed at 'Csf'; -- $10,775,177 class C notes affirmed at 'Csf'; -- $9,513,504 class D notes affirmed at 'Csf'. The rating downgrade reflects the deterioration to the portfolio since the last rating action in November 2009. Approximately 45.6% of the portfolio has been downgraded since November 2009. Defaulted collateral as defined by the trustee totals $27,313,131 or 42.0% of the portfolio. The class A-2 and class B notes are still receiving timely interest payments although part of the interest to class A-2 and all interest to class B is being fulfilled through the use of principal. All classes of notes are reliant on defaulted collateral to be paid off. Therefore, default is inevitable for all classes of notes and class A-2 has been downgraded to 'Csf'. Porter Square II is a structured finance collateralized debt obligation that closed on Oct. 27, 2004. The portfolio is monitored by TCW Asset Management Company. The portfolio is composed of 51.1% residential mortgage-backed securities, 41.6% CDOs, 6.2% commercial mortgage-backed securities, and 1.1% asset- backed securities. PORTER SQUARE: Fitch Cuts Rating on CDO III A-2 & B Notes to 'Dsf' ------------------------------------------------------------------ Fitch Ratings has downgraded two and affirmed three classes of Porter Square CDO III, Ltd./Inc. notes: -- $145,197,619 class A-1 notes affirmed at 'Csf'; -- $56,000,000 class A-2 notes downgraded to 'Dsf' from 'Csf'; -- $48,000,000 class B notes downgraded to 'Dsf' from 'Csf'; -- $15,397,081 class C notes affirmed at 'Csf'; -- $25,086,023 class D notes affirmed at 'Csf'. The rating downgrades reflect the default in the payment of interest to class A-2 and class B notes. These classes are non- deferrable and accordingly, have been downgraded to 'Dsf'. Porter Square III entered an Event of Default on Oct. 1, 2009, when the class A overcollateralization test fell below 100%. Acceleration of maturity occurred on Dec. 23, 2009; consequently, all interest and principal after the applicable fees and expenses is going to pay the interest due to and to pay down class A-1. Defaulted collateral as defined by the trustee totals $136,152,400 or 72.5% of the portfolio. All classes of notes are reliant on defaulted collateral to pay off. Default is inevitable for all notes. The class C and class D notes are deferring interest. Porter Square III is a structured finance collateralized debt obligation that closed on Oct. 25, 2005. The portfolio is monitored by TCW Asset Management Company. The portfolio is composed of 71.8% residential mortgage-backed securities and 28.2% CDOs. PRETSL COMBINATION: Moody's Cuts Rating on XXVI-2 Certs. to C (sf) ------------------------------------------------------------------ Moody's Investors Service announced that it has downgraded two combination note securities whose underlying components are significantly linked to bank and insurance trust preferred CDO tranches. Issuer: PreTSL Combination Series P XXVI-1 Trust -- PreTSL US$500,000 Combination Series P XXVI-1 Certificates (current rated balance of $441,703.81), Downgraded to A1 (sf); previously on April 28, 2009 Downgraded to Aa1 (sf) Issuer: PreTSL Combination Series P XXVI-2 Trust -- PreTSL US$11,500,000 Combination Series P XXVI-2 Certificates (current rated balance of $1,342,262.35), Downgraded to C (sf); previously on April 28, 2009 Downgraded to Ca (sf) Ratings Rationale PreTSL Combination Series P XXVI-1 Trust and PreTSL Combination Series P XXVI-2 Trust, issued on June 21, 2007, are combination note securities whose ratings are based primarily on the credit quality of the underlying securities and the legal structure of the transaction. The rating actions are a reflection of the change in the ratings of the underlying securities backing the combination notes. PreTSL US$500,000 Combination Series P XXVI-1 Certificates is composed of a treasury strip, and the Class A-1 Notes and Subordinate Income Notes issued by Preferred Term Securities XXVI, Ltd. while PreTSL US$11,500,000 Combination Series P XXVI-2 Certificates is composed of the Class C-1 Notes and Subordinate Income Notes issued by Preferred Term Securities XXVI, Ltd. As of the last rating action on April 28, 2009, the Class A-1 Notes and Class C-1 Notes were rated A1 (sf) and Ca (sf) respectively. The current ratings for the Class A-1 Notes and Class C-1 Notes are Ba1 (sf) and C (sf) respectively. The transaction portfolio collateralizing the underlying tranches issued by the TRUP CDO, Preferred Term Securities XXVI, Ltd., is mainly composed of trust preferred securities issued by small to medium sized U.S. community banks and insurance companies that are generally not publicly rated by Moody's. To evaluate their credit quality, Moody's derives credit scores for these non-publicly rated assets and evaluates the sensitivity of the rated transactions to their volatility, as described in Moody's Rating Methodology "Updated Approach to the Usage of Credit Estimates in rated Transactions", October 2009. The effect of the stress testing of these credit scores varies between one and three notches, depending on the total amount and relative size of these securities in the collateral pool. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. Moody's considers as well the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, and specific documentation features. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. Due to the impact of revised and updated key assumptions referenced in these rating methodologies, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, Moody's Asset Correlation, and weighted average recovery rate, may be different from the trustee's reported numbers. In particular, rating assumptions for all publicly rated corporate credits in the underlying portfolio have been adjusted for "Review for Possible Downgrade", "Review for Possible Upgrade", or "Negative Outlook". The transaction's portfolio was modeled, according to Moody's rating approach, using CDOROM v.2.6 to develop the loss distribution from which the Moody's Asset Correlation parameter was obtained. This parameter was then used as an input in a cash flow model using CDOEdge. CDOROM v.2.6 is available on moodys.com under Products and Solutions -- Analytical models, upon return of a signed free license agreement. Moody's Investors Service did not receive or take into account a third-party due diligence report on the underlying assets or financial instruments related to the monitoring of this transaction in the past six months. PRUDENTIAL SECURITIES: Moody's Takes Actions on 1999-NRF1 Notes --------------------------------------------------------------- Moody's Investors Service upgraded the rating of one class, downgraded three classes and affirmed three classes of Prudential Securities Secured Financing Corporation, Commercial Mortgage Pass-Through Certificates, Series 1999-NRF1. -- Cl. A-EC, Affirmed at Aaa (sf); previously on March 25, 1999 Definitive Rating Assigned Aaa (sf) -- Cl. F, Upgraded to Aaa (sf); previously on April 15, 2009 Upgraded to A1 (sf) -- Cl. G, Affirmed at Baa3 (sf); previously on Nov. 1, 2007 Upgraded to Baa3 (sf) -- Cl. H, Downgraded to B2 (sf); previously on Oct. 23, 2006 Upgraded to Ba2 (sf) -- Cl. J, Downgraded to Caa2 (sf); previously on March 25, 1999 Definitive Rating Assigned B1 (sf) -- Cl. K, Downgraded to C (sf); previously on April 15, 2009 Downgraded to Caa3 (sf) -- Cl. L, Affirmed at C (sf); previously on April 15, 2009 Downgraded to C (sf) Ratings Rationale The upgrade is due to the significant increase in subordination due to loan payoffs and amortization. The pool has paid down by 54% since Moody's last review. The downgrades are due to higher expected losses for the pool resulting from realized and anticipated losses from specially serviced and troubled loans and concerns about refinance risk associated with loans approaching maturity in an adverse environment. Twelve loans, representing 69% of the pool, have either matured or mature within the next six months. Three of these loans, representing 41% of the pool, have a Moody's stressed debt service coverage less than 1.00X. The affirmations are due to key parameters, including Moody's loan to value ratio and Moody's stressed DSCR remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. Moody's rating action reflects a cumulative base expected loss of 29.6% of the current balance. At last review, Moody's cumulative base expected loss was 12.3%. Moody's stressed scenario loss is 32.5% of the current balance. Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes. Moody's analysis reflects a forward-looking view of the likely range of collateral performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside an acceptable range of the key parameters may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated during the current review. Even so, deviation from the expected range will not necessarily result in a rating action. There may be mitigating or offsetting factors to an improvement or decline in collateral performance, such as increased subordination levels due to amortization and loan payoffs or a decline in subordination due to realized losses. Primary sources of assumption uncertainty are the current stressed macroeconomic environment and continuing weakness in the commercial real estate and lending markets. Moody's currently views the commercial real estate market as stressed with further performance declines expected in the industrial, office, and retail sectors. Hotel performance has begun to rebound, albeit off a very weak base. Multifamily has also begun to rebound reflecting an improved supply / demand relationship. The availability of debt capital is improving with terms returning towards market norms. Job growth and housing price stability will be necessary precursors to commercial real estate recovery. Overall, Moody's central global scenario remains "hook-shaped" for 2010 and 2011; Moody's expect overall a sluggish recovery in most of the world's largest economies, returning to trend growth rate with elevated fiscal deficits and persistent unemployment levels. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.50 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score, a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in Moody's analysis. Based on the model pooled credit enhancement levels at Aa2 and B2, the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade credit estimates is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the underlying rating of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the underlying rating level, is incorporated for loans with similar credit estimates in the same transaction. Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 9 compared to 6 at Moody's prior review. In cases where the Herf falls below 20, Moody's also employs the large loan/single borrower methodology. This methodology uses the excel-based Large Loan Model v 8.0 and then reconciles and weights the results from the two models in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan level proceeds derived from Moody's loan level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type, and sponsorship. These aggregated proceeds are then further adjusted for any pooling benefits associated with loan level diversity, other concentrations and correlations. Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated April 15, 2009. Moody's Investors Service did not receive or take into account a third party due diligence report on the underlying assets or financial instruments related to the monitoring of this transaction in the past six months. Deal Performance As of the October 18, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 92% to $78.8 million from $928.9 million at securitization. The Certificates are collateralized by 23 mortgage loans ranging in size from less than 1% to 23% of the pool, with the top ten loans representing 76% of the pool. The pool contains 14 conduit loans representing 45% of the pool. The remaining pool consists of one defeased loan (4% of the pool) and eight specially serviced loans (51% of the pool). Five loans, representing 16% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact deal performance. Eighteen loans have been liquidated from the pool, resulting in an aggregate realized loss of $11.8 million (25% loss severity overall). Eight loans, representing 51% of the pool, are currently in special servicing. Most of the loans were transferred to special servicing due to maturity default. The largest specially serviced loan is Louisville Marriott East Loan ($17.9 million - 23%), which is secured by a 254 room hotel located in suburban Louisville, Kentucky. The hotel's performance has been negatively impacted by new competition in the area. The loan transferred to special servicing in January 2009 for imminent default and is now real estate owned. The remaining seven specially serviced loans are secured by a mix of property types. Moody's has estimated an aggregate $21.9 million loss (55% expected loss on average) for the specially serviced loans. Based on the most recent remittance statement, Classes J through M have experienced cumulative interest shortfalls totaling $1.8 million. Moody's anticipates that the pool will continue to experience interest shortfalls because of the high exposure to specially serviced loans. Interest shortfalls are caused by special servicing fees, including workout and liquidation fees, appraisal subordinate entitlement reductions and extraordinary trust expenses. Moody's was provided with full year 2009 operating results for 90% of the pool's performing conduit loans. Excluding specially serviced loans, Moody's weighted average LTV is 65% compared to 74% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 11% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 10.3%. Excluding specially serviced loans, Moody's actual and stressed DSCRs are 1.77X and 2.35X, respectively, compared to 1.51X and 1.77X at last review. Moody's actual DSCR is based on Moody's net cash flow and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. Due to the high percentage of loans in special servicing, Moody's analysis was largely based on a loss and recovery analysis for specially serviced loans. The performing conduit component, which represents 45% of the pool, is stable and is performing in line with Moody's expectations. SALOMON BROTHERS: Moody's Downgrades Ratings on Five Classes ------------------------------------------------------------ Moody's Investors Service downgraded the ratings of five classes and affirmed six classes of Salomon Brothers Commercial Mortgage Trust 2001-C1, Commercial Mortgage Pass-Through Certificates, Series 2001-C1: -- Cl. A-3, Affirmed at Aaa (sf); previously on Jan. 3, 2002 Assigned Aaa (sf) -- Cl. X, Affirmed at Aaa (sf); previously on July 31, 2001 Definitive Rating Assigned Aaa (sf) -- Cl. B, Affirmed at Aaa (sf); previously on Dec. 13, 2006 Upgraded to Aaa (sf) -- Cl. C, Affirmed at Aa1 (sf); previously on Dec. 13, 2006 Upgraded to Aa1 (sf) -- Cl. D, Affirmed at Aa2 (sf); previously on Dec. 13, 2006 Upgraded to Aa2 (sf) -- Cl. E, Downgraded to A3 (sf); previously on Dec. 13, 2006 Upgraded to A1 (sf) -- Cl. F, Downgraded to Ba1 (sf); previously on Dec. 13, 2006 Upgraded to Baa1 (sf) -- Cl. G, Downgraded to Ca (sf); previously on Oct. 1, 2009 Downgraded to Ba3 (sf) -- Cl. H, Downgraded to C (sf); previously on Oct. 1, 2009 Downgraded to Caa1 (sf) -- Cl. J, Downgraded to C (sf); previously on Oct. 1, 2009 Downgraded to Ca (sf) -- Cl. K, Affirmed at C (sf); previously on Oct. 1, 2009 Downgraded to C (sf) Ratings Rationale The downgrades are due to higher expected losses for the pool resulting from realized and anticipated losses from specially serviced and troubled loans and concerns about refinancing risk associated with loans approaching maturity in an adverse environment. Eighty-two loans, representing 68% of the pool, mature within the next six months. Seventeen of these loans, representing 15% of the pool, have a Moody's stressed debt service coverage ratio less than 1.0X. The affirmations are due to key parameters, including Moody's loan to value ratio, Moody's stressed DSCR and the Herfindahl Index, remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. Moody's rating action reflects a cumulative base expected loss of 8.8% of the current balance. At last review, Moody's cumulative base expected loss was 5.6%. Moody's stressed scenario loss is 10.7% of the current balance. Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes. Moody's analysis reflects a forward-looking view of the likely range of collateral performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside an acceptable range of the key parameters may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated during the current review. Even so, deviation from the expected range will not necessarily result in a rating action. There may be mitigating or offsetting factors to an improvement or decline in collateral performance, such as increased subordination levels due to amortization and loan payoffs or a decline in subordination due to realized losses. Primary sources of assumption uncertainty are the current stressed macroeconomic environment and continuing weakness in the commercial real estate and lending markets. Moody's currently views the commercial real estate market as stressed with further performance declines expected in the industrial, office, and retail sectors. Hotel performance has begun to rebound, albeit off a very weak base. Multifamily has also begun to rebound reflecting an improved supply / demand relationship. The availability of debt capital is improving with terms returning towards market norms. Job growth and housing price stability will be necessary precursors to commercial real estate recovery. Overall, Moody's central global scenario remains "hook-shaped" for 2010 and 2011; Moody's expect overall a sluggish recovery in most of the world's largest economies, returning to trend growth rate with elevated fiscal deficits and persistent unemployment levels. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.50 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score, a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in Moody's analysis. Based on the model pooled credit enhancement levels at Aa2 and B2, the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade credit estimates is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit estimate of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the credit estimate level, is incorporated for loans with similar credit estimates in the same transaction. Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 57 compared to 73 at last review. Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated October 1, 2009. Moody's Investors Service did not receive or take into account a third party due diligence report on the underlying assets or financial instruments related to the monitoring of this transaction in the past six months. Deal Performance As of the October 18, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 44% to $530.1 million from $952.7 million at securitization. The Certificates are collateralized by 118 mortgage loans ranging in size from less than 1% to 3% of the pool, with the top ten loans representing 22% of the pool. Nineteen loans, representing 20% of the pool, have defeased and are collateralized with U.S. Government securities. Thirty-two loans, representing 28% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Sixteen loans have been liquidated from the pool, resulting in an aggregate realized loss of $38.9 million (37% loss severity). These losses have resulted in 100% loss for Classes L through P and a 41% principal loss for Class K. Twelve loans, representing 10% of the pool, are currently in special servicing. The largest specially serviced loan is Westford Technology Park II Loan ($10.5 million -- 2.0% of the pool), which is secured by a 105,000 square foot office property located in Westford, Massachusetts. The loan was transferred to speical servicing in July 2010 due to monetary default but is current. The remaining specially serviced loans are secured by a mix of property types. The master servicer has recognized appraisal reductions totaling $12.1 million for nine of the specially serviced loans. Moody's has estimated an aggregate $28.3 million loss (55% expected loss on average) for the specially serviced loans. Moody's has assumed a high default probability for 11 poorly performing loans representing 14% of the pool and has estimated a $12.7 million loss (17% expected loss based on a 55% probability default) from these troubled loans. Based on the most recent remittance statement, Classes J through K have experienced cumulative interest shortfalls totaling $744,893. Moody's anticipates that the pool will continue to experience interest shortfalls because of the exposure to specially serviced loans. Interest shortfalls are caused by special servicing fees, including workout and liquidation fees, appraisal subordinate entitlement reductions and extraordinary trust expenses. Moody's was provided with full year 2009 operating results for 68% of the pool. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 72% compared to 79% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 12% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.7%. Excluding specially serviced and troubled loans, Moody's actual and stressed DSCRs are 1.43X and 1.54X, respectively, compared to 1.34X and 1.42X at last review. Moody's actual DSCR is based on Moody's net cash flow and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. The top three performing conduit loans represent 9% of the pool balance. The largest loan is the Van Ness Post Centre Loan ($16.9 million -- 3.2% of the pool), which is secured by a 109,000 square foot mixed use property and an adjacent 144-space parking garage located in San Francisco, California. The loan matures in May 2011. The loan is on the watchlist due to a decrease in DSCR and low occupancy. Moody's LTV and stressed DSCR are 109% and 1.01 X, respectively, compared to 97% and 1.14X at last review. The second largest loan is the Ironwood Apartments Loan ($15.3 million -- 2.9% of the pool), which is secured by a 288- unit multifamily property located in Houston, Texas. The property was 92% leased as of December 2009, the same as last review. The loan is currently on the watchlist due to a low DSCR. The loan matures in February 2011. Due to poor performance, Moody's considers this loan to be a high default risk and has identified it as a troubled loan. Moody's LTV and stressed DSCR are 133% and 0.75X, respectively, compared to 155% and 0.64X at last review. The third largest loan is Union Square Marketplace Shopping Center Loan ($14.1 million -- 2.7% of the pool), which is secured by a 189,000 square foot retail center located approximately 20 miles southeast of Oakland in Union City, California. The property was 96% leased as of December 2009, the same as last review. The loan matures in January 2011. Moody's LTV and stressed DSCR are 59% and 1.8X, respectively, compared to 81% and 1.3X at last review. SCHOONER TRUST: DBRS Confirms B Rating on 2006-6 Class K Certs. --------------------------------------------------------------- DBRS has confirmed these ratings of all 14 classes of Schooner Trust Commercial Mortgage Pass-Through Certificates, Series 2006- 6: Class A-1 at AAA Class A-2 at AAA Class B at AA Class C at A Class D at BBB Class E at BBB (low) Class F at BB (high) Class G at BB Class H at BB (low) Class J at B (high) Class K at B Class L at B (low) Class XC at AAA Class XP at AAA The ratings reflect the slightly increased credit enhancement to the bonds from a balance reduction of approximately 8.5% since issuance, the healthy weighted-average debt service coverage ration (DSCR) of 1.53x for the pool and the defeasance of three loans in the pool, representing 4.07% of the current transaction balance. There are currently five loans, representing 6.6% of the transaction, on the servicer's watchlist; one of these loans is in the Top Ten, representing 3.08% of the pool. Prospectus ID#6, Alder Crossing Shopping Centre, is on the servicer's watchlist for the occupancy decline since issuance by approximately 25% as of March 2010. The property is located in Surrey, British Columbia and is anchored by a grocery store tenant with 40% of the NRA on a lease through 2015. The YE2009 DSCR is healthy at 1.37x and the loan per square foot is reasonable at $204, given the good location on King George Highway in the southern portion of the city and the age of the centre, which was constructed in 2004. Only one of the other four loans on the servicer's watchlist individually comprises greater than 1.0% of the pool: Prospectus ID #14, 2150 Islington Avenue, with 1.97% of the current transaction balance. This loan is collateralized by an office property in Toronto and is on the watchlist for an occupancy decline to 71% at YE2007, down from 91% at issuance. The September 2010 rent roll shows the property remaining at 71% occupancy. As of October 28, 2010, Altus InSite shows the property with 7% of the NRA available; DBRS has requested confirmation of the current occupancy from the servicer and will continue to monitor the loan. The DSCR for the two years of reduced occupancy was quite healthy, with the YE2008 DSCR at 1.16x and the YE2009 DSCR at 1.26x; furthermore, the loan per square foot of $51 is considered reasonable given the location and age of the asset, which was constructed in 1992. One of the remaining three loans on the servicer's watchlist will be placed on the DBRS HotList. An industrial property in Vaughn, Ontario, Prospectus ID #66, 50 & 70 Snidercroft Road (comprising 0.43% of the current transaction balance), is on the servicer's watchlist due to the Poor condition of the properties as noted during the servicer's 2009 site inspection. The buildings were cited for numerous structural issues as well as two environmental issues in an unsound refuse container for toxic chemicals and the storage of discarded tires at the property. The environmental issues have been addressed, according to correspondence from the borrower to the servicer, with the structural issues to be addressed by year-end 2010. DBRS would also note that 56.7% of the NRA between the two buildings is set to expire between November 2010 and April 2011. A leasing update has been requested from the servicer; DBRS will continue to monitor the upcoming rollover as well as the maintenance issues at the property. The YE2009 coverage is quite healthy at 1.74x and the leverage is low, with a current loan amount of $14 per square foot. DBRS applied a net cash flow stress of 20% across all loans in the pool and when comparing the DBRS required credit enhancement levels to the current credit enhancement for all classes, the confirmations as outlined were appropriate. DBRS continues to monitor this transaction on a monthly basis in the Global CMBS Monthly Surveillance report, which can provide more detailed information on the individual loans in the pool. SCHOONER TRUST: DBRS Confirms B Rating on 2007-8 Class K Certs. --------------------------------------------------------------- DBRS has confirmed these ratings of all 15 classes of Schooner Trust, Series 2007-8 Commercial Mortgage Pass-Through Certificates, Series 2007-8: Class A-1 at AAA Class A-2 at AAA Class A-J at AAA Class B at AA Class C at A Class D at BBB Class E at BBB (low) Class F at BB (high) Class G at BB Class H at BB (low) Class J at B (high) Class K at B Class L at B (low) Class XP at AAA Class XC at AAA All classes were confirmed with a Stable trend. The ratings reflect the increased credit enhancement to the bonds from a collateral reduction of approximately 9.63% since issuance, the healthy weighted-average debt service coverage ratio (DSCR) of 1.53x for the pool and the strong performance of the ten largest loans in the pool, which had a straight average debt yield of 10.9% for 2009. There is one loan on the servicer's watchlist, representing 1.19% of the transaction balance, Prospectus ID#24, 1599 Hurontario Street. The property is a Class B office property located just south of Queen Elizabeth Way in Mississauga, Ontario. This loan is on the watchlist for a low DSCR at YE2009 of 0.08x; this figure is representative of reduced cash flow at the property due to a decline in occupancy after losing the property's largest tenant with 44% of the NRA in 2008. After a few smaller tenants also vacated, the property occupancy was at 38% for much of 2009 before rebounding to 69% in the final months of the year and up to 93% as of August 2010. Altus InSite showed 3% available for lease as of November 2, 2010. The property performance should improve in the coming year; the borrower has invested heavily in the property since 2008, replacing the roof and renovating common areas at the property. There is one small loan in special servicing in the pool, Prospectus ID#66, Bonsor Commercial, representing 0.18% of the transaction balance. This loan transferred to the special servicer in October 2009 for payment default; since that time, the special servicer has secured a judgment against the borrower and is pursuing rights against the Guarantor. The loan is secured by a small retail property comprised of 6,995 sf in Burnaby, British Columbia. The property is currently listed for sale by the borrower in the range of $2 million; however, the special servicer is pursuing a Conduct of Sale order to facilitate the direct sale of the property by the special servicer through their choice of broker. The property is currently 50% occupied and the outstanding advances, as of the October 2010 remittance report, total $147,000, putting the trust's total exposure to this loan at $1.03 million. As such, if a loss is experienced, it should be minimal and sufficiently absorbed by the unrated Class M. DBRS applied a net cash flow stress of 20% across all the loans in the pool and when comparing the DBRS required credit enhancement levels to the current credit enhancement for all classes, the confirmations as outlined were appropriate. DBRS continues to monitor this transaction on a monthly basis in the Global CMBS Monthly Surveillance report, which can provide more detailed information on the individual loans in the pool. SEQUOIA ALTERNATIVE: Moody's Downgrades Ratings on Two Tranches --------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of two tranches from Sequoia Alternative Loan Trust 2006-1. The collateral backing this deal primarily consists of first-lien, adjustable rate Alt-A residential mortgages. Ratings Rationale The actions are a result of the continued performance deterioration in Alt-A pools in conjunction with home price and unemployment conditions that remain under duress. The actions reflect Moody's updated loss expectations on Alt-A pools issued from 2005 to 2007. To assess the rating implications of the updated loss levels on Alt-A RMBS, each individual pool was run through a variety of scenarios in the Structured Finance Workstation(R), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to small increments in losses on the underlying mortgage pool is taken into consideration when assigning ratings. The above mentioned approach "Alt-A RMBS Loss Projection Update: February 2010" is adjusted slightly when estimating losses on pools left with a small number of loans. To project losses on pools with fewer than 100 loans, Moody's first estimates a "baseline" average rate of new delinquencies for the pool that is dependent on the vintage of loan origination (10%, 19% and 21% for the 2005, 2006 and 2007 vintage respectively). This baseline rate is higher than the average rate of new delinquencies for the vintage to account for the volatile nature of small pools. Even if a few loans in a small pool become delinquent, there could be a large increase in the overall pool delinquency level due to the concentration risk. Once the baseline rate is set, further adjustments are made based on 1) the number of loans remaining in the pool and 2) the level of current delinquencies in the pool. The fewer the number of loans remaining in the pool, the higher the volatility and hence the stress applied. Once the loan count in a pool falls below 75, the rate of delinquency is increased by 1% for every loan less than 75. For example, for a pool with 74 loans from the 2005 vintage, the adjusted rate of new delinquency would be 10.10%. If current delinquency levels in a small pool is low, future delinquencies are expected to reflect this trend. To account for that, the rate calculated above is multiplied by a factor ranging from 0.2 to 2.0 for current delinquencies ranging from less than 2.5% to greater than 50% respectively. Delinquencies for subsequent years and ultimate expected losses are projected using the approach described in the methodology publication. The primary source of assumption uncertainty is the current macroeconomic environment, in which unemployment remains at high levels, and weakness persists in the housing market. Moody's notes an increasing potential for a double-dip recession, which could cause a further 20% decline in home prices (versus its baseline assumption of roughly 5% further decline). Overall, Moody's assumes a further 5% decline in home prices with stabilization in early 2011, accompanied by continued stress in national employment levels through that timeframe. Moody's Investors Service received and took into account one or more third party due diligence reports on the underlying assets or financial instruments in this transaction and the due diligence reports had a neutral impact on the rating. Complete rating actions are: Issuer: Sequoia Alternative Loan Trust 2006-1 -- Cl. A-1, Downgraded to Ca (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. A-2, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade SOLOSO CDO: S&P Downgrades Ratings on Two Classes to 'D' -------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings to 'D (sf)' on the class A-1LA and class A-1LB notes from Soloso CDO 2007-1 Ltd., a cash flow collateralized debt obligation transaction backed mainly by bank trust preferred securities. Concurrently, S&P affirmed its 'AAA (sf)' ratings on the class P-1 and P-2 combo notes. The 'AAA (sf)' rated notes are fully backed by U.S. Treasury principal strips. S&P's rating actions follow the receipt of an event of default notice dated Oct. 19, 2010, from the trustee subsequent to an interest shortfall that occurred on the class A-1LA and A-1LB notes on the Oct. 7, 2010, payment date. Consequently, S&P lowered its ratings on these classes of notes to 'D (sf)' since these two tranches are nondeferrable. The rating actions are consistent with S&P's published criteria for ratings on CDO transactions that have triggered an EOD due to an interest shortfall on a nondeferrable tranche. S&P will continue to monitor this transaction and take rating actions as S&P see appropriate. Ratings Lowered Soloso CDO 2007-1 Ltd Rating ------ Class To From ----- -- ---- A-1LA D CCC- A-1LB D CCC- Ratings Affirmed Soloso CDO 2007-1 Ltd Class Rating ----- ------ P-1 combo AAA P-2 combo AAA SOUNDVIEW HOME: Moody's Downgrades Ratings on Three Tranches ------------------------------------------------------------ Moody's Investors Service has downgraded the ratings of three tranches from Soundview Home Loan Trust 2006-WF1. The collateral backing this deal primarily consists of first-lien, fixed and adjustable rate Alt-A residential mortgages. Ratings Rationale The actions are a result of the continued performance deterioration in Alt-A pools in conjunction with home price and unemployment conditions that remain under duress. The actions reflect Moody's updated loss expectations on Alt-A pools issued from 2005 to 2007. To assess the rating implications of the updated loss levels on Alt-A RMBS, each individual pool was run through a variety of scenarios in the Structured Finance Workstation(R), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to small increments in losses on the underlying mortgage pool is taken into consideration when assigning ratings. The above mentioned approach "Alt-A RMBS Loss Projection Update: February 2010" is adjusted slightly when estimating losses on pools left with a small number of loans. To project losses on pools with fewer than 100 loans, Moody's first estimates a "baseline" average rate of new delinquencies for the pool that is dependent on the vintage of loan origination (10%, 19% and 21% for the 2005, 2006 and 2007 vintage respectively). This baseline rate is higher than the average rate of new delinquencies for the vintage to account for the volatile nature of small pools. Even if a few loans in a small pool become delinquent, there could be a large increase in the overall pool delinquency level due to the concentration risk. Once the baseline rate is set, further adjustments are made based on 1) the number of loans remaining in the pool and 2) the level of current delinquencies in the pool. The fewer the number of loans remaining in the pool, the higher the volatility and hence the stress applied. Once the loan count in a pool falls below 75, the rate of delinquency is increased by 1% for every loan less than 75. For example, for a pool with 74 loans from the 2005 vintage, the adjusted rate of new delinquency would be 10.10%. If current delinquency levels in a small pool is low, future delinquencies are expected to reflect this trend. To account for that, the rate calculated above is multiplied by a factor ranging from 0.2 to 2.0 for current delinquencies ranging from less than 2.5% to greater than 50% respectively. Delinquencies for subsequent years and ultimate expected losses are projected using the approach described in the methodology publication. The primary source of assumption uncertainty is the current macroeconomic environment, in which unemployment remains at high levels, and weakness persists in the housing market. Moody's notes an increasing potential for a double-dip recession, which could cause a further 20% decline in home prices (versus its baseline assumption of roughly 5% further decline). Overall, Moody's assumes a further 5% decline in home prices with stabilization in early 2011, accompanied by continued stress in national employment levels through that timeframe. Moody's Investors Service received and took into account one or more third party due diligence reports on the underlying assets or financial instruments in this transaction and the due diligence reports had a neutral impact on the rating. Complete rating actions are: Issuer: Soundview Home Loan Trust 2006-WF1 -- Cl. A-2, Downgraded to Caa1 (sf); previously on Jan. 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade -- Cl. A-3, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. A-4, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade STARM MORTGAGE: Moody's Downgrades Ratings on 10 Tranches --------------------------------------------------------- Moody's Investors Service has downgraded the ratings of 10 tranches from STARM Mortgage Loan Trust 2007-4. The collateral backing this deal primarily consists of first-lien, adjustable rate Alt-A residential mortgages. Ratings Rationale The actions are a result of the continued performance deterioration in Alt-A pools in conjunction with home price and unemployment conditions that remain under duress. The actions reflect Moody's updated loss expectations on Alt-A pools issued from 2005 to 2007. To assess the rating implications of the updated loss levels on Alt-A RMBS, each individual pool was run through a variety of scenarios in the Structured Finance Workstation(R), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to small increments in losses on the underlying mortgage pool is taken into consideration when assigning ratings. The above mentioned approach "Alt-A RMBS Loss Projection Update: February 2010" is adjusted slightly when estimating losses on pools left with a small number of loans. To project losses on pools with fewer than 100 loans, Moody's first estimates a "baseline" average rate of new delinquencies for the pool that is dependent on the vintage of loan origination (10%, 19% and 21% for the 2005, 2006 and 2007 vintage respectively). This baseline rate is higher than the average rate of new delinquencies for the vintage to account for the volatile nature of small pools. Even if a few loans in a small pool become delinquent, there could be a large increase in the overall pool delinquency level due to the concentration risk. Once the baseline rate is set, further adjustments are made based on 1) the number of loans remaining in the pool and 2) the level of current delinquencies in the pool. The fewer the number of loans remaining in the pool, the higher the volatility and hence the stress applied. Once the loan count in a pool falls below 75, the rate of delinquency is increased by 1% for every loan less than 75. For example, for a pool with 74 loans from the 2005 vintage, the adjusted rate of new delinquency would be 10.10%. If current delinquency levels in a small pool is low, future delinquencies are expected to reflect this trend. To account for that, the rate calculated above is multiplied by a factor ranging from 0.2 to 2.0 for current delinquencies ranging from less than 2.5% to greater than 50% respectively. Delinquencies for subsequent years and ultimate expected losses are projected using the approach described in the methodology publication. The primary source of assumption uncertainty is the current macroeconomic environment, in which unemployment remains at high levels, and weakness persists in the housing market. Moody's notes an increasing potential for a double-dip recession, which could cause a further 20% decline in home prices (versus its baseline assumption of roughly 5% further decline). Overall, Moody's assumes a further 5% decline in home prices with stabilization in early 2011, accompanied by continued stress in national employment levels through that timeframe. Moody's Investors Service received and took into account one or more third party due diligence reports on the underlying assets or financial instruments in this transaction and the due diligence reports had a neutral impact on the rating. Complete rating actions are: Issuer: STARM Mortgage Loan Trust 2007-4 -- Cl. 1A1, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1A2, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. 2A1, Downgraded to Caa1 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 2A2, Downgraded to Caa1 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 2A3, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. 2X, Downgraded to Caa1 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 3A1, Downgraded to Caa1 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 3A2, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. 4A1, Downgraded to Caa1 (sf); previously on Jan. 14, 2010 B2 (sf) Placed Under Review for Possible Downgrade -- Cl. 4A2, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade TCW HIGH: Moody's Upgrades Ratings on Four Classes of Notes ----------------------------------------------------------- Moody's Investors Service announced that it has upgraded the ratings of these notes issued by TCW High Income Partners, Ltd./TCW High Income Partners Corp.: -- US$25,000,000 Class II-A Senior Secured Floating Rate Notes due 2013 (current outstanding balance of $3,379,845), Upgraded to Aaa (sf); previously on June 11, 2010 Upgraded to Aa2 (sf); -- US$31,000,000 Class II-B Senior Secured Fixed Rate Notes due 2013 (current outstanding balance of $4,191,008), Upgraded to Aaa (sf); previously on June 11, 2010 Upgraded to Aa2 (sf); -- US$10,000,000 Class III-A Mezzanine Secured Floating Rate Notes due 2013, Upgraded to Ba1 (sf); previously on June 11, 2010 Upgraded to Caa2 (sf); -- US$23,000,000 Class III-B Mezzanine Secured Fixed Rate Notes due 2013, Upgraded to Ba1 (sf); previously on June 11, 2010 Upgraded to Caa2 (sf). Ratings Rationale According to Moody's, the rating actions taken on the notes result primarily from the delevering of the Class II Notes, which have been paid down by approximately 84% or $38.9 million since the last rating action in June 2010. A substantial proportion of this repayment is attributable to sales of the underlying securities in the portfolio in addition to scheduled principal proceeds. For example, in August 2010, the collateral manager has sold approximately $15 million of bonds at an average price close to par. As a result of the delevering, the overcollateralization ratios have increased since the last rating action in June 2010. As of the latest trustee report dated September 16, 2010, the Senior, the Class III and the Junior Par Value Tests are reported at 849.7%, 158.6% and 117.0%, respectively, versus May 2010 levels of 220.3%, 128.9% and 104.0%, respectively. Moody's also notes that the credit profile of the underlying portfolio has been relatively stable since the last rating action. Based on the September 2010 trustee report, the weighted average rating factor is 4154 compared to 4009 in May 2010, and securities rated Caa1 and below make up approximately 34.8% of the underlying portfolio versus 32.7%% in May 2010. Moody's adjusted WARF has declined since the last rating action due to a decrease in the percentage of securities with ratings on "Review for Possible Downgrade" or with a "Negative Outlook." The deal also experienced a decrease in defaults. While the transaction has benefited from delevering, Moody's noted that the portfolio includes a number of investments in securities that mature after the maturity date of the notes. Based on the trustee report dated September 16, 2010, securities that mature after the maturity date of the notes make up approximately 18.7% of the underlying portfolio versus 11.7% in May 2010. These investments potentially expose the notes to market risk in the event of liquidation at the time of the notes' maturity. Due to the impact of revised and updated key assumptions referenced in "Moody's Approach to Rating Collateralized Loan Obligations" and "Annual Sector Review (2009): Global CLOs," key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. In its base case, Moody's analyzed the underlying collateral pool to have a performing par and principal proceeds of $56.8 million, defaulted par of $15.9 million, weighted average default probability of 22.5% (implying a WARF of 4650), a weighted average recovery rate upon default of 21.2%, and a diversity score of 25. These default and recovery properties of the collateral pool are incorporated in cash flow model analysis where they are subject to stresses as a function of the target rating of each CLO liability being reviewed. The default probability is derived from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The average recovery rate to be realized on future defaults is based primarily on the seniority of the assets in the collateral pool. In each case, historical and market performance trends, and collateral manager latitude for trading the collateral are also factors. TCW High Income Partners, Ltd./TCW High Income Partners Corp., issued in August of 2001, is a collateralized bond obligation backed primarily by a portfolio of senior unsecured bonds. Moody's Investors Service did not receive or take into account a third-party due diligence report on the underlying assets or financial instruments related to the monitoring of this transaction in the past six months. Moody's modeled the transaction using the Binomial Expansion Technique, as described in Section 2.3.2.1 of the "Moody's Approach to Rating Collateralized Loan Obligations" rating methodology published in August 2009. In addition to the base case analysis described above, Moody's also performed a number of sensitivity analyses to test the impact on all rated notes, including these: 1. Various default probabilities to capture potential defaults in the underlying portfolio. 2. A range of recovery rate assumptions for all assets to capture variability in recovery rates. A summary of the impact of different default probabilities (expressed in terms of WARF levels) on all rated notes (shown in terms of the number of notches' difference versus the current model output, where a positive difference corresponds to lower expected losses), assuming that all other factors are held equal: Moody's Adjusted WARF -- 20% (3720) -- Class II-A: 0 -- Class II-B: 0 -- Class III-A: +2 -- Class III-B: +2 -- Class IV: 0 Moody's Adjusted WARF + 20% (5580) -- Class II-A: 0 -- Class II-B: 0 -- Class III-A: -1 -- Class III-B: -1 -- Class IV: 0 A summary of the impact of different recovery rate levels on all rated notes (shown in terms of the number of notches' difference versus the current model output, where a positive difference corresponds to lower expected losses), assuming that all other factors are held equal: Moody's Adjusted WARR + 2% (23.2%) -- Class II-A: 0 -- Class II-B: 0 -- Class III-A: +1 -- Class III-B: +1 -- Class IV: 0 Moody's Adjusted WARR - 2% (19.2%) -- Class II-A: 0 -- Class II-B: 0 -- Class III-A: 0 -- Class III-B: 0 -- Class IV: 0 Moody's notes that this transaction is subject to a high level of macroeconomic uncertainty, as evidenced by 1) uncertainties of credit conditions in the general economy and 2) the large concentration of speculative-grade debt maturing between 2012 and 2014 which may create challenges for issuers to refinance. CDO notes' performance may also be impacted by 1) the managers' investment strategies and behavior, 2) divergence in legal interpretation of CDO documentation by different transactional parties due to embedded ambiguities. Sources of additional performance uncertainties are described below: 1) Delevering: The main source of uncertainty in this transaction is whether delevering from unscheduled principal proceeds will continue and at what pace. Delevering may accelerate due to high prepayment levels in the bond market and/or collateral sales by the manager, which may have significant impact on the notes' ratings. 2) Recovery of defaulted assets: Market value fluctuations in defaulted assets reported by the trustee and those assumed to be defaulted by Moody's may create volatility in the deals' overcollateralization levels. Further, the timing of recoveries and the manager's decision to work out versus selling defaulted assets create additional uncertainties. Moody's analyzed defaulted recoveries assuming the lower of the market price and the recovery rate in order to account for potential volatility in market prices. 3) Long-dated assets: The presence of assets that mature beyond the CLO's legal maturity date exposes the deal to liquidation risk on those assets. Moody's assumes an asset's terminal value upon liquidation at maturity to be equal to the lower of an assumed liquidation value (depending on the extent to which the asset's maturity lags that of the liabilities) and the asset's current market value. TEXAS PUBLIC: Fitch Upgrades Rating on $86.2 Mil. Bonds From 'BB+' ------------------------------------------------------------------ Fitch Ratings upgrades to 'BBB' from 'BB+' approximately $86.2 million of outstanding revenue financing system bonds issued by the Texas Public Finance Authority (the authority) on behalf of Texas Southern University (TSU or the university). At the same time, Fitch assigns a 'BBB' rating to these series of TSU bonds issued by the authority: -- $31.5 million revenue financing system bonds series 2010. The series 2010 bonds (the bonds) are expected to price via negotiated sale on or about the week of Dec. 13, 2010. Proceeds of the bonds will fund the construction and equipping of a new technology center on the university's campus, partially fund a debt service reserve fund, with the remainder to be cash funded from the receipt of federal funds and insurance related to Hurricane Ike, and to pay various costs of issuance. The Rating Outlook is revised to Positive from Negative. Rating Rationale: -- The upgrade to 'BBB' primarily reflects the measured progress made by senior leadership at TSU, including the board of regents and management team, in implementing needed internal controls and other best practices necessary to preserve the university's financial integrity and ensure compliance with the requirements of external accreditation bodies. -- TSU's unique niche as the only historically black college and university within the state of Texas (the state, general obligation bonds rated 'AAA' by Fitch), its urban location and professionally focused program offerings, and broad geographic draw compared to its public university counterparts, helped support the rebound in student headcount during fall 2009 and fall 2010. -- Reflecting both its niche and role within the state's public higher education system, state support for both operations and capital has historically been significant and provides a level of credit stability; state appropriations for operations accounted for 36% of total revenues in fiscal 2010. -- TSU's more limited ability, as compared to other state public institutions, to materially raise tuition and fees without a loss in enrollment may limit its financial flexibility in dealing with potentially significant state funding reductions during the next biennium. -- Despite the issues related to governance and internal controls that have since been addressed, TSU has been able to maintain a generally stable, positive operating margin over the past five fiscal years, and a modest, though adequate, financial cushion relative to both operating expenditures and financial leverage. What Could Trigger An Upgrade: -- Ability to manage potential declines in state funding and/or modest enrollment volatility while sustaining operating performance at or above a break-even level. -- Modest growth in available funds, or cash and non-permanently restricted, expendable investments, which provide a financial cushion necessary to manage the uncertainty regarding state funding and enrollment. -- Additional debt, while none is currently expected, supported by a commensurate rise in resources available for its repayment. Security: RFS debt is secured by a broad pledge of all unencumbered revenues of the university, excluding state appropriations and restricted gifts. RFS debt classified as tuition revenue bonds, including the series 2010 bonds, are also eligible to receive an appropriation equal to debt service. Other security provisions offering varying degrees of protection include a cash funded debt service reserve fund equal to maximum annual debt service and an additional bonds test. Credit Summary: Established in 1947, TSU is a public, four-year, liberal arts institution and is the second-largest, single-campus African American university in the country. TSU's 145-acre campus is located approximately three miles from downtown Houston. As of June 2010, TSU's accreditation was fully restored, following an 29-month monitoring period during which the university submit quarterly compliance updates to the Southern Association of Colleges and Schools (SACS or the association), the regional accrediting association for southern states. TSU's accreditation was originally placed on probation in fiscal 2007 as a result of various issues stemming from lax governance and a lack of meaningful internal controls. In response to the sanction, the governor of the state replaced the BOR in phases through the spring of 2009, while at the same time installing a new, highly experienced management team. Since joining the university, the new BOR and management team has worked diligently to strengthen various administrative and financial management practices, build a university-wide culture of accountability, and create systems and infrastructure which facilitate effective communication and governance. In Fitch's view, these important changes are viewed favorably as they help reduce the risk that compliance violations which lead to the probationary action in fiscal 2007 will again resurface. Probationary accreditation and/or a lack of accreditation has extremely negative implications for a university's enrollment base as it can result in a loss of student financial aid. In the case of TSU, its years of probationary accreditation coincided with a period of enrollment volatility and extremely limited demand flexibility. Further exacerbating this situation was the dependence of a significant 85%-90% of the university's student body upon some form of financial assistance to defray the cost of attendance. With accreditation now fully restored, student demand, measured by both headcount and applications, has begun to rebound. Application volume is up 25.8% from fall 2007 to fall 2010, while full-time equivalent enrollment has grown 8% since its low point in fall 2008. Matriculation rates have also returned to the mid- 30% range, which is particularly noteworthy given the university's abandonment of open enrollment policies beginning in fall 2008 and focus on significantly increasing student quality. While TSU's historically high cost of attendance has fallen in line with state-wide averages for competing institutions as of fall 2010, the price sensitive nature of the university's market coupled with the high financial aid needs of its student body effectively limits ongoing, significant increases in tuition and fees without corresponding increases in tuition discounting. As of fall 2010, tuition discounting was approximately 29%, which is somewhat high for a public university. Despite an environment of volatility, TSU has produced positive operating margins for the past five years, averaging 6.5%. These results are driven by the university's well-diversified revenue streams, including approximately equal inflows from tuition and auxiliaries (30.3%), grant and contract revenue (31.9% and state appropriations (36%) based on fiscal 2010 unaudited results, which the university may need to rely in to manage declines in state appropriations in the next biennium. These positive operations have contributed to the university's ability to rebuild its liquidity levels, which had declined to $39.2 million in fiscal 2009, and returned to $55.4 million in fiscal 2010. The university's strong operations and adequate liquidity levels provide comfort regarding the university's moderately high debt burden, with MADs totaling 8.6% of total unrestricted revenues. Operations have provided an average of 1.7x actual debt service coverage over the past five years, while current available funds provide 2.9x pro-forma MADS coverage. WACHOVIA BANK: Moody's Downgrades Ratings on 17 2006-C24 Certs. --------------------------------------------------------------- Moody's Investors Service downgraded the ratings of 17 classes and affirmed six classes of Wachovia Bank Commercial Mortgage Trust, Commercial Pass-Through Certificates, Series 2006-C24: -- Cl. A-2, Affirmed at Aaa (sf); previously on April 5, 2006 Definitive Rating Assigned Aaa (sf) -- Cl. A-PB, Affirmed at Aaa (sf); previously on April 5, 2006 Definitive Rating Assigned Aaa (sf) -- Cl. A-3, Affirmed at Aaa (sf); previously on April 5, 2006 Definitive Rating Assigned Aaa (sf) -- Cl. A-1A, Affirmed at Aaa (sf); previously on April 5, 2006 Definitive Rating Assigned Aaa (sf) -- Cl. X-P, Affirmed at Aaa (sf); previously on April 5, 2006 Definitive Rating Assigned Aaa (sf) -- Cl. X-C, Affirmed at Aaa (sf); previously on April 5, 2006 Definitive Rating Assigned Aaa (sf) -- Cl. A-M, Downgraded to Aa3 (sf); previously on Sept. 29, 2010 Aaa (sf) Placed Under Review for Possible Downgrade -- Cl. A-J, Downgraded to Baa3 (sf); previously on Sept. 29, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade -- Cl. B, Downgraded to Ba1 (sf); previously on Sept. 29, 2010 A1 (sf) Placed Under Review for Possible Downgrade -- Cl. C, Downgraded to Ba2 (sf); previously on Sept. 29, 2010 A2 (sf) Placed Under Review for Possible Downgrade -- Cl. D, Downgraded to B2 (sf); previously on Sept. 29, 2010 A3 (sf) Placed Under Review for Possible Downgrade -- Cl. E, Downgraded to B3 (sf); previously on Sept. 29, 2010 Baa1 (sf) Placed Under Review for Possible Downgrade -- Cl. F, Downgraded to Caa1 (sf); previously on Sept. 29, 2010 Baa2 (sf) Placed Under Review for Possible Downgrade -- Cl. G, Downgraded to Caa2 (sf); previously on Sept. 29, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade -- Cl. H, Downgraded to Ca (sf); previously on Sept. 29, 2010 Ba2 (sf) Placed Under Review for Possible Downgrade -- Cl. J, Downgraded to Ca (sf); previously on Sept. 29, 2010 B1 (sf) Placed Under Review for Possible Downgrade -- Cl. K, Downgraded to C (sf); previously on Sept. 29, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. L, Downgraded to C (sf); previously on Sept. 29, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. M, Downgraded to C (sf); previously on Sept. 29, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. N, Downgraded to C (sf); previously on Sept. 29, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade -- Cl. O, Downgraded to C (sf); previously on Sept. 29, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade -- Cl. P, Downgraded to C (sf); previously on Sept. 29, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. Q, Downgraded to C (sf); previously on Sept. 29, 2010 Ca (sf) Placed Under Review for Possible Downgrade Ratings Rationale The downgrades are due to higher expected losses for the pool resulting from realized and anticipated losses from specially serviced and troubled loans. The affirmations are due to key parameters, including Moody's loan to value ratio, Moody's stressed debt service coverage ratio and the Herfindahl Index, remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. On September 29, 2010, Moody's placed 17 classes on review for possible downgrade. This action concludes Moody's review. Moody's rating action reflects a cumulative base expected loss of 10.5% of the current balance. At last full review, Moody's cumulative base expected loss was 2.1%. Moody's stressed scenario loss is 24.6% of the current balance. Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes. Moody's analysis reflects a forward-looking view of the likely range of collateral performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside an acceptable range of the key parameters may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated during the current review. Even so, deviation from the expected range will not necessarily result in a rating action. There may be mitigating or offsetting factors to an improvement or decline in collateral performance, such as increased subordination levels due to amortization and loan payoffs or a decline in subordination due to realized losses. Primary sources of assumption uncertainty are the current stressed macroeconomic environment and continuing weakness in the commercial real estate and lending markets. Moody's currently views the commercial real estate market as stressed with further performance declines expected in the industrial, office, and retail sectors. Hotel performance has begun to rebound, albeit off a very weak base. Multifamily has also begun to rebound reflecting an improved supply / demand relationship. The availability of debt capital is improving with terms returning towards market norms. Job growth and housing price stability will be necessary precursors to commercial real estate recovery. Overall, Moody's central global scenario remains "hook-shaped" for 2010 and 2011; Moody's expect overall a sluggish recovery in most of the world's largest economies, returning to trend growth rate with elevated fiscal deficits and persistent unemployment levels. The principal methodology used in these ratings was "CMBS: Moody's Approach to Rating Fusion Transactions" published in April 2005. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found on Moody's website. In addition to methodologies and research available on moodys.com, Moody's publishes a weekly summary of structured finance credit, ratings and methodologies, available to all registered users of Moody's website, at www.moodys.com/SFQuickCheck. Moody's review incorporated the use of the Excel-based CMBS Conduit Model v 2.50 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score, a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in Moody's analysis. Based on the model pooled credit enhancement levels at Aa2 and B2, the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade credit estimates is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the underlying rating of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the underlying rating level, is incorporated for loans with similar credit estimates in the same transaction. Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated November 19, 2007. Please see the ratings tab on the issuer / entity page on moodys.com for the last rating action and the ratings history. Moody's Investors Service did not receive or take into account a third party due diligence report on the underlying assets or financial instruments related to the monitoring of this transaction in the past six months. As of the October 18, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 20% to $1.61 billion from $2.00 billion at securitization. The Certificates are collateralized by 114 mortgage loans ranging in size from less than 1% to 13% of the pool, with the top ten loans representing 51% of the pool. Two loans, representing 0.4% of the pool, have defeased and are collateralized by U.S. Government securities. One loan, representing 1% of the pool, has an investment grade credit estimate. Twenty-nine loans, representing 25% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Three loans have been liquidated from the pool since securitization, resulting in an aggregate $8.0 million loss (58% loss severity on average). Currently 12 loans, representing 11% of the pool, are in special servicing. The largest specially serviced loan is the Grandeville on Saxon Loan ($27.5 million -- 1.7% of the pool), which is secured by a 316-unit multifamily property located in Orange City, Florida. The loan was transferred to special servicing in August 2010 due to monetary default and is currently 90+ days delinquent. The remaining 11 specially serviced loans are secured by a mix of property types. The master servicer has recognized an aggregate $64.4 million appraisal reduction for seven of the specially serviced loans. Moody's has estimated an aggregate loss of $89.5 million (59% expected loss on average) for the specially serviced loans. Moody's has assumed a high default probability for 13 poorly performing loans representing 12% of the pool and has estimated a $39.1 million loss (20% expected loss based on a 40% probability default) from these troubled loans. Moody's was provided with full year 2009 and partial year 2010 operating results for 87% and 54% of the non-defeased performing pool, respectively. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 110% compared to 108% at last full review. Moody's net cash flow reflects a weighted average haircut of 13% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.0%. Excluding specially serviced and troubled loans, Moody's actual and stressed DSCRs are 1.18X and 0.91X, respectively, compared to 1.23X and 0.92X at last full review. Moody's actual DSCR is based on Moody's net cash flow and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 20 compared to 44 at Moody's prior full review. The loan with a credit estimate is the Branmar Shopping Center loan ($15.5 million -- 1.0%), which is secured by a 156,000 square foot retail center located in Wilmington, Delaware. The center is anchored by Super Fresh and Walgreen's. The center was 92% leased as of April 2010, compared to 98% at last full review. Performance remains stable despite a decrease in occupancy. The loan has amortized 5% since last full review and matures in September 2015. Moody's current credit estimate and stressed DSCR are Baa3 and 1.39X, respectively, compared to Baa3 and 1.41X last full review. The top three performing conduit loans represent 26% of the pool balance. The largest loan is the Regency Portfolio Loan ($213.0 million -- 13.2%), which is secured by ten retail properties (originally 13) totaling 1.4 million square feet. The remaining properties are located in seven states, with the largest concentrations in California (37%) and Illinois (25%). The portfolio was 84% occupied as of December 2009, compared to 93% at last full review. Moody's LTV and stressed DSCR are 120% and 0.80X, respectively, compared to 110% and 0.92X at last full review. The second largest loan is the 1818 Market Street Loan ($122.0 million -- 7.6%), which is secured by a 983,160 square foot Class A office building located in Philadelphia, Pennsylvania. Property performance has declined since last review due to rising vacancy. The property was 76% leased as of May 2010 compared to 94% at last review. The loan has five months remaining in a 60-month interest only period and will amortize on a 360-month schedule maturing in March 2016. Moody's LTV and stressed DSCR are 127% and 0.77X, respectively, compared to 120% and 0.86X at last full review. The third largest loan is the Forum at Peachtree Parkway Loan ($84.0 million -- 5.2% of the pool), which is secured by a 389,159 square foot retail center located in Norcross, Georgia. The center's major tenants include Belk, Wakefield Beasley and Barnes & Noble. The center was 89% leased as of May 2010, compared to 90% at last full review. The loan is interest-only for its entire ten-year term maturing in March 2016. Moody's LTV and stressed DSCR are 114% and 0.80X, respectively, compared to 110% and 0.88X at last full review. WACHOVIA BANK: Moody's Reviews Ratings on 11 2006-C28 Certs. ------------------------------------------------------------ Moody's Investors Service placed 11 classes of Wachovia Bank Commercial Mortgage Securities Trust Commercial Mortgage Pass- Through Certificates, Series 2006-C28 on review for possible downgrade: -- Cl. A-M, Aa2 (sf) Placed Under Review for Possible Downgrade; previously on Nov. 19, 2009 Downgraded to Aa2 (sf) -- Cl. A-J, Baa1 (sf) Placed Under Review for Possible Downgrade; previously on Nov. 19, 2009 Downgraded to Baa1 (sf) -- Cl. B, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Nov. 19, 2009 Downgraded to Baa3 (sf) -- Cl. C, Ba3 (sf) Placed Under Review for Possible Downgrade; previously on Nov. 19, 2009 Downgraded to Ba3 (sf) -- Cl. D, B3 (sf) Placed Under Review for Possible Downgrade; previously on Nov. 19, 2009 Downgraded to B3 (sf) -- Cl. E, Caa1 (sf) Placed Under Review for Possible Downgrade; previously on Nov. 19, 2009 Downgraded to Caa1 (sf) -- Cl. F, Caa2 (sf) Placed Under Review for Possible Downgrade; previously on Nov. 19, 2009 Downgraded to Caa2 (sf) -- Cl. G, Caa3 (sf) Placed Under Review for Possible Downgrade; previously on Nov. 19, 2009 Downgraded to Caa3 (sf) -- Cl. H, Ca (sf) Placed Under Review for Possible Downgrade; previously on Nov. 19, 2009 Downgraded to Ca (sf) -- Cl. J, Ca (sf) Placed Under Review for Possible Downgrade; previously on Nov. 19, 2009 Downgraded to Ca (sf) -- Cl. K, Ca (sf) Placed Under Review for Possible Downgrade; previously on Nov. 19, 2009 Downgraded to Ca (sf) The classes were placed on review due to higher expected losses for the pool resulting from anticipated losses from specially serviced and troubled loans. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated November 19, 2009. Deal And Performance Summary As of the October 18, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 2% to $3.53 billion from $3.60 billion at securitization. The Certificates are collateralized by 207 mortgage loans ranging in size from less than 1% to 7% of the pool, with the top ten loans representing 43% of the pool. Forty-eight loans, representing 19% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. The pool has not experienced any realized losses to date. Currently, 25 loans, including two of the pool's top five loans, are in special servicing. The special serviced loans represent 18% of the pool. The largest specially serviced loan is the Montclair Plaza Loan ($190.0 million -- 5.4% of the pool), which is secured by a 875,000 square foot regional mall located in Montclair, California. The mall is anchored by Macy's, Sears and JC Penney. The loan was transferred to special servicing in January 2010 for monetary default and the loan is 60 days delinquent. The sponsor is General Growth Properties. The remaining 24 specially serviced loans are secured by a mix of property types. The master servicer has recognized an aggregate $205.3 million appraisal reduction for the specially serviced loans. Based on the most recent remittance statement, Classes H through NR have experienced cumulative interest shortfalls totaling $8.18 million. Moody's anticipates that the pool will continue to experience interest shortfalls because of the high exposure to specially serviced loans. Interest shortfalls are caused by special servicing fees, including workout and liquidation fees, appraisal subordinate entitlement reductions and extraordinary trust expenses. Moody's review will focus on potential losses from specially serviced and troubled loans and the performance of the overall pool. WCP WIRELESS: Fitch Rates Class C Notes at 'BB-sf' -------------------------------------------------- Fitch Ratings rates WCP Wireless Site Funding LLC, WCP Wireless Site RE Funding LLC, & WCP Wireless Site Non-RE Funding LLC's secured wireless site contract revenue notes, series 2010-1: -- $222,000,000 class A 'Asf'; Outlook Stable; -- $55,000,000 class B 'BBB-sf'; Outlook Stable; -- $50,000,000 class C 'BB-sf'; Outlook Stable. WESTERLY HOSPITAL: Moody's Junks Ratings on Series 1994 Bonds ------------------------------------------------------------- Moody's Investors Service has downgrade to Caa1 from B2 the long- term rating assigned to Westerly Hospital's Series 1994 bonds ($9.3 million outstanding), issued by Rhode Island Health & Educational Building Corporation. The outlook remains negative. The two-notch rating downgrade reflects the thin cash position at the end of FY 2010 (unaudited) that is largely supported by two bank lines of credit that the bank can call at any time if unrestricted cash falls below the required collateral amount. In the event that the bank were to demand payment or not extend the lines, very little liquidity would remain available for the fixed rate bondholders given the thin cash reserves. The rating outlook remains negative reflecting Moody's expectations for continued operating challenges and liquidity pressures. While management is endeavoring to improve performance, it is Moody's opinion that given the financial challenges, there would be further rating pressure should Westerly have a payment default. Ratings Rationale Legal Security: The Series 1994 Bonds are secured by a lien on the hospital's gross receipts. Negative mortgage lien. Debt service reserve fund maintained. Interest Rate Derivatives: None Challenges * Weak (unaudited) cash position as of September 30, 2010, with $14.8 million; when removing the lines of credit and a $4.6 million promissory note all at the same local bank, unencumbered cash declines to a weak $4.8 million management reports that there is $3.5 million of earnings on the permanent endowment which is available for debt service with board approval; this has not been used before; when including these funds, unencumbered cash would be $8.3 million * Large amount of obligations beyond the Series 1994 bonds of $9.3 million in the form of two bank lines and a promissory note totaling $9.7 million all with one local bank; the bank requires that all of these obligations be collateralized by a minimum of $10 million from unrestricted investments and $1.4 million in real estate (120% collateral requirement); $10 million represents a high 68% of Westerly's total unrestricted cash as of September 30, 2010; the bank can call the lines of credit if unrestricted cash falls below the required collateral amount * Large exposure to equities (60%) equities with no more than 6% allowed in any one company and no more than 20% allowed in any one industry. Four managers are utilized along with an outside investment advisor. No change to the investment allocation is anticipated * Operating loss of $800 thousand in FY 2010 was significantly unfavorable to budgeted expectations of $2.6 million; revenues declined 1.4% in FY 2010 from FY 2009; five year history of operating losses places further pressure on the ability to increase liquidity * Volume declines in seven out of the last ten years continuing in fiscal year 2010 with 5% decline in admissions offset by an increase in outpatient observation patients who reside on an inpatient unit, 12% decline in surgical volumes, 4% decline in emergency room visits, and 15% decline in newborns admissions * Large underfunded pension liability that continues to pressure Westerly's cash position although the pension plan is frozen Strengths * Market leader with over 70% market share in a favorable service area; no competition within in a 30 minute drive ;plans to expand outpatient services into north Stonington, CT may generate additional revenue and cash flow * Fully funded debt service reserve fund; all fixed rate debt Recent Developments/Results The downgrade to Caa1 from B2 and the maintenance of the negative outlook reflects Westerly's thin liquidity position compounded with continued weak financial performance. At unaudited fiscal year end 2010 unrestricted cash and investments was $14.8 million or 63.8 days, a 37% decline compared to FYE 2005 when unrestricted cash and investments was a much higher $23.5 million or 125 days. Moody's primary concern and key driver to the rating downgrade reflects the presence of two lines of credit and a promissory note from one local bank, Washington Trust (not rated by Moody's). The bank requires that Westerly maintain 120% of collateral for amount of lines available to the hospital (totals $5 million) and the $4.6 million promissory note outstanding. Management recently negotiated with the bank that $1.4 million in off campus properties can be used for collateral with the balance, $10 million, in unrestricted cash and investments. The $3.5 million line of credit expires on June 1, 2012, and the bank can call both lines of credit (totaling $5.0 million) at any time leaving very little for the Series 1994 bondholders or for working capital needs. When removing the $10 million collateral from cash the remaining cash and investments declines to a weak $4.8 million or 20.7 days cash; this also reduces cash to debt at FYE 2010 by more than half to 21.7% from 67%. When adding the $3.5 million of accumulated earnings on the endowment, pro forma cash would be $8.3 million or 35.8 days; board approval is needed to use these funds and it has not been used before. Furthermore, the cash position has been variable. Over the past four months, unrestricted cash has ranged from a low point of $11.9 million, a 19% decline from the end of FY 2009 to the present amount of $14.7 million. The increased pension liability adds further pressure on Westerly's cash position. Based on the interim statements, the pension liability at the end of FY 2010 increased to $20.4 million from $16.3 million at the end of FY 2009. A further credit concern is Westerly's investment policy. 60% of Westerly's cash is invested in equities with no more than 6% allowed in any one company and no more than 20% allowed in any one industry. Four managers are utilized along with an outside investment advisor. Management anticipates no change to the investment allocation. This policy makes the hospital's cash balance susceptible to variability in investment returns. With the declines in cash over the last six years and a volatile market, Moody's believe Westerly has reached a point that minimal investment losses could result in a rapid decline in liquidity. Contributing to the decline in cash position are the operating losses Westerly has reported annually for the past ten years. In FY 2010 Westerly is reporting an operating loss of $800 thousand (-0.9% operating margin) similar to the $883 thousand operating loss (-1.0% operating margin) recorded in FY 2009. FY 2010 results were materially off budget as a $2.9 million gain was expected. The primary driver to the operating losses is the variability in volumes, with declines in admissions recorded in seven out of the last ten years. FY 2010 represents another year of volume declines with inpatient medical/surgical admissions down 5% offset by an increase in outpatient observation patients who reside on an inpatient unit, outpatient surgeries down 12%, emergence room visits down 4%, and newborn admission down 15% from the prior year period. Management attributes the declines to the economy and physician departures. As a result, revenues are down 1.4% in FY 2010 from FY 2009 although management responded with a 1% decline in expenses achieved through cost saving initiatives including reducing supply costs, overtime, and the use of temporary employees. At this time, the budget for FY 2011 is not available. Westerly has a debt service reserve fund that is fully funded with cash. There are no new debt plans and capital spending in FY 2010 was $3.5 million funded with cash flow and leases. Future capital spending will be a function of cash flow performance. In addition to the bonds, lines of credit and promissory note, Westerly also has $4.5 million in capital lease obligations per the FY 2009 audit. The average age of plant is very high at 16.5 years. Outlook The negative rating reflects Moody's expectations for continued operating challenges and liquidity pressures. While management is endeavoring to improve performance, it is Moody's opinion that given the financial challenges, there would be further rating pressure should Westerly have a payment default. What could change the rating -- Up Unlikely given the negative outlook; however, over the longer term a consistent trend of improving operating performance that Moody's believe is sustainable, material increase in unencumbered liquidity and increased volumes What could change the rating -- Down Bankruptcy filing or payment default, further decline in cash reserves Key Indicators Assumptions & Adjustments: -- Based on financial statements for The Westerly Hospital and Subsidiary -- First number reflects audit year ended September 30, 2009 -- Second number reflects unaudited year ended September 30, 2010 -- Investment returns normalized at 6% unless otherwise noted * Inpatient admissions: 4,789; 4,543 * Total operating revenues: $89.1 million; $88.5 million * Moody's-adjusted net revenue available for debt service: $6.4 million; $6.8 million * Total debt outstanding: $21.7 million; $22.1 million * Maximum annual debt service: $2.25 million; $2.25 million * MADS Coverage with reported investment income: 2.28 times; 2.63 times * Moody's-adjusted MADS Coverage with normalized investment income: 2.84 times; 3.02 times * Debt-to-cash flow: 4.32 times; 4.01 times * Days cash on hand: 60.8 days; 63.8 days * Cash-to-debt: 65.7%; 67.0% * Operating margin: -1.0%; -0.9% * Operating cash flow margin: 5.5%; 5.8% Rated Debt (debt outstanding as of 9/30/2009): -- Series 1994 ($9.3 million outstanding) rated Caa1 The last rating action with respect to Westerly Hospital was on January 16, 2009, when a municipal finance scale rating of B2 was assigned and affirmed and the outlook was negative. That rating was subsequently recalibrated to B2 on May 7, 2010. WIREFREE PARTNERS: S&P Withdraws 'BB-' Rating on $138.5 Mil. Notes ------------------------------------------------------------------ Standard & Poor's Ratings Services withdrew its rating on Wirefree Partners III LLC's $138.5 million PCS spectrum lease-backed notes series 2005-1 after the issuer sold all licenses to lessees and used the proceeds to redeem the notes in full. The Wirefree securitization was backed by lease agreements for Personal Communication Services spectrum and PCS spectrum licenses. As the issuer announced in June of this year, the lessees exercised their lessee purchase option pursuant to the lease agreements, which constitutes a mandatory redemption event. The payment date for the mandatory redemption event was Nov. 2, 2010, at which time the issuer repaid all the notes in full. Rating Withdrawn Wirefree Partners III LLC $138.5 million PCS spectrum lease-backed notes series 2005-1 Rating ------ Class To From ----- -- ---- Notes NR BB- (sf) NR - Not rated. * Fitch Downgrades Ratings on 229 Bonds in 155 RMBS Deals --------------------------------------------------------- Fitch Ratings has downgraded 229 bonds in 155 U.S. RMBS transactions to 'Dsf'. The downgrades indicate that the bonds in question have incurred a principal write-down. The bonds that Fitch is downgrading to 'Dsf' were all previously rated 'Csf', indicating an expected default. The action is limited to just the bonds with write-downs. The remaining bonds in these transactions have not been analyzed and the Recovery Ratings have not been updated as part of this review. Of the 155 transactions affected by these downgrades, 61 are Prime, 50 Alt-A and 44 are Subprime. The majority of the bonds (71%) have a Recovery Rating of 'RR5' or 'RR6' indicating that minimal recovery is expected. Some 29% of the bonds have Recovery Ratings of either 'RR2' or 'RR3', which indicates anywhere from 50%-90% of the outstanding balance is expected to be recovered. The downgrades are part of Fitch's ongoing surveillance process. Fitch will continue to monitor these transactions for additional defaults. The spreadsheet also details Fitch's assignment of Recovery Ratings to the transactions. The Recovery Rating scale is based upon the expected relative recovery characteristics of an obligation. For structured finance, Recovery Ratings are designed to estimate recoveries on a forward-looking basis while taking into account the time value of money. * Moody's Reviews Ratings on Tranches From Three Subprime RMBS -------------------------------------------------------------- Moody's Investors Service has placed tranches with an outstanding balance of $112 million from three subprime residential mortgage- backed securities deals on review for possible downgrade. These three deals were not included in the analysis for Moody's review action announcement released on April 8 for pre-05 RMBS. Actions were prompted by continued performance deterioration in these vintages. Review Action To determine which tranches to place on review, Moody's compared the tranches' credit enhancement from subordination plus one and a half years of excess spread to a loss proxy that was based on a multiple of two times the lifetime pipeline losses expected from the related pools. The lifetime pipeline loss was derived based on lifetime roll rates to default of 85% for 60-day delinquencies, 95% for 90+day delinquencies, 100% for loans in foreclosure, and 100% for real estate owned, each applied with a severity assumption of 70%. Tranches without enough credit enhancement to sustain current ratings based on this calculation have been placed on review for possible downgrade. Revision of Loss Methodology for Seasoned RMBS In the coming months, Moody's will update its loss projection methodology for seasoned RMBS, and will release a report detailing the updated methodology. Complete rating actions are: Issuer: ACE Securities Corp. Home Equity Loan Trust, Series 2004- IN1 -- Cl. M-1, Aa2 (sf) Placed Under Review for Possible Downgrade; previously on Aug. 13, 2004 Assigned Aa2 (sf) -- Cl. M-2, A2 (sf) Placed Under Review for Possible Downgrade; previously on Aug. 13, 2004 Assigned A2 (sf) -- Cl. M-3, A3 (sf) Placed Under Review for Possible Downgrade; previously on Aug. 13, 2004 Assigned A3 (sf) -- Cl. M-4, Baa2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 3, 2009 Downgraded to Baa2 (sf) -- Cl. M-5, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 3, 2009 Downgraded to Baa3 (sf) -- Cl. M-6, Ba2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 3, 2009 Downgraded to Ba2 (sf) -- Cl. B, Ca (sf) Placed Under Review for Possible Downgrade; previously on Feb. 3, 2009 Downgraded to Ca (sf) Issuer: Bear Stearns Asset-Backed Securities Trust 2002-1 -- Cl. 1-A5, Aaa (sf) Placed Under Review for Possible Downgrade; previously on April 23, 2002 Assigned Aaa (sf) -- Cl. 2-A, Aaa (sf) Placed Under Review for Possible Downgrade; previously on April 23, 2002 Assigned Aaa (sf) -- Cl. M-1, Aa2 (sf) Placed Under Review for Possible Downgrade; previously on April 23, 2002 Assigned Aa2 (sf) -- Cl. M-2, Baa2 (sf) Placed Under Review for Possible Downgrade; previously on June 5, 2009 Downgraded to Baa2 (sf) -- Cl. B, Ba3 (sf) Placed Under Review for Possible Downgrade; previously on June 5, 2009 Downgraded to Ba3 (sf) Issuer: C-BASS Mortgage Loan Asset-Backed Certificates, Series 2004-CB8 -- Cl. M-1, A1 (sf) Placed Under Review for Possible Downgrade; previously on March 16, 2009 Downgraded to A1 (sf) -- Cl. M-2, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on March 16, 2009 Downgraded to Baa3 (sf) -- Cl. M-3, B1 (sf) Placed Under Review for Possible Downgrade; previously on March 16, 2009 Downgraded to B1 (sf) -- Cl. B-1, Caa2 (sf) Placed Under Review for Possible Downgrade; previously on March 16, 2009 Downgraded to Caa2 (sf) * S&P Downgrades Ratings on 71 Certs. From 10 CMBS Transactions --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 71 classes of certificates from 10 U.S. commercial mortgage-backed securities transactions due to interest shortfalls. S&P lowered its ratings on 51 of these classes to 'D (sf)' because S&P expects these interest shortfalls to continue. Forty-nine of the 51 classes that S&P downgraded to 'D (sf)' have had accumulated interest shortfalls outstanding for five or more months. The recurring interest shortfalls for the respective certificates are primarily due to one or more of these factors: * Appraisal subordinate entitlement reductions in effect for specially serviced loans; * Lack of servicer advancing for loans where nonrecoverable advance declarations have been made; and * Special servicing fees. Standard & Poor's analysis primarily considered the ASERs based on appraisal reduction amounts calculated using recent Member of the Appraisal Institute appraisals. S&P also considered servicer nonrecoverable advance declarations and special servicing fees that are likely, in S&P's view, to cause recurring interest shortfalls. ARAs and resulting ASERs are implemented in accordance with each respective transaction's terms. Typically, these terms call for the automatic implementation of an ARA equal to 25% of the stated principal balance of a loan when a loan is 60 days past due and an appraisal or other valuation is not available within a specified timeframe. S&P primarily considered ASERs based on ARAs calculated from MAI appraisals when deciding which classes from the affected transactions to downgrade to 'D (sf)' because ARAs based on a principal balance haircut are highly subject to change, or even reversal, once the special servicer obtains the MAI appraisals. Servicer nonrecoverable advance declarations can prompt shortfalls due to a lack of debt service advancing, the recovery of previously made advances deemed nonrecoverable, or the failure to advance trust expenses when nonrecoverable declarations have been determined. Trust expenses may include, but are not limited to, property operating expenses, property taxes, insurance payments, and legal expenses. Banc of America Commercial Mortgage Inc. Series 2004-4 S&P lowered its ratings on the class H, J, K, and L certificates from Banc of America Commercial Mortgage Inc.'s series 2004-4 due to interest shortfalls resulting from ASERs related to the seven loans that are currently with the special servicer, Orix Capital Markets LLC, as well as special servicing fees. S&P lowered its rating on the class G certificates because S&P believes the class is susceptible to future interest shortfalls. As of the Oct. 12, 2010, remittance report, ARAs totaling $28.3 million were in effect for seven loans. The total reported ASER amount was $138,779 and the reported cumulative ASER amount was $1.6 million. Standard & Poor's considered the seven ASERs (totaling $141,261), all of which were based on MAI appraisals, as well as current special servicing fees in determining its rating actions. The reported interest shortfalls totaled $110,606 and have affected all of the classes subordinate to and including class J. Classes J, K, and L have had accumulated interest shortfalls outstanding for 11 months, and S&P expects these shortfalls to remain outstanding for the foreseeable future. Consequently, S&P downgraded these classes to 'D (sf)'. The collateral pool for the BACM 2004-4 transaction consists of 78 loans with an aggregate trust balance of $1.04 billion. As of the Oct. 12, 2010, remittance report, seven loans ($63.9 million; 7.0%) in the pool were with the special servicer. The payment status of these loans is: five ($54.9 million, 6.0%) are real estate owned, one ($3.3 million, 0.4%) is in foreclosure, and one ($5.8 million, 0.6%) is more than 90 days delinquent. Banc of America Commercial Mortgage Inc. Series 2005-3 S&P lowered its ratings on the class F, G, H, J, K, L, M, and N certificates from Banc of America Commercial Mortgage Inc.'s series 2005-3 due to interest shortfalls primarily resulting from ASERs related to seven of the 13 loans that are currently with the special servicer, LNR Partners Inc., as well as special servicing fees. S&P lowered its rating on the class E certificates because S&P believes the class is susceptible to future interest shortfalls. As of the Oct. 12, 2010, remittance report, ARAs totaling $169.8 million were in effect for 12 loans. The total reported ASER amount was $678,213, and the reported cumulative ASER amount was $5.7 million. Standard & Poor's considered four ASERs (totaling $395,169), all of which were based on MAI appraisals, as well as current special servicing fees in determining its rating actions. The reported interest shortfalls totaled $817,951 and have affected all of the classes subordinate to and including class F. Classes H, J, K, L, M, and N have had accumulated interest shortfalls outstanding for eight (class H) and nine (classes J-N) months, and S&P expects these shortfalls to remain outstanding for the foreseeable future. Consequently, S&P downgraded these classes to 'D (sf)'. The collateral pool for the BACM 2005-3 transaction consists of 88 loans with an aggregate trust balance of $2.0 billion. As of the Oct. 12, 2010, remittance report, 13 loans ($390.2 million; 20.4%) in the pool were with the special servicer. The payment status of the delinquent loans is: One ($21.4 million, 1.1%) is REO, one ($132.0 million, 6.9%) is in foreclosure, three ($35.2 million, 1.8%) are more than 90 days delinquent, six ($177.8 million, 9.3%) are matured balloons, and two ($23.8 million, 1.2%) are in their grace periods. Banc of America Commercial Mortgage Inc. Series 2005-4 S&P lowered its ratings on the class F, G, H, J, K, L, M, N, and O certificates from Banc of America Commercial Mortgage Inc.'s series 2005-4 due to interest shortfalls primarily resulting from ASERs related to 12 of the 22 loans that are currently with the special servicer, ORIX, as well as special servicing fees. As of the Oct. 12, 2010, remittance report, ARAs totaling $86.9 million were in effect for 12 loans. The total reported ASER amount was $343,437, and the reported cumulative ASER amount was $2.9 million. Standard & Poor's considered nine ASERs (totaling $334,850), all of which were based on MAI appraisals, as well as current special servicing fees in determining its rating actions. The reported interest shortfalls totaled $421,293 and have affected all of the classes subordinate to and including class G. Classes G, H, J, K, L, M, N, and O have had accumulated interest shortfalls outstanding for nine months, and S&P expects these shortfalls to remain outstanding for the foreseeable future. Consequently, S&P downgraded these classes to 'D (sf)'. The collateral pool for the BACM 2005-4 transaction consists of 118 loans with an aggregate trust balance of $1.38 billion. As of the Oct. 12, 2010, remittance report, 22 loans ($288.2 million; 20.8%) in the pool were with the special servicer. The payment status of the delinquent loans is: four ($32.1 million, 2.3%) are REO, four ($36.2 million, 2.6%) are in foreclosure, three ($121.9 million, 8.8%) are more than 90 days delinquent, two ($23.2 million, 1.7%) are matured balloons, one ($17.3 million, 1.3%) is 30 days delinquent, three ($46.3 million, 3.3%) are in their grace periods, and four ($11.2 million, 0.8%) are current. COMM 2005-C6 S&P lowered its ratings on the class F, G, and H certificates from COMM 2005-C6 due to interest shortfalls resulting from ASERs related to six of the 10 loans that are currently with the special servicer, Helios AMC LLC, as well as special servicing fees. As of the Oct. 12, 2010, remittance report, ARAs totaling $57.5 million were in effect for six loans. The total reported ASER amount was $270,232, and the reported cumulative ASER amount was $2.7 million. Standard & Poor's considered four ASERs (totaling $222,278), all of which were based on MAI appraisals, as well as current special servicing fees in determining its rating actions. The reported interest shortfalls totaled $325,606 and have affected all of the classes subordinate to and including class F. Class H has had accumulated interest shortfalls outstanding for 12 months, and S&P expects these shortfalls to remain outstanding for the foreseeable future. Consequently, S&P downgraded this class to 'D (sf)'. The collateral pool for COMM 2005-6 consists of 124 loans with an aggregate trust balance of $1.9 billion. As of the Oct. 12, 2010, remittance report, 10 loans ($165.7 million; 9.0%) in the pool were with the special servicer. The payment status of these loans is: four (60.0 million, 3.2%) are REO, two ($57.3 million, 3.1%) are more than 90 days delinquent, one ($15.5 million, 0.8%) is 30 days delinquent, two ($26.3 million, 1.4%) are in their grace periods, and one ($6.6 million, 0.4%) is current. GE Commercial Mortgage Corp. Series 2005-C4 S&P lowered its ratings on the class H, J, K, L, M, N, O, and P certificates from GE Commercial Mortgage Corp.'s series 2005-C4 due to interest shortfalls resulting from ASERs related to 10 of the 16 loans that are currently with the special servicer, Midland Loan Servicers Inc. (Midland), as well as special servicing fees. As of the Oct. 12, 2010, remittance report, ARAs totaling $91.5 million were in effect for 10 loans. The total reported ASER amount was $416,534, and the reported cumulative ASER amount was $3.7 million. Standard & Poor's considered nine ASERs, all of which were based on MAI appraisals, as well as current special servicing fees in determining its rating actions. The reported interest shortfalls totaled $490,980 and have affected all of the classes subordinate to and including class J. Classes J, K, L, M, N, O, and P have had accumulated interest shortfalls outstanding for six (classes J and K), seven (class L), eight (classes M, N, and O), and 11 (class P) months, and S&P expects these shortfalls to remain outstanding for the foreseeable future. Consequently, S&P downgraded these classes to 'D (sf)'. The collateral pool for the GECM 2005-C4 transaction consists of 162 loans with an aggregate trust balance of $2.24 billion. As of the Oct. 12, 2010, remittance report, 16 loans ($525.5 million; 23.4%) in the pool were with the special servicer. The payment status of these loans is: one ($3.8 million, 0.2%) is in foreclosure, eight ($127.7 million, 5.7%) are more than 90 days delinquent, two ($35.6 million, 1.6%) are 60 days delinquent, one ($71.3 million, 3.2%) is a matured balloon, two ($164.0 million, 7.3%) are less than 30 days delinquent, and two ($123.0 million, 5.5%) are current. JPMorgan Chase Commercial Mortgage Securities Trust 2007-CIBC19 S&P lowered its ratings on the class F, G, H, J, K, L, M, N, and P certificates from JPMorgan Chase Commercial Mortgage Securities Trust 2007-CIBC19 due to interest shortfalls resulting from ASERs related to 21 of the 26 loans that are currently with the special servicer, LNR, as well as interest not advanced and special servicing fees. As of the Oct. 12, 2010, remittance report, ARAs totaling $165.8 million were in effect for the 26 loans in special servicing. The total reported ASER amount was $714,357, and the reported cumulative ASER amount was $4.9 million. Standard & Poor's considered 14 ASERs (totaling $521,469), all of which were based on MAI appraisals, as well as interest not advanced ($78,666) and current special servicing fees, in determining its rating actions. The reported interest shortfalls totaled $852,997 and have affected all of the classes subordinate to and including class F. Classes J, K, L, M, N, and P have had accumulated interest shortfalls outstanding for 10 (classes J and K) and 11 (classes L, M, N, and P) months, and S&P expects these shortfalls to remain outstanding for the foreseeable future. Consequently, S&P downgraded these classes to 'D (sf)'. The collateral pool for the JPMC 2007-CIBC19 transaction consists of 234 loans with an aggregate trust balance of $3.18 billion. As of the Oct. 12, 2010, remittance report, 26 loans ($358.9 million; 11.3%) in the pool were with the special servicer. The payment status of these loans is: six ($49.2 million, 1.5%) are REO, two ($60.9 million, 1.9%) are in foreclosure, and 18 ($248.9 million, 7.8%) are more than 90 days delinquent. LB-UBS Commercial Mortgage Trust 2004-C4 S&P lowered its ratings on the class K, L, M, and N certificates from LB-UBS Commercial Mortgage Trust 2004-C4 due to interest shortfalls resulting from ASERs related to three of the seven loans that are currently with the special servicer, LNR, as well as special servicing fees. S&P lowered its rating on the class J certificate because S&P believes the class is susceptible to future interest shortfalls. As of the Oct. 18, 2010, remittance report, ARAs totaling $11.8 million were in effect for three loans. The total reported ASER amount was $61,029, and the reported cumulative ASER amount was $190,440. Standard & Poor's considered two ASERs, both of which were based on MAI appraisals, as well as current special servicing fees, in determining its rating actions. The reported interest shortfalls totaled $83,546 million and have affected all of the classes subordinate to and including class L. Classes M and N have had accumulated interest shortfalls outstanding for eight months, and S&P expects these shortfalls to remain outstanding for the foreseeable future. Consequently, S&P downgraded these classes to 'D (sf)'. The collateral pool for the LB-UBS 2004-C4 transaction consists of 85 loans with an aggregate trust balance of $988.6 million. As of the Oct. 18, 2010, remittance report, seven loans ($81.6 million; 8.3%) in the pool were with the special servicer. The payment status of these loans is: five ($43.0 million, 4.4%) are in foreclosure, and two ($38.6 million, 3.9%) are more than 90 days delinquent. ML-CFC Commercial Mortgage Trust 2007-5 S&P lowered its ratings on the class H, J, K, L, M, N, and P certificates from ML-CFC Commercial Mortgage Trust 2007-5 due to recurring interest shortfalls resulting from ASERs related to four of the 23 loans that are currently with the special servicer, CWCapital Asset Management LLC, as well as interest not advanced on two loans and special servicing fees. As of the Oct. 15, 2010, remittance report, ARAs totaling $24.2 million were in effect for six loans. The total reported ASER amount was $24,143, and the reported cumulative ASER amount was $584,653. Standard & Poor's considered the six ASERs, which were based on an MAI appraisals, as well as interest not advanced ($77,160) and current special servicing fees in determining its rating actions. The reported interest shortfalls totaled $490,039 and have affected all of the classes subordinate to and including class H. Classes H, J, K, L, M, N, and P have had accumulated interest shortfalls outstanding for two (class H), three (class J), six (classes K and L) and 11 (classes M, N, and P) months, and S&P expects these shortfalls to remain outstanding for the foreseeable future. Consequently, S&P downgraded these classes to 'D (sf)'. The collateral pool for the ML-CFC 2007-5 transaction consists of 323 loans with an aggregate trust balance of $4.30 billion. As of the Oct. 15, 2010, remittance report, 23 loans ($1.03 billion; 23.9%) in the pool were with the special servicer, including the Peter Cooper Village and Stuyvesant Town loan, which is the largest loan in the pool ($800 million, 18.6%). The payment status of these loans is: five ($54.9 million, 1.3%) are REO, 10 ($885.9 million, 20.6%) are in foreclosure, seven ($83.6 million, 1.9%) are more than 90 days delinquent, and one ($4.5 million, 0.1%) is less than 30 days delinquent. Merrill Lynch Mortgage Trust 2006-C1 S&P lowered its ratings on the class G, H, J, K, L, M, N, and P certificates from Merrill Lynch Mortgage Trust 2006-C1 due to interest shortfalls resulting from ASERs related to 20 of the 23 loans that are currently with the special servicer, CWCapital, as well as special servicing fees. S&P lowered its rating on the class F certificates because S&P believes the class is susceptible to future interest shortfalls. As of the Oct. 12, 2010, remittance report, ARAs totaling $89.2 million were in effect for 22 loans. The total reported ASER amount was $382,973, and the reported cumulative ASER amount was $2.9 million. Standard & Poor's considered 16 ASERs, all of which were based on MAI appraisals, as well as current special servicing fees in determining its rating actions. The reported interest shortfalls totaled $481,888 and have affected all of the classes subordinate to and including class G. Classes H, J, K, L, M, N, and P have had accumulated interest shortfalls outstanding for seven (classes H and J) and 11 (classes K, L, M, N, and P) months, and S&P expects these shortfalls to remain outstanding for the foreseeable future. Consequently, S&P downgraded these classes to 'D (sf)'. The collateral pool for the MLMT 2006-C1 transaction consists of 244 loans with an aggregate trust balance of $2.4 billion. As of the Oct. 12, 2010, remittance report, 23 loans ($208.0 million; 8.7%) in the pool were with the special servicer. The payment status of these loans is: five ($53.8 million, 2.3%) are REO, eight ($88.8 million, 3.7%) are in foreclosure, nine ($46.2 million, 1.9%) are more than 90 days delinquent, and one ($19.1 million, 0.8%) is in its grace period. Wachovia Bank Commercial Mortgage Trust Series 2003-C3 S&P lowered its ratings on the class J, K, L, M, N, and O certificates from Wachovia Bank Commercial Mortgage Trust's series 2003-C3 due to current and potential interest shortfalls resulting from ASERs related to four of the nine loans that are currently with the special servicer, LNR, as well as special servicing fees and interest not advanced on one loan. The downgrade of the class H certificates reflects a reduction in available interest to this class resulting from the interest shortfalls. As of the Oct. 15, 2010, remittance report, ARAs totaling $33.7 million were in effect for seven loans. The total reported ASER amount was $85,713, and the reported cumulative ASER amount was $1.2 million. Standard & Poor's considered the four ASERs, all of which were based on MAI appraisals, as well as interest not advanced ($67,870) for one loan and current special servicing fees in determining its rating actions. The reported interest shortfalls totaled $168,571 and have affected all of the classes subordinate to and including class K. Classes L, M, N, and O have had accumulated interest shortfalls outstanding for five (classes L, M, and N) and eight (class O) months, and S&P expects these shortfalls to remain outstanding for the foreseeable future. Consequently, S&P downgraded these classes to 'D (sf)'. The collateral pool for the WBCMT 2003-C3 transaction consists of 115 loans with an aggregate trust balance of $724.0 million. As of the Oct. 15, 2010, remittance report, nine loans ($72.1 million; 10.0%) in the pool were with the special servicer. The payment status of these loans is: five ($30.7 million, 4.2%) are REO, two ($23.9 million, 3.3%) are more than 90 days delinquent, one ($7.0 million, 1.0%) is 30 days delinquent, and one ($10.5 million, 1.5%) is in its grace period. Ratings Lowered Banc of America Commercial Mortgage Inc. Commercial mortgage pass-through certificates series 2004-4 Reported Rating interest shortfalls ($) ------ ----------------------- Class To From Credit enhancement (%) Current Accumulated ----- -- ---- ---------------------- ------- ----------- G B+ (sf) BB (sf) 6.96 0 0 H CCC (sf)B (sf) 5.17 (70,919) 277,444 J D (sf) CCC (sf) 4.46 25,040 275,444 K D (sf) CCC- (sf) 3.75 25,040 275,444 L D (sf) CCC- (sf) 3.03 25,040 275,444 Banc of America Commercial Mortgage Inc. Commercial mortgage pass-through certificates series 2005-3 Reported Rating interest shortfalls ($) ------ ----------------------- Class To From Credit enhancement (%) Current Accumulated ----- -- ---- ---------------------- ------- ----------- E B+ (sf) BB (sf) 9.50 (5,563) 0 F CCC (sf) BB-(sf) 8.38 9,539 100,539 G CCC- (sf)B+ (sf) 6.82 128,764 261,764 H D (sf) B+ (sf) 5.41 117,060 782,737 J D (sf) B (sf) 4.00 117,060 1,066,848 K D (sf) CCC+ (sf) 3.30 50,291 452,620 L D (sf) CCC+ (sf) 2.73 40,231 362,076 M D (sf) CCC (sf) 2.17 40,231 362,076 N D (sf) CCC-(sf) 1.89 20,117 181,055 Banc of America Commercial Mortgage Inc. Commercial mortgage pass-through certificates series 2005-4 Reported Rating interest shortfalls ($) ------ ----------------------- Class To From Credit enhancement (%) Current Accumulated ----- -- ---- ---------------------- ------- ----------- F B- (sf) BB+ (sf) 7.46 (2,724) 57,602 G D (sf) BB (sf) 6.17 76,940 401,580 H D (sf) BB- (sf) 4.46 102,586 935,658 J D (sf) B+ (sf) 3.88 31,088 279,795 K D (sf) B+ (sf) 3.31 31,084 279,759 L D (sf) B (sf) 2.74 31,084 279,759 M D (sf) B (sf) 2.45 15,542 139,880 N D (sf) B- (sf) 2.02 23,317 209,855 O D (sf) CCC+ (sf) 1.59 23,313 209,820 COMM 2005-C6 Commercial mortgage pass-through certificates Reported Rating interest shortfalls ($) ------ ----------------------- Class To From Credit enhancement (%) Current Accumulated ----- -- ---- ---------------------- ------- ----------- F CCC (sf) B- (sf) 3.91 13,982 13,982 G CCC- (sf)CCC (sf 2.53 112,908 214,400 H D (sf) CCC- (sf) 1.31 100,369 1,027,571 GE Commercial Mortgage Corp. Commercial mortgage pass-through certificates series 2005-C4 Reported Rating interest shortfalls ($) ------ ----------------------- Class To From Credit enhancement (%) Current Accumulated ----- -- ---- ---------------------- ------- ----------- H CCC+(sf) B (sf) 5.18 (838) 22,915 J D (sf) B- (sf) 3.97 119,962 383,465 K D (sf) CCC+ (sf) 3.44 50,088 300,529 L D (sf) CCC (sf) 2.90 50,088 325,857 M D (sf) CCC-(sf) 2.50 37,568 285,220 N D (sf) CCC-(sf) 2.10 37,568 300,546 O D (sf) CCC-(sf) 1.83 25,044 236,616 P D (sf) CCC-(sf) 1.43 37,564 413,196 JPMorgan Chase Commercial Mortgage Securities Trust 2007-CIBC19 Commercial mortgage pass-through certificates Reported Rating interest shortfalls ($) ------ ----------------------- Class To From Credit enhancement (%) Current Accumulated ----- -- ---- ---------------------- ------- ----------- F CCC+(sf) B (sf) 5.27 61,624 61,624 G CCC-(sf) B (sf) 3.98 195,926 353,344 H CCC-(sf) B- (sf) 2.95 156,741 318,675 J D (sf) B- (sf) 1.67 195,926 726,401 K D (sf) CCC+ (sf) 1.41 37,328 373,282 L D (sf) CCC+ (sf) 1.15 37,328 402,277 M D (sf) CCC (sf) 0.64 74,656 821,220 N D (sf) CCC (sf) 0.38 37,328 410,610 P D (sf) CCC (sf) 0.25 18,662 205,280 LB-UBS Commercial Mortgage Trust 2004-C4 Commercial mortgage pass-through certificates Reported Rating interest shortfalls ($) ------ ----------------------- Class To From Credit enhancement (%) Current Accumulated ----- -- ---- ---------------------- ------- ----------- J BB(sf) BBB- (sf) 4.34 0 0 K CCC+(sf) BB (sf) 2.74 (35,018) 200,500 L CCC-(sf) BB- (sf) 2.38 15,470 124,157 M D (sf) B+ (sf) 2.02 15,465 124,122 N D (sf) B (sf) 1.67 15,465 124,122 ML-CFC Commercial Mortgage Trust 2007-5 Commercial mortgage pass-through certificates Reported Rating interest shortfalls ($) ------ ----------------------- Class To From Credit enhancement (%) Current Accumulated ----- -- ---- ---------------------- ------- ----------- H D (sf) CCC- (sf) 2.01 119,673 240,122 J D (sf) CCC- (sf) 1.62 69,592 201,702 K D (sf) CCC- (sf) 1.37 46,399 277,176 L D (sf) CCC- (sf 1.11 46,399 336,879 M D (sf) CCC- (sf) 0.85 46,395 510,343 N D (sf) CCC- (sf) 0.72 23,197 255,171 P D (sf) CCC- (sf) 0.47 46,399 510,389 Merrill Lynch Mortgage Trust 2006-C1 Commercial mortgage pass-through certificates Reported Rating interest shortfalls ($) ------ ----------------------- Class To From Credit enhancement (%) Current Accumulated ----- -- ---- ---------------------- ------- ----------- F B- (sf) B+ (sf) 4.81 0 0 G CCC (sf) B (sf) 3.90 44,966 44,966 H D (sf) B- (sf) 2.86 117,322 502,581 J D (sf) B- (sf) 2.60 29,066 203,459 K D (sf) CCC+ (sf) 2.21 43,596 438,947 L D (sf) CCC (sf) 1.95 29,061 319,670 M D (sf) CCC- (sf) 1.69 29,066 319,721 N D (sf) CCC- (sf) 1.43 29,066 319,721 P D (sf) CCC- (sf) 1.17 29,061 319,670 Wachovia Bank Commercial Mortgage Trust Commercial mortgage pass-through certificates series 2003-C3 Reported Rating interest shortfalls ($) ------ ----------------------- Class To From Credit enhancement (%) Current Accumulated ----- -- ---- ---------------------- ------- ----------- H BBB (sf) A (sf) 9.66 0 0 J B+ (sf) BB+ (sf) 6.58 (29,331) 115,347 K CCC (sf) BB (sf) 5.29 38,914 194,568 L D (sf) B+ (sf) 4.32 29,182 145,910 M D (sf) B (sf) 3.99 9,727 48,637 N D (sf) CCC (sf) 3.02 29,186 145,931 O D (sf) CCC- (sf) 2.38 19,455 108,879 * S&P Takes Various Rating Actions on Three Market Value CDOs ------------------------------------------------------------- Standard & Poor's Ratings Services took various rating actions on three market value collateralized debt obligation transactions. S&P lowered its ratings on the C and D tranches from Sankaty High Yield Partners III and affirmed its rating on one tranche from the same transaction. At the same time, S&P affirmed its ratings on two tranches from Blackrock Senior Income Series III PLC and left its rating on one tranche from the same transaction on CreditWatch with negative implications. S&P also withdrew its ratings on one tranche from Sankaty High Yield Partners III and five tranches from Anchorage Crossover Credit Finance Ltd. following the complete paydown of the notes. The rating actions follow S&P's most recent monthly review of market value CDO performance. The downgrades and CreditWatch placements reflect a decrease in the transactions' overcollateralization levels. Standard & Poor's will continue to monitor the CDO transactions it rates and take rating actions, including CreditWatch placements, when appropriate. Rating And Creditwatch Actions Rating ------ Transaction Class To From ----------- ----- -- ---- BlackRock Sr C CCC- (sf)/WatchNeg CCC- (sf)/WatchNeg Incme Series III Sankaty High C CCC- (sf) CCC (sf) Yield Ptnrs III Sankaty High D CC (sf) CCC- (sf) Yield Ptnrs III Sankaty High B NR BB- (sf)/WatchPos Yield Ptnrs III Anchorage A-1a 2006-1 NR AAA (sf) Crossover Crdt Fnce Anchorage A-1b 2006-1 NR AAA (sf) Crossover Crdt Fnce Anchorage A-2 2007-1 NR AAA (sf) Crossover Crdt Fnce Anchorage A-3 2007-1 NR AAA (sf) Crossover Crdt Fnce Anchorage A-4 2007-1 NR AAA (sf) Crossover Crdt Fnce Ratings Affirmed Transaction Class Rating ----------- ----- ------ BlackRock Senior Income Series III D CC (sf) BlackRock Senior Income Series III E CC (sf) Sankaty High Yield Partners III E CC (sf) ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers" public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com/ On Thursdays, the TCR delivers a list of recently filed Chapter 11 cases involving less than $1,000,000 in assets and liabilities delivered to nation's bankruptcy courts. The list includes links to freely downloadable images of these small-dollar petitions in Acrobat PDF format. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. The Sunday TCR delivers securitization rating news from the week then-ending. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors" Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland, USA. Marites Claro, Joy Agravante, Rousel Elaine Tumanda, Howard C. Tolentino, Joseph Medel C. Martirez, Denise Marie Varquez, Philline Reluya, Ronald C. Sy, Joel Anthony G. Lopez, Cecil R. Villacampa, Sheryl Joy P. Olano, Carlo Fernandez, Christopher G. Patalinghug, and Peter A. Chapman, Editors. Copyright 2010. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $775 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***