/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/120923.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, September 23, 2012, Vol. 16, No. 265 Headlines ACCESS GROUP: S&P Cuts Rating on Series 2001 Class II-B to 'B+' ACE SECURITIES: Moody's Cuts Cl. A-2B Secs. Rating to 'Caa3' ADVANTA BUSINESS: S&P Cuts Rating on Class D(2006-D3) Notes to 'D' AEGIS ASSET: Moody's Lowers Rating on Class M3 Tranche to 'C' AJAX TWO: Moody's Affirms Rating on Class C Notes at 'Caa3' ARES XIX: S&P Affirms 'B+' Rating on Class D Notes; Off Watch Pos ASSET BACKED SECURITIES: Moody's Affirms Caa3 Rating on A5 Secs. ATRIUM VIII: S&P Assigns 'BB' Prelim Rating on Class E Def Notes BABSON 2004-II: S&P Hikes Ratings on 2 Note Classes From 'BB+' BANC OF AMERICA 2001-PB1: S&P Lowers Ratings on 3 Classes to 'D' BAYVIEW COMMERCIAL: Moody's Cuts Ratings on 10 Tranches to 'C' BEAR STEARNS 2005-2: Moody's Confirms 'Ca' Rating on X-1 Tranche BEAR STEARNS 2006-TOP22: Loss Certainty Cues Fitch to Cut Ratings BEAR STEARNS 2006-HE8: Moody's Cuts Rating on II-1A-2 RMBS to 'B3' BLACK DIAMOND 2005-1: S&P Affirms 'CCC+' Rating on Class E Notes C-BASS MORTGAGE: Moody's Cuts Rating on Cl. AF-4 Secs. to 'Caa3' CARLYLE GLOBAL 2012-3: S&P Rates $33-Mil. Class D Notes 'BB' CD 2007-CD5: Moody's Affirms 'C' Ratings on Two Cert. Classes CENT CLO 16: S&P Gives 'BB' Rating on Class D Deferrable Notes CHASE MORTGAGE 2007-A3: Moody's Gives Caa2 Rating on 22 Tranches CHL MORTGAGE: Moody's Cuts Ratings on 6 RMBS Tranches to 'Caa3' CIENA CAPITAL: Moody's Upgrades Rating on Cl. C Certs. to 'Caa3' CITIGROUP COMMERCIAL 2006-C4: Fitch Cuts Rating on 8 Cert. Classes CITIGROUP COMMERCIAL 2006-C5: Moody's Cuts Rating on F Certs. to C CPS AUTO 2012-C: Moody's Assigns 'B1' Rating to Class E Notes CPS AUTO 2012-C: S&P Rates Class E Asset-Backed Notes 'B+' CREDIT SUISSE 2007-C3: Moody's Cuts 2 Cert. Class Ratings to 'C' CWABS 2005-16: Moody's Cuts Rating on Class 2-AF-5 Secs. to 'Ca' DIAMOND INVESTMENT: Moody's Cuts Ratings on CBO Notes to 'Caa2' EQUIFIRST MORTGAGE: Moody's Confirms Ca Ratings on Two Tranches EXETER AUTOMOBILE 2012-2: S&P Gives 'BB' Rating on Class D Notes FBR SECURITIZATION: Moody's Raises Rating on One Tranche to 'B1' FIRST UNION 2001-C4: Moody's Affirms 'Caa3' Rating on Cl. P Certs FREMF 2011-K703: Moody's Affirms 'Ba3' Rating on Cl. X-2 Certs. G-STAR 2003-3: Moody's Affirms Rating on Class A-3 Notes at 'Ca' GE COMMERCIAL 2005-C1: Fitch Cuts Ratings on 5 Certs. to 'Dsf' GEM VIII: S&P Affirms 'BB' Ratings on 2 Note Classes; Off Watch GLOBAL MORTGAGE: Moody's Cuts Rating on Cl. B4 Tranche to 'Ca' GOLDMAN SACHS: S&P Raises Rating on Class E Notes to 'BB+' GOLDMAN SACHS 2010-C2: Fitch Affirms 'Bsf' Rating on Class F Certs GSC CAPITAL 2005-1: S&P Raises Rating on Class F Notes to 'BB-' GSC PARTNERS VII: S&P Raises Rating on Class E Notes to 'BB-' GSR MORTGAGE: Moody's Confirms 'Ba1' Rating on Cl. 1A-1 Tranche HOME LOAN: Moody's Confirms 'B2' Rating on Class A-2 Tranche HSBC HOME 2007-2: Moody's Lifts Cl. M-2 Tranche Rating to 'Ba2' HSI ASSET 2005-OPT1: Moody's Cuts Class M-1 Rating to 'Caa1' INDOSUEZ VI: Fitch Withdraws 'Dsf' Rating on Two Note Classes INFINITI SPC 2006-4: S&P Withdraws 'CCC-' Rating on Class B Notes JASPER CLO: S&P Raises Ratings on 2 Note Classes to 'B-' JP MORGAN: Moody's Cuts Ratings on 12 RMBS Tranches to 'Caa3' JP MORGAN 2002-C2: Moody's Cuts Ratings on 2 Cert. Classes to 'C' JP MORGAN 2005-OPT2: Moody's Hikes Class M-3 RMBS Rating to Caa3 JP MORGAN 2007-C1: Moody's Cuts Ratings on 2 Cert. Classes to 'C' JP MORGAN 2012-FL2: Moody's Assigns 'Ba2' Rating to Cl. E Certs. KINGSLAND I: S&P Hikes Rating on Class D Notes to 'BB-'; Off Watch LATITUDE CLO II: S&P Affirms 'CCC-' Rating on Class D Notes LATITUDE CLO III: S&P Hikes Rating on Class F Notes to 'BB' LB-UBS 2005-C2: Fitch Lowers Three Certificate Classes to 'Csf' LB-UBS 2005-C2: Moody's Cuts Ratings on 2 Cert. Classes to 'C' LB-UBS 2008-C1: Moody's Cuts Ratings on 3 Certs. to 'C' LCM XII: S&P Assigns Prelim. 'BB' Rating on $18MM Class E Notes LEHMAN BROTHERS 2007-2: Moody's Cuts Rating on B Tranche to Caa3 LONG BEACH: Moody's Upgrades Rating on One RMBS Tranche to 'Ca' MADISON PARK I: S&P Affirms 'BB+' Rating on Class E Notes MADISON PARK IV: S&P Affirms 'BB' Rating on Class E Notes MAGNETITE VI: S&P Gives 'BB' Rating on Class E Deferrable Notes MORGAN STANLEY 2007-TOP27: Losses Cue Fitch to Lower Ratings MORGAN STANLEY 2007-11: S&P Withdraws 'CCC-' Rating on Notes MORGAN STANLEY 2011-C4: Moody's Corrects April 2 Rating Release NORTH STREET 2003-5: S&P Withdraws 'BB-' Rating on Class B-2 Notes NORTHWOODS CAPITAL IV: S&P Affirms 'BB+' Rating on 3 Note Classes NORTHWOODS CAPITAL V: S&P Lifts Ratings on 2 Note Classes to 'BB-' NUCO2 FUNDING: Fitch Affirms 'BB' Rating on $75-Mil. Notes OCTAGON INVESTMENT XII: S&P Affirms 'BB-' Rating on Class E Notes RACE POINT VI: S&P Affirms 'BB' Rating on Class E Deferrable Notes RASC SERIES: Moody's Confirms 'Caa2' Rating on Cl. M-3 Tranche SALISBURY INT'L: S&P Withdraws 'CCC-' Rating on Class A Notes SBA SENIOR: Moody's Rates New $300MM Incremental Term Loan 'Ba2' SOUND POINT I: S&P Assigns Prelim 'BB' Rating on Class E Notes SOUNDVIEW HOME: Moody's Lifts Ratings on Two Tranches to 'Caa1' SOUTHFORK CLO: S&P Affirms 'BB+' Rating on Class C Notes STARTS (CAYMAN): S&P Withdraws 'B+' Rating on Class A1-D1 Notes STOCKTON PUBLIC: Fitch Keeps 'BB+' Ratings on Rating Watch Neg TALMAGE STRUCTURED: Moody's Lifts Rating on Cl. E Notes to Caa3 TERWIN MORTGAGE: Moody's Cuts Rating on I-A-2b Secs. to 'Caa3' TRICADIA CDO: Moody's Raises Rating on $55MM Notes to 'Ba2' UBS-BARCLAYS 2012-C3: Moody's Rates Class F Certificates '(P)B2' VALHALLA CLO: S&P Raises Rating on Class B Notes to 'BB+' WACHOVIA BANK 2003-C6: Moody's Affirms 'Caa3' Rating on O Certs. WACHOVIA BANK 2004-C10: Moody's Affirms 'C' Rating on O Certs. WACHOVIA BANK 2004-C14: Moody's Cuts Rating on O Certs. to 'Ca' WCP WIRELESS: Fitch Affirms 'BB-' Rating on $50MM Class C Notes WELLS FARGO 2005-1: Moody's Cuts Cl. M-6 RMBS Rating to 'Ca' WELLS FARGO 2010-C1: Moody's Affirms B2 Rating on Class F Certs. WESTGATE RESORTS 2012-2: S&P Gives 'BB' Rating on Class C Notes WFCM 2012-LC5: Fitch Issues Presale Report on Several Certificates WHITEHORSE I: Moody's Lifts Rating on Cl. B-1L Notes From 'Ba1' * S&P Puts Ratings on 17 Tranches From 14 CDOs on Watch Positive * S&P Withdraws 'D' Ratings on 94 Classes From CDO, Re-REMIC Deals ********* ACCESS GROUP: S&P Cuts Rating on Series 2001 Class II-B to 'B+' --------------------------------------------------------------- Standard & Poor's Ratings Services lowered four ratings, raised five ratings, and affirmed three ratings on six asset-backed securities (ABS) trusts issued by Access Group Inc. "At the same time, we removed five ratings from CreditWatch positive and seven from CreditWatch negative, where we placed them on June 2, 2012," S&P said. "The lowered ratings and affirmations reflect our view of the future collateral performance, the remaining credit enhancement, and the trust structures and payment priorities. In most cases, the trust structures cap the amount of credit enhancement the transactions can build, which means they release available funds to the issuer once the deals reach certain asset-to-liability (parity) thresholds. The classes currently benefit from credit enhancement comprised of overcollateralization, excess spread, and funds in a reserve account," S&P said. "The raised ratings on the 2004-A transaction reflect our view of the increase in current credit enhancement to the class A. The raised ratings on the 2005-B transaction reflect a decrease in our remaining expected net losses and an increase in current credit enhancement to the class A. The classes currently benefit from credit enhancement composed of overcollateralization, excess spread, and funds in a reserve account. The ratings also reflect our views of the future collateral performance as well as the trust's structure and payment priority," S&P said. COLLATERAL "The trusts' collateral performance has not materially differed from that highlighted in 'Ratings Placed On CreditWatch, Others Affirmed, On 7 Access Group Inc. Private Student Loan ABS Transactions,' published June 1, 2012," S&P said. DEFAULT EXPECTATIONS AND NET LOSS PROJECTIONS "Table 1 sets out our view of the projected performance for these pools of private student loans. We expect future recovery rates of 25%-30% of the dollar amount of cumulative defaults, which supports our expectation that remaining cumulative net losses as a percent of the current balance for the trusts will range between approximately 5% and 10%," S&P said. Table 1 Projected Projected lifetime remaining cumulative Recovery cumulative defaults (i) assumption net loss (ii) As of Series (%) (%) (%) 2001 15-17 25-30 4.92 - 8.83 Apr 2012 2002-A 15-17 25-30 5.63 - 9.06 Feb 2012 2003-A 14-16 25-30 5.29 - 8.67 Apr 2012 2004-A 14-16 25-30 6.17 - 9.37 Apr 2012 2005-A 15-17 25-30 7.02 - 10.03 Mar 2012 2005-B 12-13 25-30 7.45 - 9.51 Mar 2012 (i) Projected lifetime cumulative default: as a % of initial collateral balance plus any prefunding. (ii) Projected remaining cumulative net loss: as a % of current collateral balance. CASH FLOW MODELING ASSUMPTIONS Based on a loan-level collateral file provided by the issuer, S&P ran midstream cash flows. These are some of the major assumptions S&P modeled: * Four-year straight-line default curves; * Recovery rates in the 25%-30% range and received over five years; * Various prepayment speed scenarios starting at approximately three constant prepayment rate (CPR; an annualized prepayment speed stated as a percentage of the current loan balance) and ramping up 1% per year to a maximum rate ranging from 5 CPR to 8 CPR depending on the rating scenario. S&P held the Applicable maximum rate constant for the remainder the deal's life; * Forbearance: 8% of the loans are in forbearance for 12 months; Stressed interest rate vectors at the respective rating categories; and * Auctions failed for the life of each transaction. S&P determined the coupons for the auction rate security based on the applicable "maximum rate" definition in the transaction documents.. "Additionally, we ran scenarios for the 2002-A and 2004-A transaction in which the issuer optionally redeemed the class B notes and scenarios in which the issuer continued to pay the notes sequentially. We did not observe a material difference in the results from these scenarios because our stress scenarios in which the class B was optionally redeemed quickly breached performance triggers that caused the deals to revert to sequential pay structures. The issuer has indicated that it plans to pay the senior and subordinate classes sequentially in the 2003-A deal; accordingly, we assumed the deal continued to pay sequentially between class A and class B for the purposes of the cash flow assumptions," S&P said. CASH FLOW MODELING RESULTS 2002-A, 2003-A, and 2004-A "The structures for the 2002-A, 2003-A, and 2004-A deals directs available funds (subsequent to senior fee and bond interest payments) to first pay principal to the senior LIBOR notes and then to senior auction/variable-rate notes until the senior parity and total parity levels reach 110% and 101.5% respectively. The issuer then has the option to make payments to the subordinate auction/variable-rate bonds. The transaction can release amounts in excess of 102% parity to the issuer. Interest is reprioritized to make principal payments to senior bonds if the senior parity falls below 100%, and the deals are required to pay principal sequentially if total parity falls below 101%," S&P said. "In June, we placed our ratings on the subordinate notes from these trusts on CreditWatch negative because the amount payable on the liabilities is currently tied to a rate in which the margin is determined based on the ratings on the notes. Over the life of the deals, the amount payable to the notes has increased due to increases in the margin on the notes. The level of credit enhancement for the subordinate bonds is limited by the release thresholds and cannot build beyond those levels. For 2003-A and 2004-A, the remaining credit enhancement in our stressed runs was commensurate with a 'BB' rating. The 2002-A deal, although structurally similar to the 2003-A and 2004-A deals, had remaining credit enhancement in our stressed runs that is commensurate with a 'B' rating. Accordingly, we lowered the rating on class B from series 2003-A to 'BB' from 'BBB' and lowered the rating on class B from series 2002-A to 'B' from 'BB'. We also affirmed the 'BB' rating on class B from series 2004-A. We also removed these ratings from CreditWatch with negative implications. The difference in the remaining credit enhancement for the 2002-A class B compared with the 2003-A class B primarily reflects a difference in the rate the assets earn: the assets backing the 2002-A deal earn less than the assets backing the 2003-A deal," S&P said. "The issuer has continued to pay principal sequentially to the noteholders, and the senior credit enhancement has grown accordingly. Specifically, the reported senior parity levels are approximately equal to or greater than 128%. We expect the senior parity to continue to grow for as long as the issuer allocates payments sequentially. Accordingly, we raised our rating on class A from series 2004-A to 'AAA' from 'AA' to reflect the increase in credit enhancement relative to our remaining expected cumulative net losses. Our ratings on the class A notes from series 2002-A and 2003-A remain unchanged at 'AAA'," S&P said. 2005-A and 2005-B "The liabilities for the 2005-A and 2005-B transactions are LIBOR based, and the deals paid sequentially until they reached their stepdown dates (October 2011 and November, 2011). Subsequent to the respective stepdown dates, the deals have paid pro rata to class A and class B notes. The transactions reprioritize subordinate class interest to pay principal to senior classes if the senior parity falls below 100%, and the deals are required to allocate principal payments sequentially if total parity falls below 101%. Release thresholds decrease throughout the deal to levels in which amounts in excess of 103% parity can be released to the issuer. On June 2, 2012, we increased our default assumptions for the 2005-A deal and placed the rating on the subordinate bond on CreditWatch Negative because we believed the credit enhancement (which cannot materially increase given the release thresholds) might not be adequate to cover our increased default assumptions. We affirmed the 'BB' rating on class B from series 2005-A and removed it from CreditWatch negative because after further review we believe the credit enhancement in our stressed runs is commensurate with a 'BB' rating. Our rating on class B from the 2005-B transaction remains unchanged at 'BB'," S&P said. "A large portion of the loan collateral backing the 2005-B pool were seasoned loans at closing, and the transaction has a lower current pool factor (approximately 50%) than what we expected for the amount of seasoning the transaction has at this time. Accordingly, we lowered our default assumption to 12%-13% on June 2, 2012, and placed our rating on the senior class on CreditWatch positive. We believe the current credit enhancement for class A from the 2005-B trust is commensurate with a 'AA+' rating. The major difference between the 2005-B class A and the 2004-A class A is that the 2004-A deal is currently paying sequentially. In that regard, credit enhancement will continue to build for the senior class in the 2004-A transaction, whereas deal payments in the 2005-B transaction are being allocated pro rata, which limits the senior class' ability to increase credit enhancement," S&P said. 2001 "The 2001 trust originally had two pools of loans that supported two separate groups of notes. Access Group Inc. has exercised its call right on the first pool, which consisted of Federal Family Education Loan Program (FFELP) loans guaranteed by the U.S. Department of Education (DOE). The issuer used proceeds from the call to pay the corresponding notes in full in February 2012. Currently, this trust consists primarily of notes backed by noncosigned private loans provided to graduate students," S&P said. "We also recently placed our ratings on classes IIA and IIB from the 2001 trust on CreditWatch Negative after we increased our default assumption and because the senior and total parity levels indicated credit enhancement levels that were commensurate with lower ratings. This deal is currently allocating payments pro rata to the class IIA and class IIB notes. The class IIA reported senior parity is approximately 112%. The transaction reprioritizes interest if the senior parity falls below 100%, and the deal is required to pay sequentially if the senior parity falls below 100% or defaults among the private loans exceed 17%. This deal called for mandatory redemption starting in August 2011, so releases are no longer being distributed to the issuer. This allows for both senior and total parity levels to grow. We believe the current credit enhancement is commensurate with a 'BBB' rating on the class A notes and believe a 'B+' rating is appropriate for the class B notes," S&P said. "Standard & Poor's will continue to monitor the performance of the student loan receivables backing these transactions relative to its revised cumulative default expectations and the available credit enhancement. We will take rating actions as we consider appropriate," S&P said. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATINGS LOWERED AND REMOVED FROM CREDITWATCH NEGATIVE Access Group Inc. Floating-rate student loan asset-backed notes series 2001 Rating Class To From IIA-1 BBB (sf) AAA (sf)/Watch Neg II-B B+ (sf) A (sf)/Watch Neg Access Group Inc. Private student loan asset-backed notes series 2002-A Rating Class To From B B (sf) A (sf)/Watch Neg Access Group Inc. Private student loan asset-backed notes series 2003-A Rating Class To From B BB (sf) BBB (sf)/Watch Neg RATINGS AFFIRMED AND REMOVED FROM CREDITWATCH NEGATIVE Access Group Inc. Private student loan asset-backed notes series 2004-A Rating Class To From B-1 BB (sf) BB (sf)/Watch Neg B-2 BB (sf) BB (sf)/Watch Neg Access Group Inc. Private student loan asset-backed floating-rate notes series 2005- A Rating Class To From B BB (sf) BB (sf)/Watch Neg RATINGS RAISED AND REMOVED FROM CREDITWATCH POSITIVE Access Group Inc. Private student loan asset-backed notes series 2004-A Rating Class To From A-2 AAA (sf) AA (sf)/Watch Pos A-3 AAA (sf) AA (sf)/Watch Pos A-4 AAA (sf) AA (sf)/Watch Pos Access Group Inc. Private student loan asset-backed notes series 2005-B Rating Class To From A-2 AA+ (sf) AA (sf)/Watch Pos A-3 AA+ (sf) AA (sf)/Watch Pos OTHER OUTSTANDING RATINGS Access Group Inc. Private student loan asset-backed notes series 2002-A Class Rating A-2 AAA (sf) Access Group Inc. Private student loan asset-backed notes series 2003-A Class Rating A-2 AAA (sf) A-3 AAA (sf) Access Group Inc. Private student loan asset-backed floating-rate notes series 2005-A Class Rating A-2 AA (sf) A-3 AA (sf) Access Group Inc. Private student loan asset-backed notes series 2005-B Class Rating B-2 BB (sf) Access Group Inc. private student loan asset backed notes series 2007-A series 2007- A Class Rating A-2 AA (sf) A-3 AA (sf) B BB (sf) ACE SECURITIES: Moody's Cuts Cl. A-2B Secs. Rating to 'Caa3' ------------------------------------------------------------ Moody's Investors Service has downgraded the rating on 1 tranche, and confirmed the ratings on 2 tranches from two subprime RMBS transactions issued by ACE. The collateral backing these transactions are subprime residential mortgage loans. Complete rating actions are as follows: Issuer: ACE Securities Corp. Home Equity Loan Trust, Series 2006- HE1 Cl. A-1A, Confirmed at Ba2 (sf); previously on May 30, 2012 Ba2 (sf) Placed Under Review for Possible Upgrade Cl. A-1B1, Confirmed at Baa3 (sf); previously on May 30, 2012 Baa3 (sf) Placed Under Review for Possible Upgrade Issuer: ACE Securities Corp. Home Equity Loan Trust, Series 2006- NC2 Cl. A-2B, Downgraded to Caa3 (sf); previously on May 30, 2012 B2 (sf) Placed Under Review for Possible Downgrade Ratings Rationale The actions are a result of the recent performance of Subprime pools originated after 2005 and reflect Moody's updated loss expectations on these pools. The downgrade in the rating action is a result of deteriorating performance and/or structural features resulting in higher expected losses for the bond than previously anticipated. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. Moody's adjusts the methodologies noted above for Moody's current view on loan modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. 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) (SFW), 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 extended foreclosure timelines by servicers is taken into consideration when assigning ratings. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in April 2011 to 8.2% in June 2012. Moody's forecasts a further drop to 7.8% for 2013. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF298009 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF198689 ADVANTA BUSINESS: S&P Cuts Rating on Class D(2006-D3) Notes to 'D' ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its rating on the class D(2006-D3) notes from Advanta Business Card Master Trust to 'D (sf)' from 'CC (sf)'. "We lowered our rating to 'D (sf)' to reflect the nonpayment of full principal to the investors of the class D(2006-D3) notes on the Sept. 20, 2012, final maturity date," S&P said. "As of the Sept. 20, 2012, distribution date, the transaction hasn't repaid the invested amount of the class D(2006-D3) notes, leaving the full initial principal amount of $30,000,000 outstanding or unpaid on the legal final maturity date," S&P said. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com/985.pdf AEGIS ASSET: Moody's Lowers Rating on Class M3 Tranche to 'C' ------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of two tranches issued by Aegis Asset Backed Securities 2005-4 Trust. The collateral backing this transaction are subprime residential mortgages. Complete rating actions are as follows: Issuer: Aegis Asset Backed Securities Trust 2005-4 Cl. M2, Downgraded to Ca (sf); previously on May 30, 2012 B3 (sf) Placed Under Review for Possible Downgrade Cl. M3, Downgraded to C (sf); previously on May 30, 2012 Caa2 (sf) Placed Under Review for Possible Downgrade Ratings Rationale The actions are a result of the recent performance of Subprime pools originated after 2005 and reflect Moody's updated loss expectations on these pools. The downgrades in the rating action are a result of deteriorating performance and/or structural features resulting in higher expected losses for certain bonds than previously anticipated. Moody's has also corrected the rating on the Class M2 tranche, which due to an analytical oversight was not downgraded when Moody's last took rating actions on this transaction on July 18, 2011. The methodologies used in this rating were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. Moody's adjusts the methodologies noted above for Moody's current view on loan modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. 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)(SFW), 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 extended foreclosure timelines by servicers is taken into consideration when assigning ratings. The above RMBS approach only applies to structures with at least 40 loans and a pool factor of greater than 5%. Moody's can withdraw its rating when the pool factor drops below 5% and the number of loans in the deal declines to 40 loans or lower. If, however, a transaction has a specific structural feature, such as a credit enhancement floor, that mitigates the risks of small pool size, Moody's can choose to continue to rate the transaction. The primary sources of assumption uncertainty are Moody's central macroeconomic forecast and performance volatility as a result of servicer-related activity such as modifications. The unemployment rate fell from 9.1% in June 2011 to 8.2% in June 2012. Moody's forecasts a further drop to 7.8% by the end of 2Q 2013. Moody's expects housing prices to remain stable through the remainder of 2012 before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer activity such as modification-related principal forgiveness and interest rate reductions. Any change resulting from servicing transfers or other policy or regulatory change can also impact the performance of these transactions. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF298164 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF198689 AJAX TWO: Moody's Affirms Rating on Class C Notes at 'Caa3' ----------------------------------------------------------- Moody's Investors Service has upgraded the rating of one class and affirmed the rating of one class of Notes issued by Ajax Two Limited. The upgrades are due to greater than expected amortization resulting in approximately $43.1 million of paydown (44.7% of aggregate Note balance at last review) to the top two classes: 100% pay-off to Class A-2A Notes and 23.6% paydown to Class B Notes since last review. The affirmations are due to key transaction parameters performing within levels commensurate with the existing ratings levels. The rating action is the result of Moody's on-going surveillance of commercial real estate collateralized debt obligation (CRE CDO and Re-Remic) transactions. Class B Floating Rate Deferrable Interest Notes, Due 2032, Upgraded to Aaa (sf); previously on Nov 11, 2010 Upgraded to A1 (sf) Class C Floating Rate Notes, Due 2032, Affirmed at Caa3 (sf); previously on Oct 7, 2011 Downgraded to Caa3 (sf) RATINGS RATIONALE Ajax Two CDO 2002-1 is a static cash CRE CDO transaction backed by a portfolio of commercial mortgage backed securities (CMBS) (55.1%), CRE CDO (6.8%), and asset backed securities (ABS) (38.1%). As of the August 8, 2012 payment date, the aggregate Note balance of the transaction, including Preferred Shares and D Combination, has decreased to $59.1 million from $383.9 million at issuance, with the paydown directed to the Class A-1, Class A-2A, Class A-2B, and Class B Notes (100% payoffs to Class A-1, Class A- 2A, and Class A-2B Notes), as a result of the combination of principal repayment of collateral and failing the par value test. There are seven assets with par balance of $16.4 million (27.9% of the current pool balance) that are considered defaulted securities as of the August 8, 2012 payment date, compared to four defaulted securities totaling $8.9 million par amount at last review. Moody's does expect significant losses to occur from these defaulted securitieis once they are realized. Moody's has identified the following parameters as key indicators of the expected loss within CRE CDO transactions: weighted average rating factor (WARF), weighted average life (WAL), weighted average recovery rate (WARR), and Moody's asset correlation (MAC). These parameters are typically modeled as actual parameters for static deals and as covenants for managed deals. WARF is a primary measure of the credit quality of a CRE CDO pool. Moody's has updated credit assessments for the non-Moody's rated collateral. The bottom-dollar WARF is a measure of the default probability within a collateral pool. Moody's modeled a bottom- dollar WARF of 4,137 compared to 2,905 at last review. The current distribution of Moody's rated collateral and assessments for non- Moody's rated collateral is as follows: Aaa-Aa3 (42.7% compared to 33.2% at last review), A1-A3 (2.0% compared to 8.8% at last review), Baa1-Baa3 (12.0% compared to 20.8% at last review), Ba1- Ba3 (0.0% compared to 7.6% at last review), and Caa1-Ca/C (43.3% compared to 29.6% at last review). WAL acts to adjust the probability of default of the collateral in the pool for time. Moody's modeled to a WAL of 2.9 years, the same as that at last review. WARR is the par-weighted average of the mean recovery values for the collateral assets in the pool. Moody's modeled a fixed 26.8% WARR compared to 35.5% at last review. MAC is a single factor that describes the pair-wise asset correlation to the default distribution among the instruments within the collateral pool (i.e. the measure of diversity). Moody's modeled a MAC of 2.3%, compared to 4.4% at last review. Moody's review incorporated CDOROM(R)v2.8, one of Moody's CDO rating models, which was released on January 24, 2011. The cash flow model, CDOEdge(R)v3.2.1.2, was used to analyze the cash flow waterfall and its effect on the capital structure of the deal. Changes in any one or combination of the key parameters may have rating implications on certain classes of rated notes. However, in many instances, a change in key parameter assumptions in certain stress scenarios may be offset by a change in one or more of the other key parameters. In general, the rated notes are particularly sensitive to changes in recovery rate assumptions. Holding all other key parameters static, changing the recovery rate assumption down from 26.8% to 16.8% or up to 36.8% would result in average modeled rating movement on the rated tranches of 0 to 4 notches downward and 0 to 2 notches upward, respectively. The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of assumption uncertainty are the extent of growth in the current macroeconomic environment and commercial real estate property markets. While commercial real estate property values are beginning to move in a positive direction along with a rise in investment activity and stabilization in core property type performance, a consistent upward trend will not be evident until the volume of investment activity steadily increases, distressed properties are cleared from the pipeline, and job creation rebounds. The hotel sector is performing strongly and the multifamily sector continues to show increases in demand. Moderate improvements in the office sector continue with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow. Performance in the retail sector has been mixed with lackluster sales driven by discounting and promotions. However, rising wages and reduced unemployment, along with increased consumer confidence, is helping to spur consumer spending. Across all property sectors, the availability of debt capital continues to improve with increased securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario reflects healthier growth in the US and US growth decoupling from the recessionary trend in the euro zone, while a mild recession is expected in 2012. Downside risks remain significant, although they have moderated compared to earlier this year. Major downside risks include an increase in the potential magnitude of the euro area recession, the risk of an oil supply shock weighing negatively on consumer purchasing power and home prices, ongoing and policy-induced banking sector deleveraging leading to a tightening of bank lending standards and credit contraction, financial market turmoil continuing to negatively impact consumer and business confidence, persistently high unemployment levels, and weak housing markets, any or all of which will continue to constrain growth. The methodologies used in this rating were "Moody's Approach to Rating SF CDOs" published in May 2012, and "Moody's Approach to Rating Commercial Real Estate CDOs" published in July 2011. ARES XIX: S&P Affirms 'B+' Rating on Class D Notes; Off Watch Pos ----------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the A-2, B, C-1, and C-2 notes from Ares XIX CLO Ltd., a U.S. collateralized loan obligation (CLO) transaction managed by Ares CLO Management XIX L.P. "We also affirmed our ratings on the A-1 and the D notes. At the same time, we removed the class A-2, B, C- 1, C-2, and D note ratings from CreditWatch, where we placed them with positive implications on June 18, 2012," S&P said. The upgrades and rating affirmations mainly reflect improved collateral credit quality, strengthened underlying asset performance, and class A-1 note paydowns. "Ares XIX CLO Ltd. ended its reinvestment period in February 2011. The A-1 notes have paid down significantly since our November 2011 rating actions and currently have a balance of $64 million, about 29% of their original balance," S&P said. "The credit quality of the underlying collateral has improved since November 2011 as well. As of the Aug. 10, 2012, trustee report, the transaction had $2.6 million in defaulted assets, compared with over $5 million noted in the Oct. 20, 2011, trustee report, which we used for our November 2011 rating actions. Additionally, no 'CCC' haircuts are being applied to the calculation of the overcollateralization (O/C) ratios because the amount of 'CCC' rated assets is below the allowed limit of 7.5% of the total collateral," S&P said. "The O/C available to support the notes has also increased, primarily due to note paydowns and the improved credit quality of the collateral. The senior O/C ratio calculated at the class A-2 level was at 149.70%, about 20% more than the 129.9% noted in the Oct. 20, 2011, report. The subordinate O/C ratio calculated at the class D level was at 109.40%, about 3% higher than the 106.29% noted in the October 2011 report," S&P saud. "The transaction currently has approximately $13.25 million (about 10%) in underlying collateral that matures after the legal final maturity of the transaction. Our affirmation of the rating on the class D notes took into account the potential market value and/or settlement related risk arising from the potential liquidation of the remaining securities on the legal final maturity date of the transaction," S&P said. Standard & Poor's will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it deems necessary. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATING AND CREDITWATCH ACTIONS Ares XIX CLO Ltd. Rating Class To From A-2 AAA (sf) AA+ (sf)/Watch Pos B AA+ (sf) A+ (sf)/Watch Pos C-1 BBB+ (sf) BBB (sf)/Watch Pos C-2 BBB+ (sf) BBB (sf)/Watch Pos D B+ (sf) B+ (sf)/Watch Pos RATING AFFIRMATION Ares XIX CLO Ltd. Class Rating A-1 AAA (sf) ASSET BACKED SECURITIES: Moody's Affirms Caa3 Rating on A5 Secs. ---------------------------------------------------------------- Moody's Investors Service has downgraded the ratings on one tranche, and confirmed the ratings on two tranches from Asset Backed Securities Corporation Home Equity Loan Trust Series MO 2006-HE6. The collateral backing these transactions are subprime residential mortgage loans. Complete rating actions are as follows: Issuer: Asset Backed Securities Corporation Home Equity Loan Trust Series MO 2006-HE6 Cl. A1, Downgraded to B2 (sf); previously on May 30, 2012 Ba3 (sf) Placed Under Review for Possible Downgrade Cl. A4, Confirmed at Caa2 (sf); previously on May 30, 2012 Caa2 (sf) Placed Under Review for Possible Upgrade Cl. A5, Confirmed at Caa3 (sf); previously on May 30, 2012 Caa3 (sf) Placed Under Review for Possible Upgrade Ratings Rationale The actions are a result of the recent performance of Subprime pools originated after 2005 and reflect Moody's updated loss expectations on these pools. The downgrades in the rating action are a result of deteriorating performance and/or structural features resulting in higher expected losses for certain bonds than previously anticipated. The methodologies used in this rating were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. Moody's adjusts the methodologies noted above for Moody's current view on loan modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. 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) (SFW), 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 extended foreclosure timelines by servicers is taken into consideration when assigning ratings. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in April 2011 to 8.2% in June 2012. Moody's forecasts a further drop to 7.8% for 2013. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF297354 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF198689 ATRIUM VIII: S&P Assigns 'BB' Prelim Rating on Class E Def Notes ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Atrium VIII/Atrium VIII LLC's $460.0 million floating- and fixed-rate notes. The note issuance is a cash flow collateralized loan obligation securitization backed by a revolving pool consisting primarily of broadly syndicated senior-secured loans. The preliminary ratings are based on information as of Sept. 18, 2012. 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 credit enhancement provided to the preliminary rated notes through the subordination of cash flows that are payable to the subordinated notes. -- The transaction's credit enhancement, which is sufficient to withstand the defaults applicable for the supplemental tests (not counting excess spread), and cash flow structure, which can withstand the default rate projected by Standard & Poor's CDO Evaluator model, as assessed by Standard & Poor's using the assumptions and methods outlined in its corporate collateralized debt obligation (CDO) criteria. -- The transaction's legal structure, which is expected to be bankruptcy remote. -- The diversified collateral portfolio, which consists primarily of broadly syndicated speculative-grade senior-secured term loans. -- The collateral manager's experienced management team. -- S&P's projections regarding the timely interest and ultimate principal payments on the preliminary rated notes, which S&P assessed using its cash flow analysis and assumptions commensurate with the assigned preliminary ratings under various interest-rate scenarios, including LIBOR ranging from 0.3950%-13.8391%. -- The transaction's overcollateralization and interest coverage tests, a failure of which will lead to the diversion of interest and principal proceeds to reduce the balance of the rated notes outstanding. -- The transaction's reinvestment overcollateralization test, a failure of which will lead to the reclassification of excess interest proceeds that are available prior to paying uncapped administrative expenses and fees; subordinated hedge termination payments; portfolio manager incentive fees; and subordinated note payments to principal proceeds for the purchase of additional collateral assets during the reinvestment period and to reduce the balance of the rated notes outstanding, sequentially, after the reinvestment period. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com PRELIMINARY RATINGS ASSIGNED Atrium VIII/Atrium VIII LLC Class Rating Amount mil. $) A-1 AAA (sf) 298 A-2 AAA (sf) 20 B AA (sf) 53 C (deferrable) A (sf) 42 D (deferrable) BBB (sf) 26 E (deferrable) BB (sf) 21 Subordinated notes NR 56.3 NR-Not rated. BABSON 2004-II: S&P Hikes Ratings on 2 Note Classes From 'BB+' -------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class B, C-1, C-2, D-1, and D-2 notes from Babson CLO Ltd. 2004-II, a collateralized loan obligation (CLO) transaction managed by Babson Capital Management LLC. "At the same time, we affirmed the ratings on the class A-1, A-2A, A-2Av, A-2B, and A-2C notes. We also removed our ratings on the class B, C-1, and C-2 notes from CreditWatch, where we placed them with positive implications on June 18, 2012," S&P said. "The upgrades of the class B, C-1, C-2, D-1, and D-2 notes follow our performance review of the transaction and primarily reflect $98 million in paydowns to the class A-1 and A-2 notes. The class A-1, A-2A, A-2Av, A-2B, and A-2C notes receive pro rata paydowns, and the paydowns to date have reduced their outstanding note balances to 26% of their original balances. The paydowns have also significantly increased the overcollateralization (O/C) available to support the notes since our December 2011 rating actions. As of the August 2012 trustee report, the senior O/C test had increased to 160.87% from 136.46% in November 2011, which we referenced for our December 2011 rating actions," S&P said. "The affirmed ratings on the class A-1, A-2A, A-2Av, A-2B, and A- 2C notes reflect the availability of sufficient credit support at the 'AAA' rating level. We will continue to review our ratings on the notes and assess whether, in our view, the ratings remain consistent with the credit enhancement available," S&P said. Standard & Poor's will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it deems necessary. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATINGS AND CREDITWATCH ACTIONS Babson CLO Ltd. 2004-II Class Rating To From B AAA (sf) AA+ (sf)/Watch Pos C-1 AA+ (sf) A+ (sf)/Watch Pos C-2 AA+ (sf) A+ (sf)/Watch Pos D-1 BBB+ (sf) BB+ (sf) D-2 BBB+ (sf) BB+ (sf) RATINGS AFFIRMED Babson CLO Ltd. 2004-II Class Rating A-1 AAA (sf) A-2A AAA (sf) A-2Av AAA (sf) A-2B AAA (sf) A-2C AAA (sf) BANC OF AMERICA 2001-PB1: S&P Lowers Ratings on 3 Classes to 'D' ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on five classes of commercial mortgage pass-through certificates from Banc of America Commercial Mortgage Inc.'s series 2001-PB1, a U.S. commercial mortgage-backed securities (CMBS) transaction. "The downgrades of the class N, O, and P certificates to 'D (sf)' reflect principal losses that these classes incurred, as detailed in the Sept. 11, 2012, trustee remittance report. According to the September 2012 trustee remittance report, the aggregate principal losses for the current period, which totaled $9.6 million, were primarily attributed to the disposition of the Village Plaza asset. The asset had an aggregate beginning scheduled principal balance of $12.9 million and was liquidated in September at a loss severity of 74.5%. Consequently, class N incurred a 0.8% loss of its $11.7 million beginning principal balance, and classes P and O incurred principal losses that reduced their respective balances to zero," S&P said. "We lowered our ratings on the class L and M certificates to reflect reduced liquidity support available and the potential for these classes to experience interest shortfalls in the future related to the specially serviced assets. According to the September 2012 remittance report, the trust experienced interest shortfalls due to interest not advanced ($95,790)and special servicing fees ($3,284) on the four ($15.3 million, 59.4%) assets with the special servicer, C-III Asset Management LLC. The interest shortfalls were offset by a one-time recovery totaling $175,796 associated with the liquidation of the Village Plaza asset. As a result, the trust experienced a net repayment of accumulated interest shortfalls totaling $79,308. Prior to the liquidation, accumulated interest shortfalls had affected all classes subordinate to and including class M. ARAs totaling $4.7 million were in effect for the four loans. Standard & Poor's expects the interest reductions due to nonrecoverability determinations made with respect to the four specially serviced loans and special servicing fees to continue for the foreseeable future," S&P said. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATINGS LOWERED Banc of America Commercial Mortgage Inc. Commercial mortgage pass-through certificates series 2001-PB1 Reported Rating Credit interest shortfalls Class To From enhcmt(%) Current Accumulated L B(sf) BBB-(sf) 72.36 0 0 M CCC (sf) BB-(sf) 45.09 (36,065) 0 N D(sf) CCC+(sf) 0 (91,960) 23,859 O D(sf) CCC-(sf) 0 24,044 101,202 P D(sf) CCC-(sf) 0 24,044 192,348 BAYVIEW COMMERCIAL: Moody's Cuts Ratings on 10 Tranches to 'C' -------------------------------------------------------------- Moody's Investors Service has downgraded the ratings on 25 tranches from five securitizations of small balance commercial loans issued by Bayview Commercial Asset Trusts. Ratings Rationale The downgrades are due to continued writedowns of the subordinate tranches. Principal is paid pro-rata to all tranches in the deals affected by the rating actions. As a result of continued writedowns, Moody's believes that the remaining amount of time the lower subordinate tranches will receive principal payments is limited. In most instances, the ratings of more senior subordinate tranches were adjusted accordingly based on anticipated writedowns, which will decrease the amount of subordination. Delinquency levels have been high and increasing despite loan liquidations, indicating that new delinquencies are still occurring, which will lead to further losses. As of a year ago, delinquencies of 60 days or more, including loans in foreclosure and REO, were generally declining for Bayview small balance commercial ABS deals; however, since then, delinquencies reversed their decline and began to increase, now typically constituting between 22% and 24% of outstanding pool balances. Severities have also been high, reaching about 90% during 2011 and remaining at this level, versus about 80% seen in 2010, and less than 70% in previous years. Despite a modest rebound, commercial property values in non-major markets are far from peak levels and are still contributing to 1) high delinquency rates as a result of borrowers' continued negative equity position and 2) high severity rates. A key factor in Moody's updated loss projections is its evaluation and treatment of modified loans. Bayview Loan Servicing has modified approximately 39% to 51% of the loans it now classifies as current in the deal's affected by the rating actions. Most of these loans had performance problems and were delinquent before modification and are therefore more likely to become delinquent in the future than non-modified loans. Moody's evaluation of loan- level data shows that these current, modified loans are at least twice as likely to become delinquent and default compared to current, non-modified loans. Moody's accounted for this likelihood in its loss projection methodology described below. The methodology is described as follows: For the actions, Moody's evaluated the sufficiency of credit enhancement by first analyzing the loans to determine an expected lifetime net loss for each collateral pool. Moody's compared these net losses with the available credit enhancement, consisting of subordination and excess spread, as well as a reserve account or overcollateralization. Moody's evaluated the sufficiency of loss coverage provided by credit enhancement in light of 1) the magnitude and projected variability of losses on the collateral and 2) servicer quality. For the lower subordinate tranches, Moody's identified relatively near term future writedowns by examining the current pace of writedowns and the expected losses from loans in foreclosure and REO in relation to a tranche's available credit enhancement. In forecasting expected losses, Moody's has evaluated the roll rate behavior of loans in the Bayview small balance commercial ABS pools and has generally assumed the same behavior will continue for 15 to 18 months, the amount of time Moody's projects a continued stressful environment for these loans. After this stress period, Moody's has assumed that roll rates and severities will improve to levels more consistent with historical norms. This approach generally assumes that the modification strategy pursued by Bayview Loan Servicing will continue to be viable and will continue to prevent losses on some loans that would otherwise default. To forecast expected losses for the Bayview small balance commercial ABS collateral pools, Moody's evaluated each pool according to the delinquency and modification status of the underlying loans, applying different roll rates to default to loans according to each status. In order to determine the roll rates to default, Moody's first assessed the past 12 months of monthly roll rate behavior for loans according to their modification and delinquency status. Then, to translate this recent historical data into lifetime default rates, Moody's applied the recent roll rates to each delinquency and modification category for the 15 to 18 month stress period. Moody's then decreased the monthly roll rates to more stable historical norms for the remainder of the period over which Moody's calculates the loss, typically until the pool of loans pays down to 5% to 10% of its original balance. This approach leads to a wide range of lifetime default rates. For modified current loans, the lifetime default rate was 20%, double the lifetime default rate estimate of 10% for non-modified current loans. For delinquent loans, the lifetime default rates range from 40% to 70% depending on delinquency and modification status. For loans in foreclosure or REO, the lifetime default rates are roughly 65% to 80% and 95% to 100%, respectively, depending on vintage and modification status. For loss severities, Moody's generally applied recent severities for the 15 to 18 month stress period of the loss calculation. Recent severities have been over 90% for non-modified loans and about 75% for modified loans. For the period after stress period, Moody's applied severities ranging from 65% to 75%. The resulting remaining expected losses are 32.3%, 29.3%, 32.7%, 25.1%, and 32.7% of the original pool balances for the 2006-4, 2007-1, 2007- 2, 2007-3, and 2007-4 deals, respectively. Because the ultimate re-default risk of small balance commercial loan modifications and the success of Bayview's modification program is unknown, Moody's considers the potential volatility of expected losses for these pools to be higher than pools with no modifications. The master servicer is Wells Fargo Bank. Commercial real estate primarily secures the loans. The largest property types in these deals are multifamily, retail, mixed use, and office. The primary factors for assumption uncertainty are the general economic environment, commercial property values, and the ability of small businesses to recover from the recession. If the remaining expected losses increase by 10%, then the tranches may be further downgraded. Other methodologies and factors that Moody's may have considered in the process of rating these transactions appear on Moody's website. More information on Moody's analysis of this transaction is available at www.moodys.com The complete rating actions are as follows: Issuer: Bayview Commercial Asset Trust 2006-4 Cl. M-1, Downgraded to B2 (sf); previously on May 31, 2012 Downgraded to B1 (sf) Cl. M-2, Downgraded to B3 (sf); previously on May 31, 2012 Downgraded to B2 (sf) Cl. M-3, Downgraded to Caa1 (sf); previously on May 31, 2012 Downgraded to B3 (sf) Cl. M-4, Downgraded to Caa2 (sf); previously on May 31, 2012 Downgraded to Caa1 (sf) Cl. M-5, Downgraded to Caa3 (sf); previously on May 31, 2012 Downgraded to Caa2 (sf) Cl. M-6, Downgraded to Ca (sf); previously on May 31, 2012 Downgraded to Caa3 (sf) Cl. B-1, Downgraded to C (sf); previously on May 31, 2012 Downgraded to Ca (sf) Cl. B-2, Downgraded to C (sf); previously on May 31, 2012 Downgraded to Ca (sf) Issuer: Bayview Commercial Asset Trust 2007-1 Cl. M-1, Downgraded to B1 (sf); previously on May 31, 2012 Downgraded to Ba3 (sf) Cl. M-2, Downgraded to B2 (sf); previously on May 31, 2012 Downgraded to B1 (sf) Cl. M-3, Downgraded to B3 (sf); previously on May 31, 2012 Downgraded to B2 (sf) Cl. M-4, Downgraded to Caa1 (sf); previously on May 31, 2012 Downgraded to B3 (sf) Cl. M-5, Downgraded to Caa2 (sf); previously on May 31, 2012 Downgraded to Caa1 (sf) Cl. M-6, Downgraded to Ca (sf); previously on May 31, 2012 Downgraded to Caa2 (sf) Cl. B-1, Downgraded to C (sf); previously on May 31, 2012 Downgraded to Ca (sf) Cl. B-2, Downgraded to C (sf); previously on May 31, 2012 Downgraded to Ca (sf) Issuer: Bayview Commercial Asset Trust 2007-2 Cl. M-5, Downgraded to C (sf); previously on May 31, 2012 Downgraded to Ca (sf) Cl. M-6, Downgraded to C (sf); previously on May 31, 2012 Downgraded to Ca (sf) Cl. B-1, Downgraded to C (sf); previously on May 31, 2012 Downgraded to Ca (sf) Issuer: Bayview Commercial Asset Trust 2007-3 Cl. B-2, Downgraded to C (sf); previously on May 31, 2012 Downgraded to Ca (sf) Issuer: Bayview Commercial Asset Trust 2007-4 Cl. M-2, Downgraded to Caa2 (sf); previously on May 31, 2012 Downgraded to Caa1 (sf) Cl. M-3, Downgraded to Ca (sf); previously on May 31, 2012 Downgraded to Caa2 (sf) Cl. M-4, Downgraded to C (sf); previously on May 31, 2012 Downgraded to Ca (sf) Cl. M-5, Downgraded to C (sf); previously on May 31, 2012 Downgraded to Ca (sf) Cl. M-6, Downgraded to C (sf); previously on May 31, 2012 Downgraded to Ca (sf) BEAR STEARNS 2005-2: Moody's Confirms 'Ca' Rating on X-1 Tranche ---------------------------------------------------------------- Moody's Investors Service has confirmed the ratings on three tranches issued by Bear Stearns ARM Trust 2005-2 RMBS transaction. The collateral backing this deal primarily consists of first-lien, adjustable-rate prime Jumbo residential mortgages. The actions impact approximately $364 million of RMBS issued in 2005. Complete rating actions are as follows: Issuer: Bear Stearns ARM Trust 2005-2 Cl. A-1, Confirmed at Ba2 (sf); previously on May 30, 2012 Ba2 (sf) Placed Under Review for Possible Downgrade Cl. A-3, Confirmed at B3 (sf); previously on May 30, 2012 B3 (sf) Placed Under Review for Possible Downgrade Cl. X-1, Confirmed at Ca (sf); previously on May 30, 2012 Ca (sf) Placed Under Review for Possible Downgrade Ratings Rationale The actions are a result of the recent performance of the mortgage pools backing the transaciton and reflect Moody's updated loss expectations on these pools. The methodologies used in this rating were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. The methodology used in rating Interest- Only Securities was "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's adjusts the methodologies noted above for Moody's current view on loan modifications Loan Modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in April 2011 to 8.1% in August 2012. Moody's forecasts a further drop to 7.8% for 2013. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF298040 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF196023 BEAR STEARNS 2006-TOP22: Loss Certainty Cues Fitch to Cut Ratings ----------------------------------------------------------------- Fitch Ratings has downgraded seven classes and revised the Recovery Estimate of one class of Bear Sterns Commercial Mortgage Securities Trust (BSCMST), series 2006-TOP22 commercial mortgage pass-through certificates. The downgrades are primarily the result of higher certainty of losses from the specially serviced loans. Fitch modeled losses of 4.35% of the remaining pool, and expected losses based on the original pool balance are 3.72%, of which 0.36% are losses realized to date. Fitch designated 40 loans (20.1%) as Fitch Loans of Concern, which include six specially serviced loans (2.8%). As of the August 2012 distribution date, the pool's aggregate principal balance has been reduced by 22.7% (including 0.36% of realized losses) to $1.319 billion from $1.704 billion at issuance. Interest shortfalls are affecting classes O and P. Three loans in the pool (0.6%) are currently defeased. The largest contributor to Fitch's modeled losses is the specially-serviced Killian Hill Center (1.1% of the pool) located in Lilburn, GA. The 113,216 square foot (sf) community retail center was built in 1971 and is located 25 miles northeast of Atlanta, GA. The loan was transferred to the special servicer in November 2011 for imminent payment default. The borrower defaulted on the loan in December 2011. The special servicer continues to work with the borrower while also pursuing foreclosure. The second largest contributor to Fitch's modeled losses is Lake Buena Vista Courtyard by Marriott (1.1%), a 308 room full service, Marriot flagged hotel, located in Orlando, FL. The resort faces strong competition from the large number of properties in the sub- market which cater exclusively the same customer segment. Performance has improved recently with the first quarter 2012 reported occupancy rate at 66% and the resulting debt service coverage ratio (DSCR) at 1.04x. The improvement is due to the borrower aggressively lowering rates and actively participating in flag-related discounts. The loan remains current. The third largest contributor to Fitch's modeled losses, the specially serviced IBM Business Center (0.9% of the pool), consists of a three story office building located in Lexington, KY. The occupancy rate at the subject is 25% which is unlikely to improve in the short-term due a large amount of deferred maintenance and functional obsolesce. The special servicer continues to work to appoint a property receiver and evaluate workout options. Fitch downgrades the following classes and revises Recovery Estimates as indicated: -- $8.5 million class H to 'CCsf' from 'CCCsf'; RE to 35% from 95%; -- $10.7 million class J to 'CCsf' from 'CCCsf'; RE0%; -- $2.1 million class K to 'CCsf' from 'CCCsf'; RE0%; -- $6.4 million class L to 'Csf' from 'CCCsf', RE0%; -- $2.1 million class M to 'Csf' from 'CCCsf'; RE0%; -- $2.1 million class N to 'Csf' from 'CCsf', RE0%; -- $4.3 million class O to 'Csf' from 'CCsf'; RE0%. In addition, Fitch affirms the following classes and revises Outlooks as indicated: -- $69.2 million class A-3 at 'AAAsf'; Outlook Stable; -- $59.2 million class A-AB at 'AAAsf'; Outlook Stable; -- $563.8 million class A-4 at 'AAAsf'; Outlook Stable; -- $172.3 million class A-1A at 'AAAsf'; Outlook Stable; -- $170.5 million class A-M at 'AAAsf'; Outlook Stable; -- $125.7 million class A-J at 'AAsf'; Outlook Stable; -- $32 million class B at 'Asf'; Outlook Stable; -- $12.8 million class C at 'BBBsf'; Outlook Stable; -- $25.6 million class D at 'BBsf'; Outlook to Negative from Stable; -- $14.9 million class E at 'Bsf'; Outlook to Negative from Stable; -- $14.9 million class F at 'B-sf' ; Outlook Negative; -- $14.9 million class G at 'CCCsf'; RE100%. Fitch does not rate the $9.4 million class P. Classes A-1 and A-2 have repaid in full. Fitch previously withdrew the rating on the interest-only class X. BEAR STEARNS 2006-HE8: Moody's Cuts Rating on II-1A-2 RMBS to 'B3' ----------------------------------------------------------------- Moody's Investors Service has downgraded the ratings on two tranches and confirmed the rating on one tranche from Bear Stearns Asset Backed Securities I Trust 2006-HE8. The collateral backing this transaction are subprime residential mortgage loans. Complete rating actions are as follows: Issuer: Bear Stearns Asset Backed Securities I Trust 2006-HE8 Cl. II-1A-2, Downgraded to B3 (sf); previously on May 30, 2012 B1 (sf) Placed Under Review for Possible Downgrade Cl. II-1A-3, Confirmed at Caa2 (sf); previously on May 30, 2012 Caa2 (sf) Placed Under Review for Possible Downgrade Cl. II-2A, Downgraded to B3 (sf); previously on May 30, 2012 B1 (sf) Placed Under Review for Possible Downgrade Ratings Rationale The action is a result of the recent performance of Subprime pools originated after 2005 and reflect Moody's updated loss expectations on these pools. The downgrades in the rating action are a result of deteriorating performance and/or structural features resulting in higher expected losses for certain bonds than previously anticipated. The methodologies used in this rating were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. Moody's adjusts the methodologies noted above for Moody's current views on loan modifications. As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. 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) (SFW), 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 extended foreclosure timelines by servicers is taken into consideration when assigning ratings. The above methodology only applies to pools with at least 40 loans and a pool factor of greater than 5%. Moody's may withdraw its rating when the pool factor drops below 5% and the number of loans in the pool declines to 40 loans or lower unless specific structural features allow for a monitoring of the transaction (such as a credit enhancement floor). The primary sources of assumption uncertainty are Moody's central macroeconomic forecast and performance volatility as a result of servicer-related activity such as modifications. The unemployment rate fell from 9.1% in June 2011 to 8.2% in June 2012. Moody's forecasts a further drop to 7.8% by the end of 2Q 2013. Moody's expects housing prices to remain stable through the remainder of 2012 before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer activity such as modification-related principal forgiveness and interest rate reductions. Any change resulting from servicing transfers or other policy or regulatory change can also impact the performance of these transactions . A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF298142 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF198689 BLACK DIAMOND 2005-1: S&P Affirms 'CCC+' Rating on Class E Notes ---------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on the class A-1A, A-1B, A-1, B, C, D-1, D-2, and E notes from Black Diamond CLO 2005-1 Ltd. "At the same time, we removed our ratings on the class B, C, D-1, D-2, and E notes from CreditWatch with positive implications. Black Diamond CLO 2005-1 Ltd is a collateralized loan obligation (CLO) transaction that is managed by Black Diamond Capital Management LLC," S&P said. "We placed the class B, C, D-1, D-2, and E notes on CreditWatch positive on June 18, 2012, due to significant paydowns to the senior class A-1A and A-1 notes and the subsequent increase in overcollateralization ratios. The transaction's reinvestment period ended in June 2011 and since then, the class A-1A and A-1 notes paid down more than over $295 million," S&P said. "We also noted that as of the Aug. 7, 2012, trustee report, the transaction has roughly 20.43% of long dated assets that have maturity dates beyond the legal final maturity of the transaction in June 2017. Exposure to these long dated assets leaves the transaction subject to potential market value risk as these securities may have to be liquidated to pay down the notes on their final maturity date. The rating actions reflect this potentially negative exposure," S&P said. "Despite the significant paydowns, due to the concern of the exposure of long dated assets, we affirmed our ratings on all the notes to reflect the credit support available at the current rating levels," S&P said. Standard & Poor's will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it deems necessary. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATING ACTIONS Black Diamond CLO 2005-1 Ltd. Rating Class To From B AA+ (sf) AA+ (sf)/Watch Pos C A- (sf) A- (sf)/Watch Pos D-1 BB+ (sf) BB+ (sf)/Watch Pos D-2 BB+ (sf) BB+ (sf)/Watch Pos E CCC+ (sf) CCC+ (sf)/Watch Pos RATINGS AFFIRMED Black Diamond CLO 2005-1 Ltd. Class Rating A-1A AAA (sf) A-1B AAA (sf) A-1 AAA (sf) C-BASS MORTGAGE: Moody's Cuts Rating on Cl. AF-4 Secs. to 'Caa3' ---------------------------------------------------------------- Moody's Investors Service has downgraded the rating on one tranche, upgraded the ratings on four tranches and confirmed the ratings on two tranches from two subprime RMBS transactions issued by C-BASS. The collateal backing these transactions are subprime residential mortgages. Complete rating actions are as follows: Issuer: C-BASS Mortgage Loan Asset-Backed Certificates, Series 2005-CB5 Cl. M-1, Upgraded to Ca (sf); previously on May 30, 2012 C (sf) Placed Under Review for Possible Upgrade Cl. AF-2, Upgraded to Ba1 (sf); previously on May 30, 2012 Ba3 (sf) Placed Under Review for Possible Upgrade Cl. AF-3, Upgraded to B3 (sf); previously on May 30, 2012 Caa2 (sf) Placed Under Review for Possible Upgrade Cl. AF-4, Upgraded to Ba1 (sf); previously on May 30, 2012 B3 (sf) Placed Under Review for Possible Upgrade Cl. AV-3, Confirmed at Ba2 (sf); previously on May 30, 2012 Ba2 (sf) Placed Under Review for Possible Upgrade Issuer: C-BASS Mortgage Loan Asset-Backed Certificates, Series 2006-CB2 Cl. AF-2, Downgraded to Caa3 (sf); previously on Apr 12, 2010 Downgraded to Caa2 (sf) Cl. AF-4, Confirmed at Caa3 (sf); previously on May 30, 2012 Caa3 (sf) Placed Under Review for Possible Upgrade Ratings Rationale The actions are a result of the recent performance of Subprime pools originated after 2005 and reflect Moody's updated loss expectations on these pools. The upgrades/downgrades in the rating action are a result of improving/deteriorating performance and/or structural features resulting in lower/higher expected losses for certain bonds than previously anticipated. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. Moody's adjusts the methodologies noted above for Moody's current views on loan modifications. As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. 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) (SFW), 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 extended foreclosure timelines by servicers is taken into consideration when assigning ratings. The above methodology only applies to pools with at least 40 loans and a pool factor of greater than 5%. Moody's may withdraw its rating when the pool factor drops below 5% and the number of loans in the pool declines to 40 loans or lower unless specific structural features allow for a monitoring of the transaction (such as a credit enhancement floor). The primary sources of assumption uncertainty are Moody's central macroeconomic forecast and performance volatility as a result of servicer-related activity such as modifications. The unemployment rate fell from 9.1% in June 2011 to 8.2% in June 2012. Moody's forecasts a further drop to 7.8% by the end of 2Q 2013. Moody's expects housing prices to remain stable through the remainder of 2012 before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer activity such as modification-related principal forgiveness and interest rate reductions. Any change resulting from servicing transfers or other policy or regulatory change can also impact the performance of these transactions . A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF298019 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF198689 CARLYLE GLOBAL 2012-3: S&P Rates $33-Mil. Class D Notes 'BB' ------------------------------------------------------------ Standard & Poor's Ratings Services assigned its preliminary ratings to Carlyle Global Market Strategies CLO 2012-3 Ltd./Carlyle Global Market Strategies CLO 2012-3 LLC's $655.40 million floating-rate notes. The note issuance is a collateralized loan obligation securitization backed by a revolving pool consisting primarily of broadly syndicated senior secured loans. The preliminary ratings are based on information as of Sept. 20, 2012. 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 credit enhancement provided to the preliminary rated notes through the subordination of cash flows that are payable to the subordinated notes. -- The transaction's credit enhancement, which is sufficient to withstand the defaults applicable for the supplemental tests (not counting excess spread), and cash flow structure, which can withstand the default rate projected by Standard & Poor's CDO Evaluator model, as assessed by Standard & Poor's using the assumptions and methods outlined in its corporate collateralized debt obligation criteria. -- The transaction's legal structure, which is expected to be bankruptcy remote. -- The diversified collateral portfolio, which consists primarily of broadly syndicated speculative-grade senior secured term loans. -- The collateral manager's experienced management team. -- S&P's projections regarding the timely interest and ultimate principal payments on the preliminary rated notes, which it assessed using its cash flow analysis and assumptions commensurate with the assigned preliminary ratings under various interest-rate scenarios, including LIBOR ranging from 0.3439%-12.6500%. -- The transaction's overcollateralization and interest coverage tests, a failure of which will lead to the diversion of interest and principal proceeds to reduce the balance of the rated notes outstanding. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com/985.pdf PRELIMINARY RATINGS ASSIGNED Carlyle Global Market Strategies CLO 2012-3 Ltd./Carlyle Global Market Strategies CLO 2012-3 LLC Class Rating Amount (mil. $) A-1 AAA (sf) 391.5 A-2 AA (sf) 52.5 B (deferrable) A (sf) 49.9 C (deferrable) BBB (sf) 29.5 D (deferrable) BB (sf) 33.0 Combination securities(i) AAp (sf)/NRi(ii) 99.0 Subordinated notes NR 59.46 (i)Composed of components representing an aggregate initial principal amount of $50 million of class A-1 notes and $50 million of class A-2 notes. (iii)The 'p' subscript indicates that the rating addresses only the principal portion of the obligation. 'NRi' indicates the interest is not rated. NR--Not rated. CD 2007-CD5: Moody's Affirms 'C' Ratings on Two Cert. Classes ------------------------------------------------------------- Moody's Investors Service affirmed the ratings of 18 classes of CD 2007-CD5 Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2007-CD5 as follows: Cl. A-AB, Affirmed at Aaa (sf); previously on Apr 3, 2008 Definitive Rating Assigned Aaa (sf) Cl. A-4, Affirmed at Aaa (sf); previously on Apr 3, 2008 Definitive Rating Assigned Aaa (sf) Cl. A-1A, Affirmed at Aaa (sf); previously on Apr 3, 2008 Definitive Rating Assigned Aaa (sf) Cl. AM, Affirmed at Aa2 (sf); previously on Nov 11, 2010 Downgraded to Aa2 (sf) Cl. A-MA, Affirmed at Aa2 (sf); previously on Nov 11, 2010 Downgraded to Aa2 (sf) Cl. AJ, Affirmed at Baa2 (sf); previously on Nov 11, 2010 Downgraded to Baa2 (sf) Cl. A-JA, Affirmed at Baa2 (sf); previously on Nov 11, 2010 Downgraded to Baa2 (sf) Cl. B, Affirmed at Ba1 (sf); previously on Nov 11, 2010 Downgraded to Ba1 (sf) Cl. C, Affirmed at Ba3 (sf); previously on Sep 15, 2011 Downgraded to Ba3 (sf) Cl. D, Affirmed at B1 (sf); previously on Sep 15, 2011 Downgraded to B1 (sf) Cl. E, Affirmed at B3 (sf); previously on Sep 15, 2011 Downgraded to B3 (sf) Cl. F, Affirmed at Caa1 (sf); previously on Nov 11, 2010 Downgraded to Caa1 (sf) Cl. G, Affirmed at Caa2 (sf); previously on Nov 11, 2010 Downgraded to Caa2 (sf) Cl. H, Affirmed at Caa3 (sf); previously on Nov 11, 2010 Downgraded to Caa3 (sf) Cl. J, Affirmed at C (sf); previously on Nov 11, 2010 Downgraded to C (sf) Cl. K, Affirmed at C (sf); previously on Nov 11, 2010 Downgraded to C (sf) Cl. XS, Affirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) Cl. XP, Affirmed at Aaa (sf); previously on Apr 3, 2008 Definitive Rating Assigned Aaa (sf) Ratings Rationale The affirmations of the principal classes are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), 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. The ratings of the IO Classes, Classes X-S and S-P are consistent with the expected credit performance of their referenced classes and thus are affirmed. Moody's rating action reflects a cumulative base expected loss of 6.5% of the current balance compared to 7.0% at last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255 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 extent of growth in the current macroeconomic environment and commercial real estate property markets. Commercial real estate property values are continuing to move in a positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with eight straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Slow recovery in the office sector continues with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by discounting and promotions. However, rising wages and reduced unemployment, along with increased consumer confidence, is helping to spur consumer spending resulting in increased sales. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario maintains its forecast of relatively robust growth in the US and an expectation of a mild recession in the euro area for 2012. Downside risks remain significant, and elevated downside risks and their materialization could pose a serious threat to the outlook. Major downside risks include: a deeper than expected recession in the euro area; the potential for a hard landing in major emerging markets; an oil supply shock; and material fiscal tightening in the US given recent political gridlock. Healthy but below-trend growth in GDP is expected through the rest of this year and next with risks trending to the downside. The methodologies used in this rating were "Moody's Approach to Rating Fusion U.S. CMBS Transactions" published in April 2005, and "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.61 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) 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 (sf) level are driven by a pay down analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), 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 (sf) and B2 (sf), 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 assessments 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 assessments in the same transaction. Moody's review also incorporated the CMBS IO calculator ver1.1 which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit assessments; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type corresponding to an IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point. For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator ver1.1 would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. 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 32, compared to 35 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 (CMBS) transactions. Moody's monitors transactions on a monthly basis through a review utilizing MOST(R) (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated September 15, 2011. Deal Performance As of the August 16, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 15% to $1.79 billion from $2.10 billion at securitization. The Certificates are collateralized by 139 mortgage loans ranging in size from less than 1% to 9% of the pool. There is one credit assessment loan, the 14144 Ventura Office Building Loan ($4.5 million -- 0.2% of the pool), which is secured by a 48,000 square foot (SF) office building is located in Sherman Oaks, California. Moody's credit assessment and stressed DSCR are Baa3 and 1.70X, respectively, compared to Baa3 and 1.81X at last review. Twenty-four 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 (CREFC) monthly reporting package. As part of its ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Nineteen loans have been liquidated from the pool, resulting in an aggregate realized loss of $82.7 million (50% loss severity). Currently 11 loans, representing 7% of the pool, are in special servicing. On August 14, 2012, the largest loan that previously was in special servicing, the Georgian Towers Loan ($58.0 million -- 3.2% of the pool) paid off in full with no losses to the trust. The remaining specially serviced loans are represented by a mix of property types. Moody's has estimated an aggregate $29.9 million loss (45% expected loss on average) for nine of the specially serviced loans. Moody's has assumed a high default probability for 11 poorly performing loans representing 6% of the pool and has estimated an aggregate $20.5 million loss (20% expected loss based on a 50% probability default) from these troubled loans. Moody's was provided with full year 2010 and partial year 2011 operating results for 100% & 86% of the performing pool respectively. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 113% compared to 112% at last full review. Moody's net cash flow reflects a weighted average haircut of 13.2% 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 1.33X and 0.97X, respectively, compared to 1.29X and 0.95X, respectively, at last full review. Moody's actual DSCR is based on Moody's net cash flow (NCF) 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 26% of the pool. The largest loan is the Lincoln Square Loan ($160 million -- 8.9% of the pool), which is secured by a 406,000 SF office building located in Washington, DC. The loan represents a 72.7% pari-passu interest in a $220 million loan that is interest-only throughout its entire ten year term, maturing in July 2017. The property was 97% leased as of June 2012 compared to 100% at last review. The largest tenant is Latham & Watkins LLP, which represents 57% of the net rentable area (NRA); lease expiration January 2016. The second largest tenant is the U.S. Government which represents 12% of the NRA; lease expiration December 2013. The servicer has not been notified whether the U.S. Government will renew its lease. Moody's analysis incorporates a stressed cash flow due to Moody's concerns about potential volatility due to lease rollover. Moody's LTV and stressed DSCR are 139% and 0.68X, respectively, compared to 126% and 0.75X at last review. The second largest loan is the USFS Industrial Distribution Portfolio Loan ($157.5 million -- 8.8% of the pool), which is secured by 37 cross-collateralized and cross-defaulted warehouse properties and an office property. The properties are located in 25 states. The properties are 100% leased to the US Foodservice, Inc. through July 2027. The loan represents a 33.3% pari-passu interest in a $472.4 million loan. Moody's LTV and stressed DSCR are 106% and 1.00X, respectively, compared to 104% and 1.02X at last review. The third largest loan is the Charles River Plaza North Loan ($145.0 million -- 8.1% of the pool), which is secured by a 355,000 SF office building located in Boston, Massachusetts. The property is 100% leased to Massachusetts General Hospital through May 2029. Moody's LTV and stressed DSCR are 147% and 0.64X, respectively, compared to 139% and 0.68X at last review. CENT CLO 16: S&P Gives 'BB' Rating on Class D Deferrable Notes -------------------------------------------------------------- Standard & Poor's Ratings Services assigned its ratings to Cent CLO 16 L.P./Cent CLO 16 Corp.'s $368.0 million floating-rate notes. "The transaction is a cash flow collateralized loan obligation securitization of a revolving pool consisting primarily of broadly syndicated senior secured loans," S&P said. The ratings reflect S&P's assessment of: The credit enhancement provided to the rated notes through the subordination of cash flows that are payable to the subordinated notes. The transaction's credit enhancement, which is sufficient to withstand the defaults applicable for the supplemental tests (not counting excess spread), and cash flow structure, which can withstand the default rate projected by Standard & Poor's CDO Evaluator model, as assessed by Standard & Poor's using the assumptions and methods outlined in its corporate collateralized debt obligation criteria. The transaction's legal structure, which is expected to be bankruptcy remote. The diversified collateral portfolio, which consists primarily of broadly syndicated speculative-grade senior secured term loans. The asset manager's experienced management team. "Our projections regarding the timely interest and ultimate principal payments on the rated notes, which we assessed using our cash flow analysis and assumptions commensurate with the assigned ratings under various interest-rate scenarios, including LIBOR ranging from 0.34%-12.65%," S&P said. The transaction's overcollateralization and interest coverage tests, a failure of which will lead to the diversion of interest and principal proceeds to reduce the balance of the rated notes outstanding. The transaction's interest reinvestment test, a failure of which during the reinvestment period will lead to the reclassification of excess interest proceeds that are available prior to paying subordinated management fees, uncapped administrative expenses, and limited partnership certificate payments to principal proceeds for the purchase of collateral assets or, at the collateral manager's discretion, to reduce the balance of the rated notes outstanding sequentially. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com/938.pdf RATINGS ASSIGNED Cent CLO 16 L.P./Cent CLO 16 Corp. Class Rating Amount (mil. $) A-1a AAA (sf) 245.50 A-1b AAA (sf) 10.00 A-2 AA (sf) 45.50 B (deferrable) A (sf) 31.00 C (deferrable) BBB (sf) 19.00 D (deferrable) BB (sf) 17.00 L.P. certificates/equity NR 44.65 L.P.-Limited partnership. NR-Not rated. CHASE MORTGAGE 2007-A3: Moody's Gives Caa2 Rating on 22 Tranches ---------------------------------------------------------------- Moody's Investors Service has downgraded 22 tranches and upgraded 18 tranches from one RMBS transaction issued by Chase Mortgage Finance Trust. The collateral backing this deal primarily consists of first-lien, adjustable-rate prime Jumbo residential mortgages. The actions impact approximately $186 million of RMBS issued in 2007. Complete rating actions are as follows: Issuer: Chase Mortgage Finance Trust Series 2007-A3 Cl. 1-A3, Downgraded to Caa2 (sf); previously on May 26, 2010 Confirmed at B3 (sf) Cl. 1-A4, Upgraded to Caa2 (sf); previously on May 26, 2010 Downgraded to Ca (sf) Cl. 1-A6, Upgraded to Caa2 (sf); previously on Feb 22, 2012 Downgraded to Caa3 (sf) Cl. 1-A8, Upgraded to Caa2 (sf); previously on Feb 22, 2012 Downgraded to Caa3 (sf) Cl. 1-A10, Upgraded to Caa2 (sf); previously on Feb 22, 2012 Downgraded to Caa3 (sf) Cl. 1-A11, Downgraded to Caa2 (sf); previously on May 26, 2010 Upgraded to B3 (sf) Cl. 1-A12, Downgraded to Caa2 (sf); previously on May 26, 2010 Upgraded to B3 (sf) Cl. 1-A13, Upgraded to Caa2 (sf); previously on May 26, 2010 Downgraded to Ca (sf) Cl. 1-A14, Upgraded to Caa2 (sf); previously on May 26, 2010 Downgraded to Ca (sf) Cl. 1-A16, Upgraded to Caa2 (sf); previously on Feb 22, 2012 Downgraded to Caa3 (sf) Cl. 1-A18, Upgraded to Caa2 (sf); previously on Feb 22, 2012 Downgraded to Caa3 (sf) Cl. 1-A20, Upgraded to Caa2 (sf); previously on Feb 22, 2012 Downgraded to Caa3 (sf) Cl. 2-A1, Downgraded to Caa2 (sf); previously on May 26, 2010 Confirmed at Caa1 (sf) Cl. 2-A4, Downgraded to Caa2 (sf); previously on May 30, 2012 Caa1 (sf) Placed Under Review for Possible Upgrade Cl. 2-A5, Upgraded to Caa2 (sf); previously on May 26, 2010 Downgraded to Caa3 (sf) Cl. 2-A6, Downgraded to Caa2 (sf); previously on May 26, 2010 Downgraded to Caa1 (sf) Cl. 2-A7, Upgraded to Caa2 (sf); previously on May 30, 2012 Caa3 (sf) Placed Under Review for Possible Upgrade Cl. 2-A8, Downgraded to Caa2 (sf); previously on May 26, 2010 Downgraded to Caa1 (sf) Cl. 2-A9, Upgraded to Caa2 (sf); previously on May 30, 2012 Caa3 (sf) Placed Under Review for Possible Upgrade Cl. 2-A10, Downgraded to Caa2 (sf); previously on May 26, 2010 Downgraded to Caa1 (sf) Cl. 2-A11, Upgraded to Caa2 (sf); previously on May 30, 2012 Caa3 (sf) Placed Under Review for Possible Upgrade Cl. 2-A14, Downgraded to Caa2 (sf); previously on May 26, 2010 Downgraded to Caa1 (sf) Cl. 2-A15, Downgraded to Caa2 (sf); previously on May 30, 2012 Caa1 (sf) Placed Under Review for Possible Upgrade Cl. 2-A16, Upgraded to Caa2 (sf); previously on May 26, 2010 Downgraded to Caa3 (sf) Cl. 2-A17, Upgraded to Caa2 (sf); previously on May 26, 2010 Downgraded to Caa3 (sf) Cl. 2-A18, Downgraded to Caa2 (sf); previously on May 26, 2010 Downgraded to Caa1 (sf) Cl. 2-A19, Upgraded to Caa2 (sf); previously on May 30, 2012 Caa3 (sf) Placed Under Review for Possible Upgrade Cl. 2-A20, Downgraded to Caa2 (sf); previously on May 26, 2010 Downgraded to Caa1 (sf) Cl. 2-A21, Upgraded to Caa2 (sf); previously on May 30, 2012 Caa3 (sf) Placed Under Review for Possible Upgrade Cl. 2-A22, Downgraded to Caa2 (sf); previously on May 26, 2010 Downgraded to Caa1 (sf) Cl. 2-A23, Upgraded to Caa2 (sf); previously on May 30, 2012 Caa3 (sf) Placed Under Review for Possible Upgrade Cl. 3-A1, Downgraded to Caa2 (sf); previously on May 26, 2010 Downgraded to Caa1 (sf) Cl. 3-A4, Downgraded to Caa2 (sf); previously on May 26, 2010 Confirmed at Caa1 (sf) Cl. 3-A6, Downgraded to Caa2 (sf); previously on May 26, 2010 Confirmed at Caa1 (sf) Cl. 3-A8, Downgraded to Caa2 (sf); previously on May 26, 2010 Confirmed at Caa1 (sf) Cl. 3-A12, Downgraded to Caa2 (sf); previously on May 26, 2010 Confirmed at Caa1 (sf) Cl. 3-A13, Downgraded to Caa2 (sf); previously on May 26, 2010 Confirmed at Caa1 (sf) Cl. 3-A16, Downgraded to Caa2 (sf); previously on May 26, 2010 Confirmed at Caa1 (sf) Cl. 3-A18, Downgraded to Caa2 (sf); previously on May 26, 2010 Confirmed at Caa1 (sf) Cl. 3-A20, Downgraded to Caa2 (sf); previously on May 26, 2010 Confirmed at Caa1 (sf) Ratings Rationale The actions are a result of the recent performance of the pools backing the transaction and reflect Moody's updated loss expectations on these pools. In addition, the cash-flow modeling used in the previous May 30, 2012 rating action did not correctly allocate principal to the senior tranches after the credit support depletion date. The model incorrectly assumed that payments to the senior certificates would not become pro-rata after the credit support depletion date. The cash-flow modeling has now been corrected, and the rating action reflects this change. The methodologies used in this rating were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. The methodology used in rating Interest- Only Securities was "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's adjusts the methodologies noted above for 1) Moody's current view on loan modifications and 2) Small pool volatility Loan Modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. Small Pool Volatility The above RMBS approach only applies to structures with at least 40 loans and pool factor of greater than 5%. Moody's can withdraw its rating when the pool factor drops below 5% and the number of loans in the deal declines to 40 loans or lower. If, however, a transaction has a specific structural feature, such as a credit enhancement floor, that mitigates the risks of small pool size, Moody's can choose to continue to rate the transaction. For pools with loans less than 100, Moody's adjusts its projections of loss to account for the higher loss volatility of such pools. For small pools, a few loans becoming delinquent would greatly increase the pools' delinquency rate. To project losses on prime jumbo pools with fewer than 100 loans, Moody's first calculates an annualized delinquency rate based on vintage, number of loans remaining in the pool and the level of current delinquencies in the pool. For prime jumbo pools, Moody's first applies a baseline delinquency rate of 3.5% for 2005, 6.5% for 2006 and 7.5% for 2007. Once the loan count in a pool falls below 76, this rate of delinquency is increased by 1% for every loan fewer than 76. For example, for a 2005 pool with 75 loans, the adjusted rate of new delinquency is 3.54%. Further, to account for the actual rate of delinquencies in a small pool, Moody's multiplies the rate calculated above by a factor ranging from 0.20 to 2.0 for current delinquencies that range from less than 2.5% to greater than 50% respectively. Moody's then uses this final adjusted rate of new delinquency to project delinquencies and losses for the remaining life of the pool under the approach described in the methodology publication. When assigning the final ratings to bonds, in addition to the approach described above, Moody's considered the volatility of the projected losses and timeline of the expected defaults. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in April 2011 to 8.1% in August 2012. Moody's forecasts a further drop to 7.8% for 2013. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF297398 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF196023 CHL MORTGAGE: Moody's Cuts Ratings on 6 RMBS Tranches to 'Caa3' --------------------------------------------------------------- Moody's Investors Service has downgraded 34 tranches, upgraded 13 tranches and confirmed the ratings on two tranches from four RMBS transactions issued by CHL Mortgage Pass-Through Trust. The collateral backing these deals primarily consists of first-lien, fixed-rate prime Jumbo residential mortgages. The actions impact approximately $569 million of RMBS issued from 2005 to 2006. Complete rating actions are as follows: Issuer: CHL Mortgage Pass-Through Trust 2005-16 Cl. A-2, Confirmed at Ba2 (sf); previously on May 30, 2012 Ba2 (sf) Placed Under Review for Possible Upgrade Cl. A-22, Upgraded to A1 (sf); previously on May 30, 2012 Ba1 (sf) Placed Under Review for Possible Upgrade Cl. A-27, Upgraded to A1 (sf); previously on May 30, 2012 Ba1 (sf) Placed Under Review for Possible Upgrade Cl. A-31, Confirmed at Ba2 (sf); previously on May 30, 2012 Ba2 (sf) Placed Under Review for Possible Upgrade Issuer: CHL Mortgage Pass-Through Trust 2005-21 Cl. A-1, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Downgraded to Caa1 (sf) Cl. A-2, Downgraded to Caa1 (sf); previously on Apr 12, 2010 Downgraded to B3 (sf) Cl. A-3, Downgraded to C (sf); previously on Apr 12, 2010 Downgraded to Ca (sf) Cl. A-4, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Downgraded to Caa1 (sf) Cl. A-11, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Downgraded to Caa1 (sf) Cl. A-12, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Downgraded to Caa1 (sf) Cl. A-13, Upgraded to Baa1 (sf); previously on Apr 12, 2010 Downgraded to B3 (sf) Cl. A-16, Upgraded to Baa1 (sf); previously on Apr 12, 2010 Downgraded to B3 (sf) Cl. A-17, Downgraded to Caa1 (sf); previously on Apr 12, 2010 Downgraded to B3 (sf) Cl. A-24, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Downgraded to Caa1 (sf) Cl. A-25, Downgraded to Caa1 (sf); previously on Apr 12, 2010 Downgraded to B3 (sf) Cl. A-26, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Downgraded to Caa1 (sf) Cl. A-34, Upgraded to Baa1 (sf); previously on Apr 12, 2010 Downgraded to B3 (sf) Cl. A-35, Downgraded to Caa1 (sf); previously on Apr 12, 2010 Downgraded to B3 (sf) Cl. A-36, Upgraded to Baa1 (sf); previously on Apr 12, 2010 Downgraded to B3 (sf) Cl. PO, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Downgraded to Caa1 (sf) Issuer: CHL Mortgage Pass-Through Trust 2005-J2 Cl. 1-A-4, Downgraded to Ba3 (sf); previously on Apr 12, 2010 Downgraded to Ba2 (sf) Cl. 2-A-1, Downgraded to Caa1 (sf); previously on Apr 12, 2010 Downgraded to B3 (sf) Cl. 2-A-2, Downgraded to Caa1 (sf); previously on Apr 12, 2010 Downgraded to B3 (sf) Cl. 2-A-3, Downgraded to Caa1 (sf); previously on Apr 12, 2010 Downgraded to B3 (sf) Cl. 2-A-4, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Downgraded to B3 (sf) Cl. 2-A-5, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Downgraded to B3 (sf) Cl. 2-X, Downgraded to Caa1 (sf); previously on Apr 12, 2010 Downgraded to B3 (sf) Cl. 3-A-1, Upgraded to Baa1 (sf); previously on May 30, 2012 B1 (sf) Placed Under Review for Possible Upgrade Cl. 3-A-3, Upgraded to Baa1 (sf); previously on May 30, 2012 B2 (sf) Placed Under Review for Possible Upgrade Cl. 3-A-4, Upgraded to Ba1 (sf); previously on Apr 12, 2010 Downgraded to B2 (sf) Cl. 3-A-5, Upgraded to Ba1 (sf); previously on Apr 12, 2010 Downgraded to B1 (sf) Cl. 3-A-6, Upgraded to Ba1 (sf); previously on Apr 12, 2010 Downgraded to B2 (sf) Cl. 3-A-7, Upgraded to Ba1 (sf); previously on Apr 12, 2010 Downgraded to B2 (sf) Cl. 3-A-8, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Downgraded to Caa1 (sf) Cl. 3-A-9, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Downgraded to B3 (sf) Cl. 3-A-10, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Downgraded to B3 (sf) Cl. 3-A-12, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Downgraded to Caa1 (sf) Cl. 3-A-13, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Downgraded to Caa1 (sf) Cl. 3-A-14, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Downgraded to B3 (sf) Cl. 3-A-16, Upgraded to Ba1 (sf); previously on Apr 12, 2010 Downgraded to B2 (sf) Cl. 3-X, Downgraded to B2 (sf); previously on Feb 22, 2012 Downgraded to B1 (sf) Cl. PO, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Downgraded to B3 (sf) Issuer: CHL Mortgage Pass-Through Trust 2006-J4 Cl. A-1, Downgraded to Caa3 (sf); previously on May 30, 2012 Ba3 (sf) Placed Under Review for Possible Upgrade Cl. A-2, Downgraded to C (sf); previously on May 30, 2012 Caa1 (sf) Placed Under Review for Possible Upgrade Cl. A-3, Downgraded to Caa3 (sf); previously on Apr 12, 2010 Confirmed at B3 (sf) Cl. A-4, Downgraded to Caa3 (sf); previously on Apr 12, 2010 Downgraded to Caa2 (sf) Cl. A-9, Downgraded to Caa3 (sf); previously on Apr 12, 2010 Confirmed at B2 (sf) Cl. X, Downgraded to Caa3 (sf); previously on Feb 22, 2012 Downgraded to B3 (sf) Cl. PO, Downgraded to Caa3 (sf); previously on Apr 12, 2010 Downgraded to Caa2 (sf) Ratings Rationale The actions are a result of the recent performance of Prime jumbo pools originated on or after 2005 and reflect Moody's updated loss expectations on these pools. The rating action consists of a number of upgrades, downgrades, and confirmations. The upgrades are due to significant improvement in collateral performance, and rapid build-up in credit enhancement due to high prepayments. The downgrades are a result of deteriorating performance and structural features resulting in higher expected losses for certain bonds than previously anticipated. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. The methodology used in rating Interest- Only Securities was "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's adjusts the methodologies noted above for 1) Moody's current view on loan modifications and 2) small pool volatility Loan Modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. Small Pool Volatility The above RMBS approach only applies to structures with at least 40 loans and pool factor of greater than 5%. Moody's can withdraw its rating when the pool factor drops below 5% and the number of loans in the deal declines to 40 loans or lower. If, however, a transaction has a specific structural feature, such as a credit enhancement floor, that mitigates the risks of small pool size, Moody's can choose to continue to rate the transaction. For pools with loans less than 100, Moody's adjusts its projections of loss to account for the higher loss volatility of such pools. For small pools, a few loans becoming delinquent would greatly increase the pools' delinquency rate. To project losses on prime jumbo pools with fewer than 100 loans, Moody's first calculates an annualized delinquency rate based on vintage, number of loans remaining in the pool and the level of current delinquencies in the pool. For prime jumbo pools, Moody's first applies a baseline delinquency rate of 3.5% for 2005, 6.5% for 2006 and 7.5% for 2007. Once the loan count in a pool falls below 76, this rate of delinquency is increased by 1% for every loan fewer than 76. For example, for a 2005 pool with 75 loans, the adjusted rate of new delinquency is 3.54%. Further, to account for the actual rate of delinquencies in a small pool, Moody's multiplies the rate calculated above by a factor ranging from 0.20 to 2.0 for current delinquencies that range from less than 2.5% to greater than 50% respectively. Moody's then uses this final adjusted rate of new delinquency to project delinquencies and losses for the remaining life of the pool under the approach described in the methodology publication. When assigning the final ratings to bonds, in addition to the approach described above, Moody's considered the volatility of the projected losses and timeline of the expected defaults. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in April 2011 to 8.1% in August 2012. Moody's forecasts a further drop to 7.8% for 2013. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF297275 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF196023 CIENA CAPITAL: Moody's Upgrades Rating on Cl. C Certs. to 'Caa3' ---------------------------------------------------------------- Moody's Investors Service upgraded one certificate issued in the 2004-A securitization of small business loans sponsored by Ciena Capital, LLC, formerly known as Business Loan Express. Small balance commercial real estate primarily secures the loans. The complete rating action is as follows: Issuer: Business Loan Express Business Loan Trust 2004-A Cl. C, Upgraded to Caa3 (sf); previously on Jan 26, 2011 Downgraded to C (sf) Ratings Rationale The upgrade action in the 2004-A securitization was due to an increase in credit enhancement. Since the last rating action in January 2011, the reserve account increased from approximately 10% to 18% of the outstanding pool balance. The methodology is described as follows: The methodology used in the rating actions included a loan level analysis to determine a range of lifetime expected net losses. Moody's assessed the likelihood of each loan to default base on the current delinquency status, estimate of market value, loan concentrations, business types, property locations, past payment histories, and borrower's creditworthiness. Because of the hard charge-off policy by which a loan must be charged off after being a certain number of days past due, Moody's also estimated and incorporated future recoveries on charged-off loans whose collateral has not yet been sold. These future recoveries were determined by a loan level analysis using an estimate of market value. Moody's range of lifetime net losses, taking into account future recoveries on already charged-off loans, is 9.8%-10.1% of the original pool balance. The range of projected lifetime net losses were then evaluated against the available credit enhancement provided by the reserve account and excess spread. Sufficiency of coverage was considered in light of the credit quality of the collateral pools, industry, geographical and loan concentrations, historical variability of losses experienced by the issuer, and servicer quality. Primary sources of assumption uncertainty are the general economic environment, commercial property values, and the ability of small businesses to recover from the recession. If the remaining expected net loss used in determining the ratings increased by 20%, the tranche may be downgraded. Other methodologies and factors that may have been considered in the process of rating these transactions can also be found on Moody's website. CITIGROUP COMMERCIAL 2006-C4: Fitch Cuts Rating on 8 Cert. Classes ------------------------------------------------------------------ Fitch Ratings has downgraded eight classes of Citigroup Commercial Mortgage Trust series 2006-C4, commercial mortgage pass-through certificates, due to further deterioration of performance, increased loss expectations on the specially serviced loans and higher than expected realized losses from dispositions. The downgrades reflect an increase in Fitch modeled losses across the pool, which includes assumed losses on loans in special servicing and on performing loans with declines in performance indicative of a higher probability of default. Fitch modeled losses of 8.3% (9.8% cumulative transaction losses, which includes losses realized to date) based on expected losses on the specially serviced loans and loans that could not refinance at maturity. As of the August 2012 distribution date, the pool's aggregate principal balance has decreased 9.8% to $2 billion from $2.26 billion at issuance. One loan (0.06%) is defeased. As of August 2012, there are cumulative interest shortfalls in the amount of $4 million, currently affecting classes F through P. Fitch has designated 51 loans (38% of the pool) as Fitch Loans of Concern, which includes 12 specially serviced loans (9.9%). The largest contributor to losses is the Reston Executive Center (4.6%). The two largest tenants renewed their leases in late 2010 but downsized their spaces significantly driving occupancy down to 78.8% as of year-end (YE) 2011. The property has historically performed well but NOI declined by 40% in 2011 as a result of a decline in occupancy. The borrower is reported to be in negotiations with a tenant for a large portion of the vacant space. The second largest contributor to losses is 20 North Orange (2%). The loan is secured by a 267,398 square foot (sf) office property located in Orlando, FL. The property has exhibited declining performance since issuance. As of June 2011 (the most recent data available), NCF DSCR had declined to 0.98x compared to 1.51x underwritten at issuance. Per the May 2012 rent roll, the subject was 79.6% occupied. The loan was transferred to the special servicer in September 2011 due to a delinquency. A receiver is in-place and the special servicer is pursuing foreclosure. The third largest contributor to losses was the Bank of America Plaza (1.6%). The loan is secured by 302,000 sf office property in downtown Columbia, SC. The loan transferred to the special servicer in March 2011 when a major tenant vacated its space. The property is approximately 69% occupied. The special servicer is pursuing foreclosure and a recent appraisal indicates losses. Fitch has downgraded the following classes as indicated: -- $164.1 million class A-J to 'BBsf' from 'BBBsf'; Outlook to Negative from Stable; -- $50.9 million class B to 'Bsf' from 'BBsf'; Outlook Negative; -- $25.5 million class C to 'CCCsf' from 'Bsf'; RE 35%: -- $31.1 million class D to 'CCsf' from 'CCCsf'; RE0%: -- $22.6 million class E to 'CCsf' from 'CCCsf'; RE0%; -- $28.3 million class F to 'Csf' from 'CCsf'; RE 0%; -- $28.3 million class G to 'Csf' from 'CCsf'; RE 0%; -- $25.5 million class H to 'Csf' from 'CCsf'; RE 0%. Fitch has affirmed the following classes as indicated: -- $152.7 million class A-2 at 'AAAsf'; Outlook Stable; -- $103.2 million class A-SB at 'AAAsf'; Outlook Stable; -- $831.3 million class A-3 at 'AAAsf'; Outlook Stable; -- $327.1 million class A-1A at 'AAAsf'; Outlook Stable; -- $266.4 million class A-M at 'AAAsf'; Outlook Stable; -- $11.3 million class J at 'Csf'; RE 0%; -- $8.5 million class K at 'Csf'; RE 0%. Class A-1 has paid in pull. Classes L through O have realized losses and remain at 'Dsf' RE 0%. Fitch does not rate class P which has been reduced to $0 due to losses. Fitch previously withdrew the ratings of the interest-only class X. CITIGROUP COMMERCIAL 2006-C5: Moody's Cuts Rating on F Certs. to C ------------------------------------------------------------------ Moody's Investors Service downgraded the ratings of six classes and affirmed nine classes of Citigroup Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2006-C5 as follows: Cl. A-3, Affirmed at Aaa (sf); previously on Jan 16, 2007 Definitive Rating Assigned Aaa (sf) Cl. A-SB, Affirmed at Aaa (sf); previously on Jan 16, 2007 Definitive Rating Assigned Aaa (sf) Cl. A-4, Affirmed at Aaa (sf); previously on Jan 16, 2007 Definitive Rating Assigned Aaa (sf) Cl. A-1A, Affirmed at Aaa (sf); previously on Jan 16, 2007 Definitive Rating Assigned Aaa (sf) Cl. A-M, Affirmed at Aaa (sf); previousply on Oct 20, 2011 Confirmed at Aaa (sf) Cl. A-J, Downgraded to Ba2 (sf); previously on Oct 20, 2011 Downgraded to Baa3 (sf) Cl. B, Downgraded to B2 (sf); previously on Oct 20, 2011 Downgraded to Ba3 (sf) Cl. C, Downgraded to Caa1 (sf); previously on Oct 20, 2011 Downgraded to B2 (sf) Cl. D, Downgraded to Caa3 (sf); previously on Oct 20, 2011 Downgraded to Caa1 (sf) Cl. E, Downgraded to Ca (sf); previously on Oct 20, 2011 Downgraded to Caa2 (sf) Cl. F, Downgraded to C (sf); previously on Oct 20, 2011 Downgraded to Ca (sf) Cl. G, Affirmed at C (sf); previously on Oct 20, 2011 Downgraded to C (sf) Cl. H, Affirmed at C (sf); previously on Oct 20, 2011 Downgraded to C (sf) Cl. XC, Affirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) Cl. XP, Affirmed at Aaa (sf); previously on Jan 16, 2007 Definitive Rating Assigned Aaa (sf) Ratings Rationale The downgrades are due to higher than expected losses from troubled and specially serviced loans. The affirmations are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), 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. The ratings of the IO Classes, Class XC and XP, are consistent with the expected credit performance of their referenced classes and thus are affirmed. Moody's rating action reflects a cumulative base expected loss of 8.2% of the current balance. At last review, Moody's cumulative base expected loss was 7.5%. Realized losses have increased from 2.9% of the original pooled balance to 3.9% since the prior review. Moody's provides a current list of base losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255 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. The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of assumption uncertainty are the extent of growth in the current macroeconomic environment and commercial real estate property markets. Commercial real estate property values are continuing to move in a positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with eight straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Slow recovery in the office sector continues with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by discounting and promotions. However, rising wages and reduced unemployment, along with increased consumer confidence, is helping to spur consumer spending resulting in increased sales. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario maintains its forecast of relatively robust growth in the US and an expectation of a mild recession in the euro area for 2012. Downside risks remain significant, and elevated downside risks and their materialization could pose a serious threat to the outlook. Major downside risks include: a deeper than expected recession in the euro area; the potential for a hard landing in major emerging markets; an oil supply shock; and material fiscal tightening in the US given recent political gridlock. Healthy but below-trend growth in GDP is expected through the rest of this year and next with risks trending to the downside. The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000, and "Moody's Approach to Rating Structured Finance Interest- Only Securities" published in February 2012. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.61 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) 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 (sf) level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), 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 (sf) and B2 (sf), 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 assessments is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit assessment 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 assessment level, is incorporated for loans with similar credit assessments in the same transaction. Moody's review also incorporated the CMBS IO calculator ver1.1, which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit assessments; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point. For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator ver1.1 would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. 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 44 compared to 48 at Moody's prior 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 (CMBS) transactions. Moody's monitors transactions on a monthly basis through a review utilizing MOST(R) (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated October 20, 2011. Deal Performance As of the August 17, 2012 distribution date, the transaction's aggregate pooled certificate balance has decreased by 21% to $1.7 billion from $2.1 billion at securitization. The Certificates are collateralized by 177 mortgage loans ranging in size from less than 1% to 7% of the pool, with the top ten loans representing 37% of the pool. One loan, representing 1% of the pool, has defeased and is secured by U.S. Government securities. Forty-one loans, representing 17% 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) monthly reporting package. As part of its ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Twenty-six loans have been liquidated from the pool, resulting in an aggregate realized loss of $83.0 million (42% loss severity on average). Twelve loans, representing 8% of the pool, are currently in special servicing. The largest specially serviced loan is the One & Two Securities Centre Loan ($68 million -- 4.1% of the pool), which is secured by two office buildings totaling 521,957 square feet (SF) located in the Buckhead submarket of Atlanta, Georgia. The loan transferred to special servicing in December 2010 due to imminent default and became real estate owned (REO) in November 2011. The property was 79% leased as of July 2012 compared to 80% at last review; 22% of the net rentable area (NRA) expires within the next 12 months. The special servicer indicated that the loan will be included in an auction scheduled for September 2012. The remaining eleven specially serviced loans are secured by a mix of property types. Moody's estimates an aggregate $53.8 million loss for the specially serviced loans (41% expected loss on average). Moody's has assumed a high default probability for 20 poorly performing loans representing 9% of the pool and has estimated an aggregate $25.7 million loss (16% expected loss based on a 50% probability default) from these troubled loans. Moody's was provided with full year 2011 operating results for 90% of the pool's non-specially serviced and non-defeased loans. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 103% compared to 106% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 10% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.5%. Excluding special serviced and troubled loans, Moody's actual and stressed DSCRs are 1.36X and 1.05X, respectively, compared to 1.34X and 1.02X at last review. Moody's actual DSCR is based on Moody's net cash flow (NCF) 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 21% of the pool. The largest loan is the IRET Portfolio Loan ($122.6 million -- 7.3% of the pool), which is a comprised of nine office properties located in Minnesota, Missouri, Nebraska, and Kansas. The portfolio totals approximately 937,000 SF. The loan is interest- only for its entire 10-year term and matures in October 2016. The portfolio was 81% leased as of July 2012 compared to 86% at last review. The 2011 property performance decreased due to lower base rents and expense reimbursements caused by the increase in vacancy. Moody's LTV and stressed DSCR are 138% and 0.76X, respectively, compared to 136% and 0.75X at last full review. The second largest loan is the 801 South Figueroa Street Loan ($120 million -- 7.2% of the pool), which is secured by a 443,271 SF office building located in Los Angeles, California. The loan is interest-only for its entire 10-year term and matures in October 2016. The property was 88% leased as of March 2012 compared to 91% at last review with approximately 20% of the NRA expiring in the next 12 months. Leases representing approximately 20% of the NRA expire within the next year. A significant portion of this space is rented at above market rents. Moody's analysis includes stabilization of the building at market rents and market vacancy. Moody's LTV and stressed DSCR are 119% and 0.84X, respectively, compared to 112% and 0.90X at last full review. The third largest loan is the Tower 67 Loan ($100 million -- 6.0% of the pool), which is secured by a 449-unit multifamily property located in the upper west side of Manhattan. The property was 98% leased as of December 2011, the same as last review. Property performance has been stable. The loan is interest-only for a 10- year term and has an anticipated repayment date of July 2016. Moody's LTV and stressed DSCR are 76% and 1.07X, respectively, compared to 81% and 1.00X at last review. CPS AUTO 2012-C: Moody's Assigns 'B1' Rating to Class E Notes ------------------------------------------------------------- Moody's Investors Service has assigned definitive ratings to the notes issued by CPS Auto Receivables Trust 2012-C. This is the third senior/subordinated transaction of the year for Consumer Portfolio Services, Inc. (CPS). The complete rating actions are as follows: Issuer: CPS Auto Receivables Trust 2012-C Class A, Definitive Rating Assigned A2 (sf) Class B, Definitive Rating Assigned A2 (sf) Class C, Definitive Rating Assigned Baa1 (sf) Class D, Definitive Rating Assigned Ba1 (sf) Class E, Definitive Rating Assigned B1 (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 CPS as servicer, and the backup servicing arrangement with Aa3-rated Wells Fargo Bank, N.A. The principal methodology used in this rating was "Moody's Approach to Rating U.S. Auto Loan-Backed Securities," published in May 2011. Moody's median cumulative net loss expectation for the underlying pool is 13.5%. The loss expectation was based on an analysis of CPS' 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 Medium/High versus a Medium for the sector. This is driven by the Medium/High assessment for Governance due to the unrated sponsor/servicer. 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 23%, 27% or 30%, the initial model output for the Class A notes might change from A2 to A3, Baa3, and Ba2, respectively. If the net loss used in determining the initial rating were changed to 18.5%, 19% or 23%, the initial model output for the Class B notes might change from A2 to Ba1, Ba3, and B3, respectively. If the net loss used in determining the initial rating were changed to 14.5%, 16%, or 18.5%, the initial model output for the Class C notes might change from Baa1 to Baa3, Ba2, and B1, respectively. If the net loss used in determining the initial rating were changed to 14.5%,16% or 18.5%, the initial model output for the Class D notes might change from Ba1 to Ba3, B2 and determining the initial rating were changed to 14.5%,16% or 18%, the initial model output for the Class E notes might change from B1 to B3, 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. CPS AUTO 2012-C: S&P Rates Class E Asset-Backed Notes 'B+' ---------------------------------------------------------- Standard & Poor's Ratings Services assigned its ratings to CPS Auto Receivables Trust 2012-C's $147.0 million asset-backed notes. The note issuance is an asset-backed securitization backed by subprime auto loan receivables. The ratings reflect S&P's view of: The availability of approximately 39.7%, 34.8%, 27.9%, 21.1%, and 20.7% of credit support for the class A, B, C, D, and E notes based on stressed cash flow scenarios (including excess spread). "These credit support levels provide coverage of 3.0x, 2.3x, 1.75x, 1.5x, and 1.15x our 12.50-13.00% expected cumulative net loss range for the class A, B, C, D, and E notes," S&P said. "The expectation that, under a moderate stress scenario of 1.75x our expected net loss level, the rating on the class A notes will not decline by more than one rating category during the first year, and the ratings on the class B and C notes will not decline by more than two categories during the first year, all else being equal. This is consistent with our credit stability criteria, which outline the outer bound of credit deterioration as a one-category downgrade within the first year for 'AA (sf)' rated securities and a two-category downgrade within the first year for 'A (sf)', 'BBB (sf)', and 'BB (sf)' rated securities," S&P said. The credit enhancement underlying the rated notes, which is in the form of subordination, overcollateralization, a reserve account, and excess spread. The timely interest and principal payments made to the rated notes under S&P's stressed cash flow modeling scenarios, which S&P believes are appropriate for the assigned ratings. The collateral characteristics of the subprime automobile loans securitized in this transaction. The transaction's payment and credit enhancement structures, which include performance triggers. The transaction's legal structure. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATINGS ASSIGNED CPS Auto Receivables Trust 2012-C Class Rating Type Interest Amount rate (mil. $) A AA- (sf) Senior Fixed 111.720 B A (sf) Subordinate Fixed 13.230 C BBB (sf) Subordinate Fixed 8.820 D BB (sf) Subordinate Fixed 7.350 E B+ (sf) Subordinate Fixed 5.880 CREDIT SUISSE 2007-C3: Moody's Cuts 2 Cert. Class Ratings to 'C' ---------------------------------------------------------------- Moody's Investors Service affirmed the ratings of ten classes and downgraded six classes of Credit Suisse Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2007-C3 as follows: Cl. A-2, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed at Aaa (sf) Cl. A-3, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed at Aaa (sf) Cl. A-4, Affirmed at Aa2 (sf); previously on Nov 4, 2010 Downgraded to Aa2 (sf) Cl. A-AB, Affirmed at Aa2 (sf); previously on Nov 4, 2010 Downgraded to Aa2 (sf) Cl. A-1-A1, Affirmed at Aa2 (sf); previously on Nov 4, 2010 Downgraded to Aa2 (sf) Cl. A-1-A2, Affirmed at Aa2 (sf); previously on Nov 4, 2010 Downgraded to Aa2 (sf) Cl. A-M, Downgraded to Baa2 (sf); previously on Nov 4, 2010 Downgraded to A3 (sf) Cl. A-J, Downgraded to Caa2 (sf); previously on Nov 4, 2010 Downgraded to B3 (sf) Cl. B, Downgraded to Caa3 (sf); previously on Nov 4, 2010 Downgraded to Caa1 (sf) Cl. C, Downgraded to C (sf); previously on Nov 4, 2010 Downgraded to Caa3 (sf) Cl. D, Downgraded to C (sf); previously on Nov 4, 2010 Downgraded to Ca (sf) Cl. E, Affirmed at C (sf); previously on Nov 4, 2010 Downgraded to C (sf) Cl. F, Affirmed at C (sf); previously on Nov 4, 2010 Downgraded to C (sf) Cl. G, Affirmed at C (sf); previously on Nov 4, 2010 Downgraded to C (sf) Cl. H, Affirmed at C (sf); previously on Nov 4, 2010 Downgraded to C (sf) Cl. A-X, Downgraded to B1 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) RATINGS RATIONALE The downgrades are due to higher realized losses from specially serviced and troubled loans. The affirmations of the principal classes are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed DSCR and the Herfindahl Index (Herf), 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. The downgrade in the rating of the IO Class, Class A-X, is due to a decline in the credit profile of it's referenced classes. Moody's rating action reflects a cumulative base expected loss of 11.2% of the current balance compared to 11.6% at last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255 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 extent of growth in the current macroeconomic environment and commercial real estate property markets. While commercial real estate property values are beginning to move in a positive direction along with a rise in investment activity and stabilization in core property type performance, a consistent upward trend will not be evident until the volume of investment activity steadily increases, distressed properties are cleared from the pipeline, and job creation rebounds. The hotel sector is performing strongly and the multifamily sector continues to show increases in demand. Moderate improvements in the office sector continue with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow. Performance in the retail sector has been mixed with lackluster sales driven by discounting and promotions. However, rising wages and reduced unemployment, along with increased consumer confidence, is helping to spur consumer spending. Across all property sectors, the availability of debt capital continues to improve with increased securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario reflects healthier growth in the US and US growth decoupling from the recessionary trend in the euro zone, while a mild recession is expected in 2012. Downside risks remain significant, although they have moderated compared to earlier this year. Major downside risks include an increase in the potential magnitude of the euro area recession, the risk of an oil supply shock weighing negatively on consumer purchasing power and home prices, ongoing and policy-induced banking sector deleveraging leading to a tightening of bank lending standards and credit contraction, financial market turmoil continuing to negatively impact consumer and business confidence, persistently high unemployment levels, and weak housing markets, any or all of which will continue to constrain growth. The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000, and "Moody's Approach to Rating Structured Finance Interest- Only Securities" published in February 2012. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.61 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) 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 (sf) level are driven by a pay down analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), 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 (sf) and B2 (sf), 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 assessments 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 assessments in the same transaction. Moody's review also incorporated the CMBS IO calculator ver1.1 which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit estimates; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type corresponding to an IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point . For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator ver1.1 would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. 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 53, compared to 58 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 (CMBS) transactions. Moody's monitors transactions on a monthly basis through a review utilizing MOST(R)(Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated September 8, 2011. DEAL PERFORMANCE As of the August 17, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 23% to $2.10 billion from $2.68 billion at securitization. The Certificates are collateralized by 195 mortgage loans ranging in size from less than 1% to 8% of the pool. Two loans, representing 0.2% of the pool, have defeased and are backed by U.S. Government securities. There are no loans with credit assessments. Thirty-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 (CREFC) monthly reporting package. As part of its ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Thirty-eight loans have been liquidated from the pool, resulting in an aggregate realized loss of $180.1 million (40% loss severity). At last review, realized losses totaled $86.3 million. Currently 25 loans, representing 22% of the pool, are in special servicing. The largest specially serviced loan is the Westwood Complex Loan ($95.0 million -- 4.6% of the pool) which is secured by six mixed-use properties located in Bethesda, Maryland. The six properties consist of an anchored retail center, mixed-use building, assisted living facility, bowling alley and two apartment buildings. As of April 2012 the combined occupancy was 99%, essentially the same as at last review. The loan was transferred to special servicing in April 2012 for imminent default and the borrower's inability to pay off the loan at maturity. The loan matured on April 11, 2012. The second largest specially serviced loan is the TRT Industrial Portfolio ($85.0 million -- 4.1% of the pool). This loan is secured by seven warehouse/distribution centers containing 1.9 million square feet (SF), ranging from 100,000 SF to 500,000 SF. The properties are located in Delaware, Pennsylvania, California, South Carolina, Illinois and Georgia. The loan transferred to special servicing in May 2012 as the result of imminent default due to cash flow problems. Discussions with the borrower have begun regarding a potential loan modification. The remaining specially serviced loans are represented by a mix of property types. Moody's has estimated an aggregate $126.9 million loss (43% expected loss on average) for 24 of the specially serviced loans. Moody's has assumed a high default probability for 29 poorly performing loans representing 18% of the pool and has estimated an aggregate $61.8 million loss (17% expected loss based on a 45% probability default) from these troubled loans. Moody's was provided with full year 2010 and partial year 2011 operating results for 100% and 97% of the performing pool respectively. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 112% compared to 120% at last full review. Moody's net cash flow reflects a weighted average haircut of 10.1% 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 0.91X, respectively, compared to 1.26X and 0.87X, respectively, at last full review. Moody's actual DSCR is based on Moody's net cash flow (NCF) 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 loans represent 14% of the pool balance. The largest loan is the Main Plaza Loan ($160.7 million -- 7.8% of the pool), which is secured by two 12-story office buildings located in Irvine, California. The two buildings total 583,000 SF. As of March 2012, the properties were 84% leased compared to 81% at last review. In July 2010 the loan had been transferred into special servicing for imminent default when the borrower requested a loan modification. The borrower subsequently withdrew the modification request and the loan returned to the master servicer in June 2011 and has remained current. Due to ongoing poor property performance, Moody's has recognized this loan as a troubled loan. Moody's LTV and stressed DSCR are 184% and 0.53X, the same as at last review. The second largest loan is the Marina Shores Apartment Loan ($64.6 million -- 3.1% of the pool), which is secured by a 392 unit multifamily property located in Virginia Beach, Virginia. As of June 2012 the property was 94% leased. The loan is currently on the watchlist due to low DSCR. The loan is sponsored by Babcock and Brown and is interest only throughout the term. Moody's LTV and stressed DSCR are 149% and 0.58X, respectively, compared to 150% and 0.58X at last review. The third largest loan is the Ardenwood Corporate Park ($53.2 million -- 2.6% of the pool), which is secured by a research and development property located in Fremont, California. As of April 2012, the property was 100% leased, the same as at last review. The largest tenant is Logitech (26% of the net rentable area (NRA); lease expiration March 2013). It is unknown if Logitech will renew its lease upon expiration. Moody's stressed the cash flow due to concerns about potential cash flow volatility due to lease turnover. Moody's LTV and stressed DSCR are 96% and 1.07X, respectively, compared to 81% and 1.26X at last review. CWABS 2005-16: Moody's Cuts Rating on Class 2-AF-5 Secs. to 'Ca' ---------------------------------------------------------------- Moody's Investors Service has corrected the rating history of the Cl. 1-AF, CL. 2-AF-5 notes of the CWABS Asset-Backed Certificates Trust 2005-16 transaction and Cl.1-AF-5 note of the CWABS Asset- Backed Certificates Trust 2005-17 transaction. Ratings Rationale In March 2010, these three notes became part of Ambac's segregated account. According to a Moody's press release dated March 26, 2010, as a result of the establishment of the segregated account wrapped transactions allocated to the segregated account will be rated at the published underlying rating (and for structured securities, the published or unpublished underlying rating). Moody's completed the review of other SFG transactions allocated to the segregated account on April 16 2010. As a result of an internal administrative error, these 3 tranches were not included in the April 16 2010 rating action. The rating action is being taken on the notes to correct the rating history to reflect the underlying ratings as the published ratings in line with the action taken for other notes allocated to the segregated account on April 16 2010. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008 and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. Complete rating actions are as follows: Issuer: CWABS Asset-Backed Certificates Trust 2005-16 CL. 1-AF, Downgraded to Caa3 (sf); previously on July 29, 2009 Caa2 (sf) CL. 2-AF-5, Downgraded to Ca (sf); previously on July 29, 2009 Caa2 (sf) Issuer: CWABS Asset-Backed Certificates Trust 2005-17 CL. 1-AF-5, Downgraded to Caa3 (sf): previously on July 29, 2009 Caa2 (sf) DIAMOND INVESTMENT: Moody's Cuts Ratings on CBO Notes to 'Caa2' --------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of the following notes issued by Diamond Investment Grade CDO, Ltd.: US$29,000,000 Class B-1 Floating Rate Notes Due October 11, 2014 (current outstanding balance of $10,719,936), Downgraded to Caa2 (sf); previously on December 21, 2011 Downgraded to B3 (sf); US$36,000,000 Class B-2 Fixed Rate Notes Due October 11, 2014 (current outstanding balance of $13,307,506), Downgraded to Caa2 (sf); previously on December 21, 2011 Downgraded to B3 (sf). Ratings Rationale According to Moody's, the rating actions taken on the notes are primarily a result of deterioration in the credit quality of the underlying portfolio. Credit deterioration is observed through an increase in the weighted average rating factor since the rating action in December 2011. Based on the latest trustee report dated August 2012, the weighted average rating factor is currently 5097 compared to 2491 in the November 2011. Diamond Investment Grade CDO, Ltd., issued in September 2000, is a collateralized bond obligation backed primarily by a portfolio of senior unsecured bonds. The deal is highly concentrated, and is currently collateralized by only four performing obligations. One of the collateral obligations is an unsecured corporate bond comprising about 50% of the portfolio. This bond, which is not rated by Moody's, has a current credit quality assessment in the low speculative-grade range based on a Credit Estimate (CE) produced by Moody's. Moreover, this obligation has been partially deferring interest payments for the last three payment dates. In addition, the transaction is exposed to a Ca-rated structured finance asset representing approximately 18% of the portfolio. The principal methodology used in this rating was "Moody's Approach to Rating Collateralized Loan Obligations" published in June 2011. This publication incorporates rating criteria that apply to both collateralized loan obligations and collateralized bond obligations. Due to the deal's low diversity score and lack of granularity, Moody's did not use a cash flow model to analyze the default and recovery properties of the collateral pool. Instead, Moody's analyzed the transaction by assessing the ratings impact of and the deal's sensitivity to, jump-to-default by certain large obligors. Based on the August 2012 trustee report, the diversity score is 3.1. 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 upcoming speculative-grade debt maturities which may create challenges for issuers to refinance. CBO notes' performance may also be impacted by 1) the manager's investment strategy and behavior and 2) divergence in legal interpretation of CBO documentation by different transactional parties due to embedded ambiguities. Sources of additional performance uncertainties are described below: 1) Deleveraging: The main source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will continue and at what pace. Deleveraging 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 deal's overcollateralization levels. Further, the timing of recoveries and the manager's decision to work out versus sell defaulted assets create additional uncertainties. 3) Lack of portfolio granularity: The performance of the portfolio depends to a large extent on the credit conditions of a few large obligors that are rated Caa1 or lower, especially when they experience jump to default. Due to the deal's low diversity score and lack of granularity, Moody's substituted its typical Binomial Expansion Technique analysis by using individual scenario analysis. EQUIFIRST MORTGAGE: Moody's Confirms Ca Ratings on Two Tranches --------------------------------------------------------------- Moody's Investors Service has confirmed the ratings on three tranches from Equifirst Mortgage Loan Trust 2005-1. The collateral backing this transaction are subprime residential mortgage loans. Complete rating actions are as follows: Issuer: Equifirst Mortgage Loan Trust 2005-1 Cl. M-4, Confirmed at Caa1 (sf); previously on May 30, 2012 Caa1 (sf) Placed Under Review for Possible Upgrade Cl. M-5, Confirmed at Ca (sf); previously on May 30, 2012 Ca (sf) Placed Under Review for Possible Upgrade Cl. M-6, Confirmed at Ca (sf); previously on May 30, 2012 Ca (sf) Placed Under Review for Possible Upgrade Ratings Rationale The actions are a result of the recent performance of Subprime pools originated after 2005 and reflect Moody's updated loss expectations on these pools. The methodologies used in this rating were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. Moody's adjusts the methodologies noted above for Moody's current view on loan modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. 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) (SFW), 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 extended foreclosure timelines by servicers is taken into consideration when assigning ratings. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in April 2011 to 8.2% in June 2012. Moody's forecasts a further drop to 7.8% for 2013. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF297360 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF198689 EXETER AUTOMOBILE 2012-2: S&P Gives 'BB' Rating on Class D Notes --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its ratings to Exeter Automobile Receivables Trust 2012-2's $300 million automobile receivables-backed notes. The note issuance is an asset-backed securities transaction backed by subprime auto loan receivables. The ratings reflect S&P's view of: -- The availability of approximately 45.6%, 38.8%, 29.9%, and 23.7% credit support for the class A, B, C, and D notes, based on stressed cash flow scenarios (including excess spread), which provide coverage of more than 2.8x, 2.3x, 1.75x, and 1.4x S&P's 14.50%-15.50% expected cumulative net loss. -- The timely interest and principal payments made to the rated notes by the assumed legal final maturity dates under stressed cash flow modeling scenarios that we believe are appropriate for the assigned ratings. -- S&P's expectation that under a moderate ('BBB') stress scenario, all else being equal, S&P's ratings on the class A and B notes would remain within one rating category of S&P's 'AA (sf)' and 'A (sf)' ratings, respectively, during the first year; and our ratings on the class C and D notes would remain within two rating categories of our 'BBB (sf)' and 'BB (sf)' ratings. These potential rating movements are consistent with our credit stability criteria, which outline the outer bound of credit deterioration as a one-category downgrade within the first year for 'AA' rated securities and a two-category downgrade within the first year for 'A' through 'BB' rated securities under the moderate stress conditions," S&P said. -- The servicer's experienced management team, which has an average of more than 16 years' experience in the auto finance industry. -- S&P's analysis of four-and-a-half years of static pool data on Exeter Finance Corp.'s (Exeter's) lending programs. -- The fact that Exeter is not yet profitable, has a relatively short performance history (4.5 years) compared to its peers, and has been growing its portfolio very rapidly. -- The transaction's payment/credit enhancement and legal structures. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com/954.pdf RATINGS ASSIGNED Exeter Automobile Receivables Trust 2012-2 Class Rating Type Interest Amount rate (mil. $) A AA (sf) Senior Fixed 215.00 B A (sf) Subordinate Fixed 36.00 C BBB (sf) Subordinate Fixed 31.00 D BB (sf) Subordinate Fixed 18.00 FBR SECURITIZATION: Moody's Raises Rating on One Tranche to 'B1' --------------------------------------------------------------- Moody's Investors Service has downgraded the rating of one tranche, upgraded the ratings on two tranches and confirmed the ratings on three tranches from three subprime RMBS transactions issued by FBR. The collateral backing these transactions are subprime residential mortgage loans. Complete rating actions are as follows: Issuer: FBR Securitization Trust 2005-2 Cl. AV2-3A, Downgraded to A2 (sf); previously on Jul 14, 2010 Downgraded to A1 (sf) Cl. AV2-3B2, Confirmed at A2 (sf); previously on May 30, 2012 A2 (sf) Placed Under Review for Possible Upgrade Cl. M-1, Upgraded to B1 (sf); previously on May 30, 2012 B2 (sf) Placed Under Review for Possible Upgrade Issuer: FBR Securitization Trust 2005-4, Mortgage-Backed Notes, Series 2005-4 Cl. AV1, Upgraded to Baa2 (sf); previously on May 30, 2012 Ba2 (sf) Placed Under Review for Possible Upgrade Issuer: FBR Securitization Trust 2005-5 Cl. AV1, Confirmed at A2 (sf); previously on May 30, 2012 A2 (sf) Placed Under Review for Possible Upgrade Cl. AV2-4, Confirmed at Ba3 (sf); previously on May 30, 2012 Ba3 (sf) Placed Under Review for Possible Upgrade Ratings Rationale The actions are a result of the recent performance of Subprime pools originated after 2005 and reflect Moody's updated loss expectations on these pools. The upgrades/downgrades in the rating action are a result of improving/deteriorating performance and/or structural features resulting in lower/higher expected losses for certain bonds than previously anticipated. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. Moody's adjusts the methodologies noted above for Moody's current view on loan modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. 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) (SFW), 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 extended foreclosure timelines by servicers is taken into consideration when assigning ratings. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in April 2011 to 8.2% in June 2012. Moody's forecasts a further drop to 7.8% for 2013. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF297356 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF198689 FIRST UNION 2001-C4: Moody's Affirms 'Caa3' Rating on Cl. P Certs ----------------------------------------------------------------- Moody's Investors Service affirmed the ratings of six classes of First Union National Bank Commercial Mortgage Trust Commercial Mortgage Pass-Through Certificates, Series 2001-C4 as follows: Cl. L, Affirmed at Ba1 (sf); previously on Sep 25, 2006 Upgraded to Ba1 (sf) Cl. M, Affirmed at Ba3 (sf); previously on Dec 20, 2001 Definitive Rating Assigned Ba3 (sf) Cl. N, Affirmed at B3 (sf); previously on Oct 5, 2011 Downgraded to B3 (sf) Cl. O, Affirmed at Caa1 (sf); previously on Oct 5, 2011 Downgraded to Caa1 (sf) Cl. P, Affirmed at Caa3 (sf); previously on Oct 5, 2011 Downgraded to Caa3 (sf) Cl. IO-I, Affirmed at Caa2 (sf); previously on Feb 22, 2012 Downgraded to Caa2 (sf) Ratings Rationale The affirmations are due to key parameters, including probability of default, loss given default and expected loss and recovery estimates, remaining within acceptable ranges. The rating of the IO class, Class X-1, is consistent with the credit profile of its referenced classes and thus is affirmed. Moody's rating action reflects a cumulative base expected loss of 30.6% of the current balance compared to 11.2% at last review. The base expected loss increased significantly on a percentage basis since last review because of the significant decline in pool balance. On a dollar basis, the current cumulative expected loss is $19.2 million compared to $32.0 million at last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255 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. The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of assumption uncertainty are the extent of growth in the current macroeconomic environment and commercial real estate property markets. Commercial real estate property values are continuing to move in a positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with eight straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Slow recovery in the office sector continues with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by discounting and promotions. However, rising wages and reduced unemployment, along with increased consumer confidence, is helping to spur consumer spending resulting in increased sales. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario maintains its forecast of relatively robust growth in the US and an expectation of a mild recession in the euro area for 2012. Downside risks remain significant, and elevated downside risks and their materialization could pose a serious threat to the outlook. Major downside risks include: a deeper than expected recession in the euro area; the potential for a hard landing in major emerging markets; an oil supply shock; and material fiscal tightening in the US given recent political gridlock. Healthy but below-trend growth in GDP is expected through the rest of this year and next with risks trending to the downside. A significant portion of the remaining collateral in this deal is currently in special servicing. As a result, Moody's utilized a loss and recovery approach as its primary methodology in rating this deal. In Moody's loss and recovery approach, Moody's determines a probability of default for each of the specially serviced loans and determines a most probable loss given default based on a review of available market data and other information from the special servicer. Using the property's market value and accounting for servicer advances to date and estimated future advances and closing costs, Moody's estimates a loss given default for each loan. Translating the probability of default and loss given default into an expected loss estimate, Moody's then recognizes the aggregate loss from specially serviced loans to the most junior class(es) and the recovery as a pay down of principal to the most senior class(es). The secondary methodologies used in this rating includes "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000 and "Moody's Approach to Rating Structured Finance Interest-Only Securities", published February 2012. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.61 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) 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 (sf) level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), 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 (sf) and B2 (sf), 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 assessments is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit assessment 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 assessment level, is incorporated for loans with similar credit assessments in the same transaction. Moody's review also incorporated the CMBS IO calculator ver1.1 which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit assessments; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type corresponding to an IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point . For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator ver1.1 would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. 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 17 at Moody's prior 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 (CMBS) 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 5, 2011. Deal Performance As of the August 14, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 94% to $63 million from $979 million at securitization. The Certificates are collateralized by ten mortgage loans ranging in size from less than 2% to 43% of the pool, with the top ten loans representing 100% of the pool. There are no defeased loans and no loans with credit assessments. Currently no loans are on the master servicer's watchlist. Seventeen loans have been liquidated from the pool, resulting in an aggregate realized loss of $8.9 million (11% loss severity overall). Currently nine loans, representing 98% of the pool, are currently in special servicing. Specially serviced loans represented 30% of the pool at last review. The largest specially serviced loan is the Overlook at Great Notch Loan ($27.2 million - - 43.4% of the pool) which is secured by a 415,000 square foot (SF) Class A office building located in Little Falls (Passaic County), New Jersey. Property financial and leasing performance has continued to decline since last review. The loan is now in foreclosure proceedings. The remaining nine specially serviced loans are secured by a mix of property types. The special servicer has recognized an aggregate $4.0 million appraisal reduction for four specially serviced loans. Moody's has recognized an aggregate $19.1 million loss for the specially serviced loans (31% expected loss on average). Excluding specially serviced loans, there is one performing loan, representing 2% of the pool balance. The Walgreens - Moreno Valley, CA Loan ($1.1 million --1.7% of the pool), which is secured by a 15,000 SF Walgreens located in Moreno Valley, California. Financial performance has remained the same since last review. The loan is fully amortizing over a 20 year term. Moody's LTV and stressed DSCR are 39% and 2.65X, respectively, compared to 42% and 2.46X at last review. FREMF 2011-K703: Moody's Affirms 'Ba3' Rating on Cl. X-2 Certs. --------------------------------------------------------------- Moody's Investors Service affirmed the ratings of five classes of FREMF 2011-K703 Mortgage Trust, Multifamily Mortgage Pass-Through Certificates, Series 2011-K703 as follows: Cl. A-1, Affirmed at Aaa (sf); previously on Sep 15, 2011 Definitive Rating Assigned Aaa (sf) Cl. A-2, Affirmed at Aaa (sf); previously on Sep 15, 2011 Definitive Rating Assigned Aaa (sf) Cl. B, Affirmed at A3 (sf); previously on Sep 15, 2011 Definitive Rating Assigned A3 (sf) Cl. X-1, Affirmed at Aaa (sf); previously on Sep 15, 2011 Definitive Rating Assigned Aaa (sf) Cl. X-2, Affirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) Ratings Rationale The affirmations are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), 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. The rating of the IO classes, Classes X-1 and X-2, are consistent with the credit profile of their referenced classes and thus are affirmed. Moody's rating action reflects a cumulative base expected loss of 2.3% of the current balance. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255 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. The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of assumption uncertainty are the extent of growth in the current macroeconomic environment and commercial real estate property markets. Commercial real estate property values are continuing to move in a positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with eight straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Slow recovery in the office sector continues with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by discounting and promotions. However, rising wages and reduced unemployment, along with increased consumer confidence, is helping to spur consumer spending resulting in increased sales. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario maintains its forecast of relatively robust growth in the US and an expectation of a mild recession in the euro area for 2012. Downside risks remain significant, and elevated downside risks and their materialization could pose a serious threat to the outlook. Major downside risks include: a deeper than expected recession in the euro area; the potential for a hard landing in major emerging markets; an oil supply shock; and material fiscal tightening in the US given recent political gridlock. Healthy but below-trend growth in GDP is expected through the rest of this year and next with risks trending to the downside. The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000, and "Moody's Approach to Rating Structured Finance Interest- Only Securities" published in February 2012. Moody's review incorporated the use of the Excel-based CMBS Conduit Model v 2.61 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) 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 (sf) level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), 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 (sf) and B2 (sf), 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 assessments is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit assessment 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 assessment level, is incorporated for loans with similar credit assessments in the same transaction. Moody's review also incorporated the CMBS IO calculator ver1.1 which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit estimates; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type corresponding to an IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point. For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator ver1.0 would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. 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 45, same as at securitization. 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 (CMBS) transactions. Moody's monitors transactions on a monthly basis through a review utilizing MOST(R) (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's securitization review is summarized in a press release dated September 15, 2011. Deal Performance As of the August 27, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 0.3% to $1.22 billion from $1.23 billion at securitization. The Certificates are collateralized by 71 mortgage loans ranging in size from less than 1% to 7% of the pool, with the top ten loans representing 35% of the pool. There are no loans on the master servicer's watchlist or in special servicing. Moody's was provided with full year 2011 operating results for 100% of the performing pool. Moody's weighted average LTV is 96% compared to 104% at securitization. Moody's net cash flow reflects a weighted average haircut of 3% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 8.8%. Moody's actual and stressed DSCRs are 1.45X and 1.00X, respectively, compared to 1.33X and 0.92X at securitization. Moody's actual DSCR is based on Moody's net cash flow (NCF) 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 loans represent 15% of the pool balance. The largest loan is The Pavilions Loan ($82.9 million -- 6.8% of the pool), which is secured by a 932-unit multifamily property located in Manchester, Connecticut. Improvements consist of 34 garden-style apartment buildings, two leasing office/clubhouse buildings, a recreation center building, four maintenance buildings and 13 carport buildings. As of December 2011, the property was approximately 92% leased compared to 93% at securitization. Moody's LTV and stressed DSCR are 109% and 0.86X, respectively, compared to 108% and 0.88X at securitization. The second largest loan is The Park at Arlington Ridge II Loan ($53.3 million -- 4.4% of the pool), which is secured by a 395- unit multifamily located in Arlington, Virginia. Improvements consist of 24 three-story apartment buildings. As of December 2011, the property was approximately 96% leased compared to 97% at securitization. Despite the slight drop in occupancy, property performance has improved. Moody's LTV and stressed DSCR are 92% and 0.97X, respectively, compared to 100% and 0.89X at securitization. The third largest loan is the Casoleil Apartments Loan ($48.2 million -- 3.9% of the pool), which is secured by a 346-unit multifamily property located in San Diego, California. Improvements consist of 17 three-story apartment buildings, a clubhouse/leasing office, 16 garage buildings and a fitness center. As of March 2012, the property was approximately 96% leased, compared to 95% at securitization. Moody's LTV and stressed DSCR are 102% and 0.90X, respectively, compared to 101% and 0.91X at securitization. G-STAR 2003-3: Moody's Affirms Rating on Class A-3 Notes at 'Ca' ---------------------------------------------------------------- Moody's Investors Service has upgraded the rating of one class and affirmed the ratings of two classes of Notes issued by G-Star 2003-3 Ltd. The upgrade is due to greater than expected amortization resulting in approximately $45.1 million of paydown to the top Class A-1 Notes since last review (54.8% of Class A-1 Note balance at last review). The affirmations are due to key transaction parameters performing within levels commensurate with the existing ratings levels. The rating action is the result of Moody's on-going surveillance of commercial real estate collateralized debt obligation (CRE CDO and Re-Remic) transactions. U.S.$340,000,000 Class A-1 Floating Rate Senior Notes Due 2038, Upgraded to Aa1 (sf); previously on Mar 20, 2009 Downgraded to A2 (sf) U.S.$48,000,000 Class A-2 Floating Rate Senior Notes Due 2038, Affirmed at Caa1 (sf); previously on Oct 19, 2011 Downgraded to Caa1 (sf) U.S.$18,000,000 Class A-3 Floating Rate Senior Notes Due 2038, Affirmed at Ca (sf); previously on Dec 1, 2010 Downgraded to Ca (sf) RATINGS RATIONALE G-Star 2003-3 Ltd. is a static cash CRE CDO transaction backed by a portfolio of commercial mortgage backed securities (CMBS) (35.8%), CRE CDO (2.0%), real estate investment trust (REIT) debt (3.5%), and asset backed securities (ABS) (58.7%) primarily in the form of subprime residential mortgage backed securities. As of the August 15, 2012 trustee report, the aggregate Note balance of the transaction, including Preferred Shares, has decreased to $147.2 million from $450.0 million at issuance, with the paydown directed to the Class A-1 Notes, as a result of the combination of principal repayment of collateral and failing the par value tests. Currently, the transaction is under-collateralized by $49.8 million, including the balance of deferred interest (11.1% of original aggregate Note balance, compared to 11.3% at last review), primarily due to realized losses on the underlying collateral. On September 16, 2011, the trustee provided a notice of an event of default pursuant to Sections 5.1 and 6.2 of the Indenture, whereas the total collateral balance has fallen below sum of the total outstanding balances of the Class A Notes. The risk of collateral liquidation is a possibility, but the acceleration of Maturity has not been declared. There are nine assets with par balance of $16.2 million (16.7% of the current pool balance) that are considered defaulted securities as of the August 15, 2012 trustee report, compared to six defaulted securities totaling $8.1 million par amount at last review. Moody's does expect significant losses to occur from these defaulted securities once they are realized. Moody's has identified the following parameters as key indicators of the expected loss within CRE CDO transactions: weighted average rating factor (WARF), weighted average life (WAL), weighted average recovery rate (WARR), and Moody's asset correlation (MAC). These parameters are typically modeled as actual parameters for static deals and as covenants for managed deals. WARF is a primary measure of the credit quality of a CRE CDO pool. Moody's has updated credit assessments for the non-Moody's rated collateral. The bottom-dollar WARF is a measure of the default probability within a collateral pool. Moody's modeled a bottom- dollar WARF of 4,417 compared to 3,139 at last review. The current distribution of Moody's rated collateral and assessments for non- Moody's rated collateral is as follows: Aaa-Aa3 (19.1% compared to 21.6% at last review), A1-A3 (5.0% compared to 8.6% at last review), Baa1-Baa3 (12.2% compared to 23.1% at last review), Ba1- Ba3 (3.0% compared to 3.2% at last review), B1-B3 (12.3% compared to 12.1% at last review), and Caa1-Ca/C (48.4% compared to 31.4% at last review). WAL acts to adjust the probability of default of the collateral in the pool for time. Moody's modeled to a WAL of 3.3 years, compared to 3.7 years at last review. WARR is the par-weighted average of the mean recovery values for the collateral assets in the pool. Moody's modeled a fixed 20.4% WARR, compared to 27.7% at last review. MAC is a single factor that describes the pair-wise asset correlation to the default distribution among the instruments within the collateral pool (i.e. the measure of diversity). Moody's modeled a MAC of 4.6%, compared to 5.2% at last review. Moody's review incorporated CDOROM(R)v2.8, one of Moody's CDO rating models, which was released on January 24, 2011. The cash flow model, CDOEdge(R)v3.2.1.2, was used to analyze the cash flow waterfall and its effect on the capital structure of the deal. Changes in any one or combination of the key parameters may have rating implications on certain classes of rated notes. However, in many instances, a change in key parameter assumptions in certain stress scenarios may be offset by a change in one or more of the other key parameters. In general, the rated notes are particularly sensitive to changes in recovery rate assumptions. Holding all other key parameters static, changing the recovery rate assumption down from 20.4% to 10.4% or up to 30.4% would result in average modeled rating movement on the rated tranches of 0 to 1 notches downward and 0 to 1 notches upward, respectively. The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of assumption uncertainty are the extent of growth in the current macroeconomic environment and commercial real estate property markets. While commercial real estate property values are beginning to move in a positive direction along with a rise in investment activity and stabilization in core property type performance, a consistent upward trend will not be evident until the volume of investment activity steadily increases, distressed properties are cleared from the pipeline, and job creation rebounds. The hotel sector is performing strongly and the multifamily sector continues to show increases in demand. Moderate improvements in the office sector continue with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow. Performance in the retail sector has been mixed with lackluster sales driven by discounting and promotions. However, rising wages and reduced unemployment, along with increased consumer confidence, is helping to spur consumer spending. Across all property sectors, the availability of debt capital continues to improve with increased securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario reflects healthier growth in the US and US growth decoupling from the recessionary trend in the euro zone, while a mild recession is expected in 2012. Downside risks remain significant, although they have moderated compared to earlier this year. Major downside risks include an increase in the potential magnitude of the euro area recession, the risk of an oil supply shock weighing negatively on consumer purchasing power and home prices, ongoing and policy-induced banking sector deleveraging leading to a tightening of bank lending standards and credit contraction, financial market turmoil continuing to negatively impact consumer and business confidence, persistently high unemployment levels, and weak housing markets, any or all of which will continue to constrain growth. The methodologies used in this rating were "Moody's Approach to Rating SF CDOs" published in May 2012, and "Moody's Approach to Rating Commercial Real Estate CDOs" published in July 2011. GE COMMERCIAL 2005-C1: Fitch Cuts Ratings on 5 Certs. to 'Dsf' -------------------------------------------------------------- Fitch Ratings has downgraded five distressed classes of GE Commercial Mortgage Corporation (GECMC) commercial mortgage pass- through certificates, series 2005-C1 due to realized losses incurred on the classes. In addition, Fitch has placed seven classes on Rating Watch Negative. The rating actions are actual losses being greater than expected losses on the Washington Mutual Buildings loan. The downgrades are due to incurred losses as a result of the liquidation, in addition seven classes were impacted with interest shortfalls. Fitch downgrades the following classes: -- $15.7 million class H to 'Dsf' from 'CCsf'; -- Class J to 'Dsf' from 'CCsf'; -- Class K to 'Dsf' from 'Csf'; -- Class L to 'Dsf' from 'Csf'; -- Class M to 'Dsf' from 'Csf'. The balances for classes J, K, L and M have been reduced to zero due to realized losses. Fitch places the following classes on Rating Watch Negative: -- $110.9 million class A-J 'AAAsf'; -- $41.9 million class B 'AAsf'; -- $16.7 million class C 'Asf'; -- $27.2 million class D 'BBBsf'; -- $14.6 million class E 'BBB-sf'; -- $23 million class F 'BBsf'; -- $14.6 million class G 'B-sf'. Due to the interest shortfalls, the ratings on classes A-J and B will likely be downgraded to a maximum rating of 'Asf' based on Fitch's criteria for ratings caps. Fitch expects to resolve the Rating Watch following the updated information on the specially serviced loans and duration and ultimate recoverability of interest shortfalls. GEM VIII: S&P Affirms 'BB' Ratings on 2 Note Classes; Off Watch --------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-3 and B notes from GEM VIII Ltd., an emerging market collateralized debt obligation (CDO) transaction. "At the same time, we affirmed the ratings on the class A-1A, A-1B, A-2, C, D- 1, and D-2 notes. We removed our ratings on the class A-3, B, C, D-1, and D-2 notes from CreditWatch, where we placed them with positive implications on June 18, 2012," S&P said. "The transaction is in its amortization phase and continues to pay down the class A-1 notes. The class A-1A and A-1B notes are pro rata and their current balances are about 37% of their original amounts, down from nearly 97% of their original amounts in April 2011, which we used for the analysis when we last affirmed their ratings in May 2011," S&P said. Due to their lower balances, the classes' par value ratios have increased. The trustee reports these par value ratios as of August 2012: -- The class A ratio is 183.48%, up from 148.13% in April 2011, -- The class B ratio is 147.44%, up from 130.64% in April 2011, -- The class C ratio is 127.42%, up from 119.37% in April 2011, and -- The class D ratio is 118.85%, up from 114.14% in April 2011. "We upgraded the class A-3 and B notes due to an increase in the credit support available to them. We affirmed our ratings on the class A-1A, A-1B, A-2, C, D-1, and D-2 notes to reflect credit support available at the current rating levels," S&P said. Standard & Poor's will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it deems necessary. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATING AND CREDITWATCH ACTIONS GEM VIII Ltd. Rating Class To From A-3 AAA (sf) AA (sf)/Watch Pos B A (sf) A- (sf)/Watch Pos C BBB (sf) BBB (sf)/Watch Pos D-1 BB (sf) BB (sf)/Watch Pos D-2 BB (sf) BB (sf)/Watch Pos RATINGS AFFIRMED Gem VIII Ltd. Class Rating A-1A AAA (sf) A-1B AAA (sf) A-2 AAA (sf) GLOBAL MORTGAGE: Moody's Cuts Rating on Cl. B4 Tranche to 'Ca' -------------------------------------------------------------- Moody's Investors Service has downgraded eight tranches issued by Global Mortgage Securitization Trust 2005-A Ltd. The collateral backing these deals primarily consists of first-lien, fixed-rate prime Jumbo residential mortgages. The actions impact approximately $767 million of RMBS issued from 2005. Complete rating actions are as follows: Issuer: Global Mortgage Securitization 2005-A Ltd Cl. A1, Downgraded to Ba2 (sf); previously on May 30, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade Cl. A2, Downgraded to Ba2 (sf); previously on May 30, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade Cl. A3, Downgraded to Ba2 (sf); previously on May 30, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade Cl. X-A1, Downgraded to Ba2 (sf); previously on May 30, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade Cl. B1, Downgraded to Caa3 (sf); previously on May 30, 2012 Caa2 (sf) Placed Under Review for Possible Downgrade Cl. B2, Downgraded to Caa3 (sf); previously on May 30, 2012 Caa2 (sf) Placed Under Review for Possible Downgrade Cl. B3, Downgraded to Caa3 (sf); previously on May 30, 2012 Caa2 (sf) Placed Under Review for Possible Downgrade Cl. B4, Downgraded to Ca (sf); previously on Jun 18, 2010 Downgraded to Caa3 (sf) RATINGS RATIONALE The actions are a result of the recent performance of the pool and reflect Moody's updated loss expectations on the pools. The downgrades are a result of deteriorating performance and structural features resulting in higher expected losses for certain bonds than previously anticipated. The methodologies used in this rating were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. The methodology used in rating Interest- Only Securities was "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's adjusts the methodologies noted above for 1) Moody's current view on loan modifications 2) small pool volatility and 3) bonds that financial guarantors insure. Loan Modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. Small Pool Volatility The above RMBS approach only applies to structures with at least 40 loans and pool factor of greater than 5%. Moody's can withdraw its rating when the pool factor drops below 5% and the number of loans in the deal declines to 40 loans or lower. If, however, a transaction has a specific structural feature, such as a credit enhancement floor, that mitigates the risks of small pool size, Moody's can choose to continue to rate the transaction. For pools with loans less than 100, Moody's adjusts its projections of loss to account for the higher loss volatility of such pools. For small pools, a few loans becoming delinquent would greatly increase the pools' delinquency rate. To project losses on prime jumbo pools with fewer than 100 loans, Moody's first calculates an annualized delinquency rate based on vintage, number of loans remaining in the pool and the level of current delinquencies in the pool. For prime jumbo pools, Moody's first applies a baseline delinquency rate of 3.5% for 2005, 6.5% for 2006 and 7.5% for 2007. Once the loan count in a pool falls below 76, this rate of delinquency is increased by 1% for every loan fewer than 76. For example, for a 2005 pool with 75 loans, the adjusted rate of new delinquency is 3.54%. Further, to account for the actual rate of delinquencies in a small pool, Moody's multiplies the rate calculated above by a factor ranging from 0.20 to 2.0 for current delinquencies that range from less than 2.5% to greater than 50% respectively. Moody's then uses this final adjusted rate of new delinquency to project delinquencies and losses for the remaining life of the pool under the approach described in the methodology publication. When assigning the final ratings to bonds, in addition to the approach described above, Moody's considered the volatility of the projected losses and timeline of the expected defaults. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in April 2011 to 8.3% in July 2012. Moody's forecasts a further drop to 7.8% for 2013. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF297040 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF196023 GOLDMAN SACHS: S&P Raises Rating on Class E Notes to 'BB+' ---------------------------------------------------------- Standard & Poor's Ratings Services raised and removed from CreditWatch with positive implications its ratings on the class C, D, and E notes from Goldman Sachs Asset Management CLO PLC, a collateralized loan obligation (CLO) transaction managed by Goldman Sachs Asset Management. "At the same time, we affirmed our ratings on the class A-1, A-2, and B notes and removed our ratings on the class A-2 and B notes from CreditWatch with positive implications," S&P said. "The rating actions follow our performance review of the transaction and primarily reflect an increase in credit quality of the underlying portfolio. The amount of defaulted obligations held in the transaction's underlying portfolio declined since our December 2010 rating actions, when we raised our ratings on all six classes of notes. As of August 2012, the transaction held $3.5 million in defaulted assets, down from $8.9 million in the November 2010 trustee report, which we referenced for our December 2010 rating actions. We also observed that assets with ratings in the 'CCC' range decreased to $15.1 million, down from $46.8 million as of November 2010," S&P said. "In addition, the overcollateralization (O/C) available to support the notes has increased by approximately 1.8% on average since our last rating actions. Another positive factor in our analysis includes the increase of the weighted-average spread as the asset profile changes due to the reinvestment of principal proceeds," S&P said. The affirmations on the class A-1, A-2, and B notes reflect the sufficient credit support at the current rating levels. "The transaction is still in its reinvestment period and the rated classes have their original principal balances outstanding, with the exceptions of classes A-1 and E, which have paid down to 96.5% and 84.8% of their original balances respectively," S&P said. "We will continue to review our ratings on the notes and assess whether, in our view, the ratings remain consistent with the credit enhancement available to support them and take rating actions as we deem necessary," S&P said. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATING AND CREDITWATCH ACTIONS Goldman Sachs Asset Management CLO PLC Rating Class To From A-2 AA+ (sf) AA+/Watch Pos (sf) B AA (sf) AA/Watch Pos (sf) C A+ (sf) A/Watch Pos (sf) D BBB (sf) BBB-/Watch Pos (sf) E BB+ (sf) B+/Watch Pos (sf) RATING AFFIRMED Goldman Sachs Asset Management CLO PLC Class Rating A-1 AAA (sf) GOLDMAN SACHS 2010-C2: Fitch Affirms 'Bsf' Rating on Class F Certs ------------------------------------------------------------------ Fitch Ratings has affirmed all classes of Goldman Sachs Mortgage Securities Corp. II commercial mortgage pass-through certificates, series 2010-C2. The affirmations are due to stable performance of the underlying collateral since issuance. The transaction is geographically diversified across 32 states and Puerto Rico. However, the transaction has high loan concentration, with the top ten loans representing 52% of the pool and the top 15 representing 65.3%. As of the August 2012 distribution date, the pool's aggregate principal balance has been reduced by 1.6% to $862.2 million from $876.5 million at issuance. Currently there are no delinquent or specially serviced loans. Fitch has identified two loans (2.5%) as Fitch Loans of Concern. Both loans remain current on debt service payments. The first Fitch Loan of Concern (1.6%) is secured by a 136,423 square foot (SF) retail property in Warrington Township, PA. The first quarter (1Q) 2012 occupancy rate dropped to 74.6% from 100% at year-end (YE) 2011 after Bed, Bath, and Beyond, which formerly occupied 18% of the net rentable area,, vacated upon lease expiration in January 2012. The 1Q12 year-to-date debt service coverage ratio (DSCR) was 1.39 times (x), compared to 1.56x at YE2011. The second Fitch loan of concern (0.9%) is secured by a 112,862 SF retail property in Columbus, OH. Occupancy decreased significantly after Borders Books, the largest tenant that formerly occupied 26% of the property, rejected the lease and vacated after its bankruptcy filing. The largest loan in the pool (10.2%) is secured by a 399,935 SF class B office property in the Financial District submarket of Manhattan, NY. The property is 100% occupied by the United Federation of Teachers (UFT) under a long term lease which expires in August 2034. UFT also holds a 9.9% ownership interest in the building. The loan is structured with a letter of credit (LOC) which can be drawn upon to cover debt service shortfalls. The loan is structured with a four year interest only term followed by a 30-year amortization schedule. The servicer reported YE2011 net cash flow (NCF) DSCR was 2.44x, compared to 1.71x at issuance. The second largest loan in the pool (7.4%) is secured by two class B office properties totaling 1.15 million SF in Cleveland, OH. As of YE2012, the combined occupancy of the two properties was 74%, compared to 76% at YE2011 and 78.8% at issuance. The servicer reported YE2011 NCF DSCR was 1.55x, compared to 1.49x at issuance. The third largest loan in the pool (7.0%) is secured by a 669,682 SF mixed-use office retail property in Pittsburgh, PA. The property is considered an area landmark and tourist destination. It consists of five buildings that house office space, retail shops, restaurants, commuter parking, and night clubs, in addition to river docks, marina slips, and an outdoor amphitheater. As of YE2011, the property was 82% occupied, compared to 84.6% at issuance. The servicer reported YE2011 NCF DSCR was 1.97x, compared to 1.49x at issuance. Fitch affirms and maintains the Stable Outlook for the following classes: -- $332.7 million class A-1 'AAAsf'; -- $376 million class A-2 'AAAsf'; -- $710 million class X-A 'AAAsf'; -- $26.3 million class B 'AAsf'; -- $29.6 million class C 'Asf'; -- $47.1 million class D 'BBB-sf'; -- $12 million class E 'BBsf'; -- $9.9 million class F 'Bsf'. Fitch does not rate the IO class X-B and the $28.5 million class G. GSC CAPITAL 2005-1: S&P Raises Rating on Class F Notes to 'BB-' --------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class B, C, D, E, and F notes from GSC Capital Corp. Loan Funding 2005- 1, a collateralized loan obligation (CLO) transaction managed by GSC Acquisition Holdings LLC. "At the same time, we removed them from CreditWatch, where we placed them with positive implications on June 18, 2012. We also affirmed the ratings on the class A-1 and A-2 notes," S&P said. "The upgrades follow our performance review of the transaction and reflect $10 million in paydowns to the class A-1 and A-2 notes since our November 2011 rating actions. The class A-1 and A-2 notes receive pro rata paydowns, which to date have reduced the classes' outstanding note balances to 68% of their original balances," S&P said. "In addition, the credit quality of the underlying collateral has improved since November 2011. As of the Aug. 9, 2012, trustee report, the transaction had $8.4 million in defaulted assets, compared with $12.6 million noted in the Sept. 22, 2011, trustee report, which we used for our November 2011 rating actions," S&P said. "In our rating actions in November 2011, the largest obligor test constrained the rating of class F notes at 'CCC+ (sf)'. The largest obligor test was not a constraining factor in 's rating action on class F notes. The largest obligor test is a supplemental stress test we introduced as part of our corporate CDO criteria update in 2009," S&P said. "We affirmed our ratings on the class A-1 and A-2 notes to reflect the sufficient credit support available at the 'AAA' rating level. We will continue to review our ratings on the notes and assess whether, in our view, the ratings remain consistent with the credit enhancement available," S&P said. Standard & Poor's will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it deems necessary. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATINGS AND CREDITWATCH ACTIONS GSC Capital Corp. Loan Funding 2005-1 Class Rating To From B AAA (sf) AA+ (sf)/Watch Pos C AA+ (sf) AA (sf)/Watch Pos D AA (sf) A+ (sf)/Watch Pos E BBB- (sf) BB+ (sf)/Watch Pos F BB- (sf) CCC+ (sf)/Watch Pos RATINGS AFFIRMED GSC Capital Corp. Loan Funding 2005-1 Class Rating A-1 AAA (sf) A-2 AAA (sf) GSC PARTNERS VII: S&P Raises Rating on Class E Notes to 'BB-' ------------------------------------------------------------- Standard & Poor's Ratings Services raised and removed from CreditWatch with positive implications its ratings on the class B, C, D, and E notes from GSC Partners CDO Fund VII Ltd., a U.S. collateralized loan obligation (CLO) managed by GSC Partners. "Simultaneously, we affirmed our ratings on the class A-1 and A-2 notes," S&P said. "The upgrades reflect an improvement in the credit quality of the underlying assets since our March 2011 rating actions. The rating affirmations reflect sufficient credit enhancement at the current rating levels," S&P said. "According to the July 23, 2012, trustee report, the transaction held $21.90 million in defaulted assets, down from $34.59 million noted in the Feb. 15, 2011, trustee report, which we used for our March 2011 rating actions," S&P said. "Similarly, the amount of 'CCC' and below rated collateral held in the transaction's underlying portfolio declined during this period. According to the July 2012 trustee report, the transaction held $41.69 million in 'CCC' and below rated collateral, down from $66.22 million noted in the February 2011 trustee report," S&P said. Additional improvements in the transaction over the same time period include an increase in the class A/B, C, D, and E overcollateralization (O/C) ratio tests. "Standard & Poor's notes that the transaction has also benefit from its diversion test - which is the class E O/C ratio measured at a higher level (than the class E O/C test) in the interest section of the waterfall. The transaction was structured such that if it failed this test, the lesser of 50.00% of the available interest proceeds and the amount necessary to cure the test would be added to the principal collection account and potentially used by the collateral manager to reinvest this amount into additional collateral. Since the March 2011 rating actions, the transaction has diverted $2.84 million in excess interest proceeds in accordance with the test failure. The transaction ended its reinvestment period in May 2012, which terminates the use of this test," S&P said. "Standard & Poor's also notes that the ratings on the class E notes were driven by the application of the largest obligor default test for our March 2011 rating action. This is no longer the case, and in combination with the previously mentioned improvements, we have raised our rating accordingly," S&P said. Standard & Poor's will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it deems necessary. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATING AND CREDITWATCH ACTIONS GSC Partners CDO Fund VII Ltd. Rating Class To From B AAA (sf) AA (sf)/Watch Pos C AA- (sf) A- (sf)/Watch Pos D BBB+ (sf) BB+ (sf)/Watch Pos E BB- (sf) CCC+ (sf)/Watch Pos RATINGS AFFIRMED GSC Partners CDO Fund VII Ltd. Class Rating A-1 AAA (sf) A-2 AAA (sf) GSR MORTGAGE: Moody's Confirms 'Ba1' Rating on Cl. 1A-1 Tranche --------------------------------------------------------------- Moody's Investors Service has upgraded five tranches, downgraded three tranches, confirmed the rating on one tranche, and placed on watch the ratings of three tranches from one RMBS transaction issued by GSR Mortgage Loan Trust. The collateral backing this deal primarily consists of first-lien, fixed-rate prime Jumbo residential mortgages. The actions impact approximately $97.3 million of RMBS issued from 2005. Complete rating actions are as follows: Issuer: GSR Mortgage Loan Trust 2005-5F Cl. 1A-1, Confirmed at Ba1 (sf); previously on May 30, 2012 Ba1 (sf) Placed Under Review for Possible Upgrade Cl. 3A-1, Upgraded to Baa1 (sf); previously on Jul 15, 2011 Downgraded to Baa3 (sf) Cl. 3A-2, Upgraded to A3 (sf); previously on Jul 15, 2011 Downgraded to Baa2 (sf) Cl. 3A-3, Upgraded to Baa3 (sf); previously on May 30, 2012 Ba2 (sf) Placed Under Review for Possible Upgrade Cl. 3A-4, Upgraded to A3 (sf); previously on May 30, 2012 Baa3 (sf) Placed Under Review for Possible Upgrade Cl. 3A-5, Upgraded to A3 (sf); previously on May 30, 2012 Baa3 (sf) Placed Under Review for Possible Upgrade Cl. 8A-2, Aa3 (sf) Placed Under Review Direction Uncertain; previously on Jul 15, 2011 Downgraded to Aa3 (sf) Cl. 8A-5, Aa3 (sf) Placed Under Review Direction Uncertain; previously on Jul 15, 2011 Downgraded to Aa3 (sf) Cl. 8A-6, Downgraded to A3 (sf); previously on May 30, 2012 A2 (sf) Placed Under Review for Possible Downgrade Cl. 8A-7, Downgraded to A3 (sf); previously on May 30, 2012 A2 (sf) Placed Under Review for Possible Downgrade Cl. 8A-8, Downgraded to A3 (sf); previously on May 30, 2012 A2 (sf) Placed Under Review for Possible Downgrade Cl. 8A-9, Ba1 (sf) Placed Under Review Direction Uncertain; previously on Jul 15, 2011 Downgraded to Ba1 (sf) Ratings Rationale The actions are a result of the recent performance of the underlying pools and reflect Moody's updated loss expectations on these pools. The rating action consists of a number of upgrades, downgrades, and confirmations. The upgrades are due to improvement in individual pool performance. The downgrades are a result of deteriorating performance and structural features resulting in higher expected losses for certain bonds than previously anticipated. Classes 8-A-2, 8-A-5, and 8-A-9 have been placed on watch direction uncertain due to conflicting loss allocation language between the Prospectus Supplement and the Trust Agreement -- the prospectus supplement allows for the Cl. 8-A-9 to act as a support to the Cl. 8-A-2 while the Trust Agreement allows for the reverse with Cl. 8-A-2 as a support for Cl. 8-A-9. Cl. 8-A-5 has also been placed on watch direction uncertain because it is an interest-only tranche whose notional balance is equal to the balance of Cl. 8-A- 2. The methodologies used in this rating were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. The methodology used in rating Interest- Only Securities was "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's adjusts the methodologies noted above for 1) Moody's current view on loan modifications 2) small pool volatility and 3) bonds that financial guarantors insure. Loan Modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. Small Pool Volatility The above RMBS approach only applies to structures with at least 40 loans and pool factor of greater than 5%. Moody's can withdraw its rating when the pool factor drops below 5% and the number of loans in the deal declines to 40 loans or lower. If, however, a transaction has a specific structural feature, such as a credit enhancement floor, that mitigates the risks of small pool size, Moody's can choose to continue to rate the transaction. For pools with loans less than 100, Moody's adjusts its projections of loss to account for the higher loss volatility of such pools. For small pools, a few loans becoming delinquent would greatly increase the pools' delinquency rate. To project losses on prime jumbo pools with fewer than 100 loans, Moody's first calculates an annualized delinquency rate based on vintage, number of loans remaining in the pool and the level of current delinquencies in the pool. For prime jumbo pools, Moody's first applies a baseline delinquency rate of 3.5% for 2005, 6.5% for 2006 and 7.5% for 2007. Once the loan count in a pool falls below 76, this rate of delinquency is increased by 1% for every loan fewer than 76. For example, for a 2005 pool with 75 loans, the adjusted rate of new delinquency is 3.54%. Further, to account for the actual rate of delinquencies in a small pool, Moody's multiplies the rate calculated above by a factor ranging from 0.20 to 2.0 for current delinquencies that range from less than 2.5% to greater than 50% respectively. Moody's then uses this final adjusted rate of new delinquency to project delinquencies and losses for the remaining life of the pool under the approach described in the methodology publication. When assigning the final ratings to bonds, in addition to the approach described above, Moody's considered the volatility of the projected losses and timeline of the expected defaults. Bonds insured by financial guarantors The credit quality of RMBS that a financial guarantor insures reflect the higher of the credit quality of the guarantor or the RMBS without the benefit of the guarantee. As a result, the rating on the security is the higher of 1) the guarantor's financial strength rating and 2) the current underlying rating, which is what the rating of the security would be absent consideration of the guaranty. The principal methodology Moody's uses in determining the underlying rating is the same methodology for rating securities that do not have financial guaranty, described earlier. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in April 2011 to 8.1% in August 2012. Moody's forecasts a further drop to 7.8% for 2013. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF298028 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF196023 HOME LOAN: Moody's Confirms 'B2' Rating on Class A-2 Tranche ------------------------------------------------------------ Moody's Investors Service has confirmed the ratings on one tranche from Home Loan Mortgage Loan Trust 2006-1. The collateral backing these transactions are subprime residential mortgage loans. Complete rating actions are as follows: Issuer: Home Loan Mortgage Loan Trust 2006-1 Cl. A-2, Confirmed at B2 (sf); previously on May 30, 2012 B2 (sf) Placed Under Review for Possible Upgrade Financial Guarantor: Ambac Assurance Corporation (Segregated Account - Unrated) Ratings Rationale The actions are a result of the recent performance of Subprime pools originated after 2005 and reflect Moody's updated loss expectations on these pools. The methodologies used in this rating were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. Moody's adjusts the methodologies noted above for 1) Moody's current view on loan modifications 2) bonds that financial guarantors insure. Loan Modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. Bonds Insured by Financial Guarantors The credit quality of RMBS that a financial guarantor insures reflect the higher of the credit quality of the guarantor or the RMBS without the benefit of the guarantee. As a result, the rating on the security is the higher of 1) the guarantor's financial strength rating and 2) the current underlying rating, which is what the rating of the security would be absent consideration of the guaranty. The principal methodology Moody's uses in determining the underlying rating is the same methodology for rating securities that do not have financial guaranty, described earlier. 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) (SFW), 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 extended foreclosure timelines by servicers is taken into consideration when assigning ratings. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in April 2011 to 8.2% in June 2012. Moody's forecasts a further drop to 7.8% for 2013. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF297364 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF198689 HSBC HOME 2007-2: Moody's Lifts Cl. M-2 Tranche Rating to 'Ba2' --------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on two tranches from one subprime RMBS transaction issued by HSBC Home Equity Loan Trust 2007-2. Complete rating actions are as follows: Issuer: HSBC Home Equity Loan Trust (USA) 2007-2 Cl. M-1, Upgraded to Baa2 (sf); previously on May 30, 2012 Ba1 (sf) Placed Under Review for Possible Upgrade Cl. M-2, Upgraded to Ba2 (sf); previously on May 30, 2012 B2 (sf) Placed Under Review for Possible Upgrade Ratings Rationale The actions are a result of the recent performance of Subprime pools originated after 2005 and reflect Moody's updated loss expectations on these pools. The upgrades in the rating action are a result of improving performance and/or structural features resulting in lower expected losses for certain bonds than previously anticipated. The methodologies used in this rating were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. Moody's adjusts the methodologies noted above for Moody's current views on loan modifications. As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. 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) (SFW), 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 extended foreclosure timelines by servicers is taken into consideration when assigning ratings. The above methodology only applies to pools with at least 40 loans and a pool factor of greater than 5%. Moody's may withdraw its rating when the pool factor drops below 5% and the number of loans in the pool declines to 40 loans or lower unless specific structural features allow for a monitoring of the transaction (such as a credit enhancement floor). The primary sources of assumption uncertainty are Moody's central macroeconomic forecast and performance volatility as a result of servicer-related activity such as modifications. The unemployment rate fell from 9.1% in June 2011 to 8.2% in June 2012. Moody's forecasts a further drop to 7.8% by the end of 2Q 2013. Moody's expects housing prices to remain stable through the remainder of 2012 before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer activity such as modification-related principal forgiveness and interest rate reductions. Any change resulting from servicing transfers or other policy or regulatory change can also impact the performance of these transactions . A list of these actions including CUSIP identifiers may be found at http://moodys.com/viewresearchdoc.aspx?docid=PBS_SF297394 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF198689 HSI ASSET 2005-OPT1: Moody's Cuts Class M-1 Rating to 'Caa1' ------------------------------------------------------------ Moody's Investors Service has downgraded the rating on one tranche, and confirmed the ratings on two tranches from three subprime RMBS transactions issued by HSI. The collateral backing these transactions are subprime residential mortgage loans. Complete rating actions are as follows: Issuer: HSI Asset Securitization Corporation Trust 2005-OPT1 Cl. M-1, Downgraded to Caa1 (sf); previously on May 30, 2012 B2 (sf) Placed Under Review for Possible Downgrade Issuer: HSI Asset Securitization Corporation Trust 2006-OPT1 Cl. II-A-4, Confirmed at Ba3 (sf); previously on May 30, 2012 Ba3 (sf) Placed Under Review for Possible Upgrade Issuer: HSI Asset Securitization Corporation Trust 2006-OPT4 Cl. II-A-4, Confirmed at B2 (sf); previously on May 30, 2012 B2 (sf) Placed Under Review for Possible Upgrade Ratings Rationale The actions are a result of the recent performance of Subprime pools originated after 2005 and reflect Moody's updated loss expectations on these pools. The downgrade in the rating action is a result of deteriorating performance and/or structural features resulting in higher expected losses for the bond than previously anticipated. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. Moody's adjusts the methodologies noted above for Moody's current view on loan modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. 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) (SFW), 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 extended foreclosure timelines by servicers is taken into consideration when assigning ratings. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in April 2011 to 8.2% in June 2012. Moody's forecasts a further drop to 7.8% for 2013. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF297357 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF198689 INDOSUEZ VI: Fitch Withdraws 'Dsf' Rating on Two Note Classes ------------------------------------------------------------- Fitch Ratings has downgraded and withdrawn the ratings of two classes of notes issued by Indosuez Capital Funding VI, Ltd./Corp. (Indosuez VI) as follows: -- $19,809,761 class D-1 notes downgraded to 'Dsf' from 'Csf' and withdrawn; -- $6,317,850 class D-2 notes downgraded to 'Dsf' from 'Csf' and withdrawn. Additionally, the class C notes have been marked as paid-in-full (PIF). The transaction's final maturity date occurred on Sept. 14, 2012, at which time the class C notes received their full interest payment and were repaid their remaining principal balance of approximately $10 million. The class C notes have therefore been marked as PIF. Also on the final maturity date the class D-1 and D-2 (collectively, class D) notes received their current interest payments but did not receive any principal payments. The class D notes have each defaulted since they have not received their full principal balance by the final maturity date. The ratings of the class D notes are withdrawn due to the defaults of these tranches. Fitch will no longer maintain recovery estimates on these notes. After the final maturity date one defaulted bond with a par value of $2 million remained in the portfolio. This bond defaulted in 2007, and Fitch expects no or minimal future recoveries related to it. There is also $167 thousand of cash being reserved for future distributions. At the time of its last rating action for this transaction in December 2011, Fitch affirmed the class C notes at 'CCsf' while noting the possibility for these notes to be paid in full if the remaining assets in the portfolio were ultimately liquidated for prices similar to the market values that existed at that time. In the last month prior to the maturity date $8 million par of long- dated bonds were sold at a weighted average price of 95%, while the disposition of equity holdings generated another $1 million of proceeds, helping to repay the class C notes in full on the maturity date. Indosuez VI was a collateralized debt obligation that closed on Sept. 14, 2000 and was managed by LCM Asset Management LLC, having succeeded the original manager Indosuez Capital in July 2004. INFINITI SPC 2006-4: S&P Withdraws 'CCC-' Rating on Class B Notes ----------------------------------------------------------------- Standard & Poor's Ratings Services withdrew its rating on the class B notes issued by Infiniti SPC Ltd.'s series CPORTS 2006-4, a synthetic corporate investment-grade collateralized debt obligation (CDO) transaction. The rating withdrawal follows the termination of the notes. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATING WITHDRAWN Infiniti SPC Ltd. CPORTS 2006-4 Rating Class To From B NR CCC- (sf) NR-Not rated. JASPER CLO: S&P Raises Ratings on 2 Note Classes to 'B-' -------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A, B, D-1, and D-2 notes from Jasper CLO Ltd., a collateralized loan obligation (CLO) transaction managed by Highland Capital Management L.P. "At the same time, we affirmed the rating on the class C notes and removed our ratings on the A, B, C, D-1, and D-2 notes from CreditWatch, where we placed them with positive implications on June 18, 2012," S&P said. Jasper CLO Ltd.'s reinvestment period ended Aug. 1, 2012. Since the last downgrades on Dec. 8, 2009, the class A and D notes had principal pay down due to overcollateralization (O/C) failures. In terms of the payment structure, Jasper CLO Ltd. has an structural diversion mechanism in its waterfall which diverts available interest proceeds after paying the regular class D interest to pay down class D notes if class D O/C ratio is below 105%. Due to the interest proceeds diversion mechanism, the class D notes have paid down to 53.66% of their original balance in aggregate. Due to prior O/C failures, the class A notes have paid down by $24.58 million and the class D notes have paid down by $15.77 million in aggregate. As of July 2012 trustee report, all O/C tests are passing and no principal paydown occurred on the August 2012 payment date. In addition, the credit quality of the underlying portfolio has improved due to a decline in defaults and decline in the 'CCC' rated collateral. The defaulted obligations decreased to $39.4 million from $80.1 million between October 2009 and July 2012, and 'CCC' rated obligations also decreased from $51.1 million to $21.6 million at the same period. In terms of calculating the overcollateralization (O/C) numerator, trustee report excludes 'CCC' rated, defaulted, pay-in-kind (PIK), current pay, and deep discount obligations. The decrease in 'CCC' rated and defaulted obligations have benefited the overall O/C ratios. "We upgraded the class A, B, D-1, and D-2 notes due an increase in their credit support. The affirmation of the class C rating reflects sufficient credit support available to the note at its current rating," S&P said. "Standard & Poor's notes that according to the trustee report dated July 22, 2012, the transaction had roughly 9.39% of long- dated assets that have maturity dates beyond the legal final maturity of the transaction in August 2017. Exposure to these long-dated assets leaves the transaction subject to potential market-value risk as these securities may have to be liquidated to pay down the notes on or right before the transaction final maturity date. We took this into review in our rating actions," S&P said. Standard & Poor's will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it deems necessary. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATING AND CREDITWATCH ACTIONS Jasper CLO Ltd. Rating Class To From A AA+ (sf) A+ (sf)/Watch Pos B A+ (sf) BBB+ (sf)/Watch Pos C BB+ (sf) BB+ (sf)/Watch Pos D-1 B- (sf) CCC- (sf)/Watch Pos D-2 B- (sf) CCC- (sf)/Watch Pos JP MORGAN: Moody's Cuts Ratings on 12 RMBS Tranches to 'Caa3' ------------------------------------------------------------- Moody's Investors Service has downgraded 49 tranches, upgraded one tranche and confirmed the ratings on five tranches from four RMBS transactions issued by J.P. Morgan Mortgage Trust. The collateral backing these deals primarily consists of first-lien, fixed-rate prime Jumbo residential mortgages. The actions impact approximately $736 million of RMBS issued from 2006 to 2007. Complete rating actions are as follows: Issuer: J.P. Morgan Mortgage Trust 2006-S1 Cl. 1-A-1, Downgraded to B3 (sf); previously on Apr 12, 2010 Downgraded to B1 (sf) Cl. 1-A-2, Downgraded to Caa1 (sf); previously on Apr 12, 2010 Downgraded to B2 (sf) Cl. A-X, Downgraded to Caa1 (sf); previously on Feb 22, 2012 Upgraded to B1 (sf) Cl. 2-A-1, Confirmed at B2 (sf); previously on May 30, 2012 B2 (sf) Placed Under Review for Possible Upgrade Cl. 2-A-3, Confirmed at B2 (sf); previously on May 30, 2012 B2 (sf) Placed Under Review for Possible Upgrade Cl. 2-A-4, Upgraded to Ba1 (sf); previously on May 30, 2012 Ba3 (sf) Placed Under Review for Possible Upgrade Cl. 2-A-5, Confirmed at B3 (sf); previously on May 30, 2012 B3 (sf) Placed Under Review for Possible Upgrade Cl. 2-A-6, Downgraded to B2 (sf); previously on Apr 12, 2010 Downgraded to B1 (sf) Cl. 2-A-8, Confirmed at B3 (sf); previously on May 30, 2012 B3 (sf) Placed Under Review for Possible Upgrade Cl. 2-A-9, Downgraded to Caa1 (sf); previously on Apr 12, 2010 Downgraded to B2 (sf) Cl. 3-A-6, Downgraded to B3 (sf); previously on Apr 12, 2010 Downgraded to B2 (sf) Cl. 3-A-7, Downgraded to Ba3 (sf); previously on Apr 12, 2010 Downgraded to Ba1 (sf) Issuer: J.P. Morgan Mortgage Trust 2006-S3 Cl. 1-A-1, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Confirmed at B3 (sf) Cl. 1-A-2, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Downgraded to B3 (sf) Cl. 1-A-9, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Downgraded to B3 (sf) Cl. 1-A-10, Downgraded to Caa3 (sf); previously on Apr 12, 2010 Downgraded to Caa2 (sf) Cl. 1-A-12, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Downgraded to Caa1 (sf) Cl. 1-A-14, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Confirmed at B3 (sf) Cl. 1-A-15, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Confirmed at B3 (sf) Cl. 1-A-16, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Confirmed at B3 (sf) Cl. 1-A-17, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Confirmed at B3 (sf) Cl. 1-A-18, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Confirmed at B3 (sf) Cl. 1-A-19, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Confirmed at B3 (sf) Cl. 1-A-21, Downgraded to Caa3 (sf); previously on Apr 12, 2010 Downgraded to Caa2 (sf) Cl. 1-A-22, Downgraded to Caa3 (sf); previously on Apr 12, 2010 Downgraded to Caa2 (sf) Cl. 1-A-23, Downgraded to C (sf); previously on Apr 12, 2010 Downgraded to Ca (sf) Cl. 1-A-24, Downgraded to Caa1 (sf); previously on Apr 12, 2010 Downgraded to B3 (sf) Cl. 1-A-26, Downgraded to Caa1 (sf); previously on Apr 12, 2010 Downgraded to B3 (sf) Cl. 1-A-30, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Downgraded to Caa1 (sf) Cl. 1-A-31, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Confirmed at B3 (sf) Cl. 2-A-1, Confirmed at B1 (sf); previously on May 30, 2012 B1 (sf) Placed Under Review for Possible Upgrade Cl. 2-A-3, Downgraded to B3 (sf); previously on May 30, 2012 B1 (sf) Placed Under Review for Possible Upgrade Cl. 2-A-4, Downgraded to Caa3 (sf); previously on Apr 12, 2010 Confirmed at B3 (sf) Cl. 2-A-6, Downgraded to C (sf); previously on May 30, 2012 B3 (sf) Placed Under Review for Possible Downgrade Cl. 2-A-7, Downgraded to B3 (sf); previously on Apr 12, 2010 Upgraded to B1 (sf) Cl. 2-A-8, Downgraded to Caa3 (sf); previously on Apr 12, 2010 Upgraded to B2 (sf) Cl. A-X, Downgraded to Caa3 (sf); previously on Feb 22, 2012 Upgraded to B2 (sf) Cl. A-P, Downgraded to B2 (sf); previously on Apr 12, 2010 Upgraded to B1 (sf) Issuer: J.P. Morgan Mortgage Trust 2006-S4 Cl. A-1, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Downgraded to Caa1 (sf) Cl. A-2, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Downgraded to Caa1 (sf) Cl. A-3, Downgraded to Caa3 (sf); previously on Apr 12, 2010 Downgraded to Caa2 (sf) Cl. A-4, Downgraded to C (sf); previously on Jun 24, 2009 Downgraded to Ca (sf) Cl. A-5, Downgraded to Caa3 (sf); previously on Apr 12, 2010 Downgraded to Caa2 (sf) Cl. A-7, Downgraded to Caa3 (sf); previously on Apr 12, 2010 Downgraded to Caa2 (sf) Cl. A-8, Downgraded to Caa3 (sf); previously on Apr 12, 2010 Downgraded to Caa2 (sf) Cl. A-9, Downgraded to Caa3 (sf); previously on Apr 12, 2010 Downgraded to Caa2 (sf) Cl. A-10, Downgraded to Caa2 (sf); previously on May 30, 2012 B1 (sf) Placed Under Review for Possible Downgrade Cl. A-11, Downgraded to Caa2 (sf); previously on May 30, 2012 B1 (sf) Placed Under Review for Possible Downgrade Cl. A-13, Downgraded to Caa2 (sf); previously on May 30, 2012 B1 (sf) Placed Under Review for Possible Downgrade Cl. A-X, Downgraded to Caa3 (sf); previously on Feb 22, 2012 Upgraded to B3 (sf) Cl. A-P, Downgraded to Caa2 (sf); previously on Apr 12, 2010 Confirmed at B3 (sf) Issuer: J.P. Morgan Mortgage Trust 2007-S1 Cl. 2-A-1, Downgraded to Caa2 (sf); previously on May 30, 2012 B3 (sf) Placed Under Review for Possible Downgrade Cl. 2-A-2, Downgraded to Caa2 (sf); previously on May 30, 2012 B3 (sf) Placed Under Review for Possible Downgrade Cl. 2-A-3, Downgraded to Caa2 (sf); previously on May 30, 2012 B3 (sf) Placed Under Review for Possible Downgrade Cl. 2-A-4, Downgraded to Caa2 (sf); previously on May 30, 2012 B3 (sf) Placed Under Review for Possible Downgrade Ratings Rationale The actions are a result of the recent performance of Prime jumbo pools originated on or after 2005 and reflect Moody's updated loss expectations on these pools. The rating action consists of a number of downgrades and confirmations. The downgrades are a result of deteriorating performance and structural features resulting in higher expected losses for certain bonds than previously anticipated. In addition, the cash-flow modeling used in the May 30, 2012 rating action incorrectly assumed a loss allocation limitation, which would provide protection to the senior certificates backed by stronger performing groups. However, the pooling and servicing agreement (PSA) does not provide for a loss allocation limitation in these deals. Instead, all senior certificates will be allocated losses from the related collateral group without regard to any limits. The cash-flow modeling has now been corrected, and the rating action reflects this change. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. The methodology used in rating Interest- Only Securities was "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's adjusts the methodologies noted above for 1) Moody's current view on loan modifications and 2) small pool volatility Loan Modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. Small Pool Volatility The above RMBS approach only applies to structures with at least 40 loans and pool factor of greater than 5%. Moody's can withdraw its rating when the pool factor drops below 5% and the number of loans in the deal declines to 40 loans or lower. If, however, a transaction has a specific structural feature, such as a credit enhancement floor, that mitigates the risks of small pool size, Moody's can choose to continue to rate the transaction. For pools with loans less than 100, Moody's adjusts its projections of loss to account for the higher loss volatility of such pools. For small pools, a few loans becoming delinquent would greatly increase the pools' delinquency rate. To project losses on prime jumbo pools with fewer than 100 loans, Moody's first calculates an annualized delinquency rate based on vintage, number of loans remaining in the pool and the level of current delinquencies in the pool. For prime jumbo pools, Moody's first applies a baseline delinquency rate of 3.5% for 2005, 6.5% for 2006 and 7.5% for 2007. Once the loan count in a pool falls below 76, this rate of delinquency is increased by 1% for every loan fewer than 76. For example, for a 2005 pool with 75 loans, the adjusted rate of new delinquency is 3.54%. Further, to account for the actual rate of delinquencies in a small pool, Moody's multiplies the rate calculated above by a factor ranging from 0.20 to 2.0 for current delinquencies that range from less than 2.5% to greater than 50% respectively. Moody's then uses this final adjusted rate of new delinquency to project delinquencies and losses for the remaining life of the pool under the approach described in the methodology publication. When assigning the final ratings to bonds, in addition to the approach described above, Moody's considered the volatility of the projected losses and timeline of the expected defaults. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in April 2011 to 8.1% in August 2012. Moody's forecasts a further drop to 7.8% for 2013. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF297399 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF196023 JP MORGAN 2002-C2: Moody's Cuts Ratings on 2 Cert. Classes to 'C' ----------------------------------------------------------------- Moody's Investors Service downgraded the ratings of four classes and affirmed nine CMBS classes of J.P. Morgan Commercial Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2002-C2 as follows: Cl. A-2, Affirmed at Aaa (sf); previously on Dec 10, 2002 Definitive Rating Assigned Aaa (sf) Cl. B, Affirmed at Aaa (sf); previously on Jul 26, 2007 Upgraded to Aaa (sf) Cl. C, Affirmed at Aaa (sf); previously on Jul 26, 2007 Upgraded to Aaa (sf) Cl. D, Affirmed at Aa2 (sf); previously on Mar 25, 2009 Upgraded to Aa2 (sf) Cl. E, Affirmed at A2 (sf); previously on Jul 26, 2007 Upgraded to A2 (sf) Cl. F, Downgraded to B1 (sf); previously on Sep 29, 2011 Downgraded to Ba1 (sf) Cl. G, Downgraded to Caa1 (sf); previously on Sep 29, 2011 Downgraded to B1 (sf) Cl. H, Downgraded to C (sf); previously on Sep 29, 2011 Downgraded to Caa2 (sf) Cl. J, Downgraded to C (sf); previously on Dec 2, 2010 Downgraded to Ca (sf) Cl. SP-1, Affirmed at C (sf); previously on Sep 29, 2011 Downgraded to C (sf) Cl. SP-2, Affirmed at C (sf); previously on Sep 29, 2011 Downgraded to C (sf) Cl. SP-3, Affirmed at C (sf); previously on Sep 29, 2011 Downgraded to C (sf) Cl. X-1, Affirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (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 of the four pooled principal bonds are due to the key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), 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. The three non-pooled, or rake bonds, are secured by B-notes on the Simon Portfolio II Loan. The ratings of these classes are consistent with the expected loss associated with the these loans and are affirmed. The rating of the IO bond, Class X1, is consistent with the expected credit performance of its referenced classes and thus is affirmed. Moody's rating action reflects a cumulative base expected loss of 6.7% of the current pooled balance. At last review, Moody's cumulative base expected loss was 6.0%. The pool's pooled cumulative realized losses have increased by $18.8 million since the last review. Moody's current base expected loss plus cumulative realized losses is 7.2% of the original pooled balance as compared to 6.2% at last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255 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 extent of growth in the current macroeconomic environment and commercial real estate property markets. Commercial real estate property values are continuing to move in a positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with eight straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Slow recovery in the office sector continues with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by discounting and promotions. However, rising wages and reduced unemployment, along with increased consumer confidence, is helping to spur consumer spending resulting in increased sales. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario maintains its forecast of relatively robust growth in the US and an expectation of a mild recession in the euro area for 2012. Downside risks remain significant, and elevated downside risks and their materialization could pose a serious threat to the outlook. Major downside risks include: a deeper than expected recession in the euro area; the potential for a hard landing in major emerging markets; an oil supply shock; and material fiscal tightening in the US given recent political gridlock. Healthy but below-trend growth in GDP is expected through the rest of this year and next with risks trending to the downside. The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000, "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000, and "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.61 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) 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 (sf) level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), 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 (sf) and B2 (sf), 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 assessments is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit assessment 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 assessment level, is incorporated for loans with similar credit assessments in the same transaction. Moody's review also incorporated the CMBS IO calculator ver1.1 which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit estimates; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type corresponding to an IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point . For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator ver1.1 would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. 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 16 compared to 26 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 8.4 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 (CMBS) transactions. Moody's monitors transactions on a monthly basis through a review utilizing MOST(R) (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated September 29, 2011. Deal Performance As of the August 13, 2012 distribution date, the transaction's aggregate certificate pooled balance has decreased by 52% to $496.4 million from $1.0 billion at securitization. The Certificates are collateralized by 61 mortgage loans ranging in size from less than 1% to 8% of the pool, with the top ten non- defeased loans representing 26% of the pool. Seventeen loans, representing 52% of the pool, have defeased and are collateralized with U.S. Government securities. Thirty-two loans, representing 33% 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) monthly reporting package. As part of its ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Nine loans have been liquidated from the pool, resulting in an aggregate pooled realized loss of $40.9 million (50% loss severity overall). Four loans, representing 9% of the pool, are currently in special servicing. The largest specially serviced loan is the Century III Mall Loan ($38.1 million -- 7.7% of the pool), which was originally secured by the sponsor's interest in two regional malls totaling 1.9 million square feet (SF) and a 478,000 SF power retail center. The loan transferred to special servicing in January 2011 due to imminent default. In September 2011, the sponsor and special servicer agreed to a release of the Longview Mall (located in Longview, Texas; 211,000 SF collateral) and Highland Lakes Center (located in Orlando, Florida; 281,000 SF collateral) for a cash payment and a deed in lieu of foreclosure on the Century III Mall (located in West Mifflin, PA; 559,000 SF collateral). The loan status is now REO. The collateral is also encumbered by three subordinate loans totaling $5.2 million which secure the non-pooled Classes SP-1, SP-2 and SP-3. The master servicer has recognized an aggregate $24.3 million appraisal reduction for the specially serviced loans, including the three subordinate loans. Moody's has estimated an aggregate $27.9 million loss (49% expected loss on average) for the specially serviced loans. Moody's has assumed a high default probability for four poorly performing loans representing 4% of the pool and has estimated a $3.5 million aggregate loss (16% expected loss based on a 50% probability default) from these troubled loans. Moody's was provided with a full year 2011 and partial year 2012 operating results for 93% and 28% of the pool's non-defeased loans, respectively. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 84% compared to 86% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 14% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.6%. Excluding specially serviced and troubled loans, Moody's actual and stressed DSCRs are 1.25X and 1.33X, respectively, compared to 1.29X and 1.30X at last review. Moody's actual DSCR is based on Moody's net cash flow (NCF) 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 conduit loans represent 9% of the pool. The largest conduit loan is the West Valley Business Park Loan ($14.9 million -- 3.0% of the pool), which is secured by a 206,000 SF industrial flex property located in Kent, Washington. The property was 75% leased as of December 2011 compared to 80% at last review. The loan is currently on the watchlist due to low debt service coverage, but remains current. Performance has declined since last review due to higher vacancy. The current DSCR is 1.0X. Due to the near term maturity and a poor performance the loan was recognized as a troubled one. Moody's LTV and stressed DSCR are 127% and 0.83X, compared to 118% and 0.89X at last review. The second largest conduit loan is the Avon Commons Loan ($14.0 million -- 2.8% of the pool), which is secured by a 173,000 SF anchored retail property located in Avon, Indiana. The property was 76% leased as of December 2011, compared to 100% at last review. The property recently lost two tenants, Jo-Ann and Barnes & Noble, earlier in the year. At last review, Moody's stressed the property cash flow due to concerns about significant upcoming lease rollover risk. Current performance is inline with Moody's expectations. Moody's LTV and stressed DSCR are 109% and 0.99X, respectively, compared to 110% and 0.98X at last review. The third largest conduit loan is the Richmond Distribution Center Loan ($13.9 million -- 2.8% of the pool), which is secured by a 426,000 SF industrial property located in Richmond, California. The property was 76% leased as of December 2011, the same as last review. The largest tenant is Dreisbach Enterprises (67% of the NRA; December 2016 lease expiration). Performance has been stable. Moody's LTV and stressed DSCR are 94% and 1.12X, respectively, compared to 97% and 1.09X at last review . JP MORGAN 2005-OPT2: Moody's Hikes Class M-3 RMBS Rating to Caa3 ---------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on four tranches and confirmed the rating on one tranche from two subprime RMBS transactions issued by J.P. Morgan. The collateral backing the transactions are subprime residential mortgages. Complete rating actions are as follows: Issuer: J.P. Morgan Mortgage Acquisition Corp. 2005-OPT2 Cl. A-4, Confirmed at A3 (sf); previously on May 30, 2012 A3 (sf) Placed Under Review for Possible Upgrade Cl. M-1, Upgraded to Ba1 (sf); previously on May 30, 2012 B1 (sf) Placed Under Review for Possible Upgrade Cl. M-2, Upgraded to B2 (sf); previously on May 30, 2012 Caa2 (sf) Placed Under Review for Possible Upgrade Cl. M-3, Upgraded to Caa3 (sf); previously on May 30, 2012 C (sf) Placed Under Review for Possible Upgrade Issuer: J.P. Morgan Mortgage Acquisition Corp. 2005-WMC1 Cl. M-1, Upgraded to Baa3 (sf); previously on May 30, 2012 Ba1 (sf) Placed Under Review for Possible Upgrade Ratings Rationale The actions are a result of the recent performance of Subprime pools originated after 2005 and reflect Moody's updated loss expectations on these pools. The upgrades in the rating action are a result of improving performance and/or structural features resulting in lower expected losses for certain bonds than previously anticipated. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. Moody's adjusts the methodologies noted above for Moody's current views on loan modifications. As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. 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) (SFW), 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 extended foreclosure timelines by servicers is taken into consideration when assigning ratings. The above methodology only applies to pools with at least 40 loans and a pool factor of greater than 5%. Moody's may withdraw its rating when the pool factor drops below 5% and the number of loans in the pool declines to 40 loans or lower unless specific structural features allow for a monitoring of the transaction (such as a credit enhancement floor). The primary sources of assumption uncertainty are Moody's central macroeconomic forecast and performance volatility as a result of servicer-related activity such as modifications. The unemployment rate fell from 9.1% in June 2011 to 8.2% in June 2012. Moody's forecasts a further drop to 7.8% by the end of 2Q 2013. Moody's expects housing prices to remain stable through the remainder of 2012 before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer activity such as modification-related principal forgiveness and interest rate reductions. Any change resulting from servicing transfers or other policy or regulatory change can also impact the performance of these transactions . A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF298017 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF198689 JP MORGAN 2007-C1: Moody's Cuts Ratings on 2 Cert. Classes to 'C' ----------------------------------------------------------------- Moody's Investors Service affirmed the ratings of 12 classes and downgraded eleven classes of J.P. Morgan Chase Commercial Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2007-C1 as follows: Cl. A-2, Affirmed at Aaa (sf); previously on Jan 14, 2008 Definitive Rating Assigned Aaa (sf) Cl. A-3, Affirmed at Aaa (sf); previously on Jan 14, 2008 Definitive Rating Assigned Aaa (sf) Cl. A-SB, Downgraded to Aa2 (sf); previously on Dec 2, 2010 Confirmed at Aaa (sf) Cl. A-4, Downgraded to Aa2 (sf); previously on Dec 2, 2010 Confirmed at Aaa (sf) Cl. A-M, Downgraded to Ba1 (sf); previously on Oct 13, 2011 Downgraded to A3 (sf) Cl. A-J, Downgraded to B3 (sf); previously on Oct 13, 2011 Downgraded to Ba2 (sf) Cl. B, Downgraded to Caa1 (sf); previously on Oct 13, 2011 Downgraded to B1 (sf) Cl. C, Downgraded to Caa2 (sf); previously on Oct 13, 2011 Downgraded to B3 (sf) Cl. D, Downgraded to Caa3 (sf); previously on Oct 13, 2011 Confirmed at Caa1 (sf) Cl. E, Downgraded to Ca (sf); previously on Oct 13, 2011 Confirmed at Caa2 (sf) Cl. F, Downgraded to C (sf); previously on Oct 13, 2011 Confirmed at Caa3 (sf) Cl. G, Downgraded to C (sf); previously on Oct 13, 2011 Confirmed at Ca (sf) Cl. H, Affirmed at C (sf); previously on Dec 2, 2010 Downgraded to C (sf) Cl. J, Affirmed at C (sf); previously on Dec 2, 2010 Downgraded to C (sf) Cl. K, Affirmed at C (sf); previously on Dec 2, 2010 Downgraded to C (sf) Cl. L, Affirmed at C (sf); previously on Dec 2, 2010 Downgraded to C (sf) Cl. M, Affirmed at C (sf); previously on Dec 2, 2010 Downgraded to C (sf) Cl. N, Affirmed at C (sf); previously on Dec 2, 2010 Downgraded to C (sf) Cl. P, Affirmed at C (sf); previously on Dec 2, 2010 Downgraded to C (sf) Cl. Q, Affirmed at C (sf); previously on Dec 2, 2010 Downgraded to C (sf) Cl. T, Affirmed at C (sf); previously on Dec 2, 2010 Downgraded to C (sf) Cl. X-1, Affirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) Cl. X-2, Downgraded to Aa2 (sf); previously on Jan 14, 2008 Definitive Rating Assigned Aaa (sf) Ratings Rationale The affirmations of the principal classes are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), 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. The IO Classes, Class XP and XC, are affirmed since they are consistent with the expected credit performance of their referenced classes. The downgrades are due to higher expected losses from specially serviced and troubled loans and anticipated increased interest shortfalls caused by modified loans. Moody's rating action reflects a cumulative base expected loss of 14.4% of the current balance compared to 12.9% at last review. Base expected loss plus realized losses to date totals 14.6% compared to 13.0% at last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255 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 extent of growth in the current macroeconomic environment and commercial real estate property markets. Commercial real estate property values are continuing to move in a positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with eight straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Slow recovery in the office sector continues with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by discounting and promotions. However, rising wages and reduced unemployment, along with increased consumer confidence, is helping to spur consumer spending resulting in increased sales. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario maintains its forecast of relatively robust growth in the US and an expectation of a mild recession in the euro area for 2012. Downside risks remain significant, and elevated downside risks and their materialization could pose a serious threat to the outlook. Major downside risks include: a deeper than expected recession in the euro area; the potential for a hard landing in major emerging markets; an oil supply shock; and material fiscal tightening in the US given recent political gridlock. Healthy but below-trend growth in GDP is expected through the rest of this year and next with risks trending to the downside. The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000, "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000, and "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.61 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) 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 (sf) level are driven by a pay down analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), 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 (sf) and B2 (sf), 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 assessments is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the underlying credit assessment 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 assessments in the same transaction. Moody's review also incorporated the CMBS IO calculator ver1.1 which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit estimates; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type corresponding to an IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point. For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator ver1.1 would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. 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 19, the same as 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 8.4 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 (CMBS) transactions. Moody's monitors transactions on a monthly basis through a review utilizing MOST(R) (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated October 13, 2011. Deal Performance As of the August 15, 2012 distribution date, the transaction's aggregate certificate balance has decreased 5% to $1.12 billion from $1.18 billion at securitization. The Certificates are collateralized by 57 mortgage loans ranging in size from less than 1% to 12% of the pool, with the top ten loans representing 65% of the pool. No loans have defeased and there are no loans with an investment grade credit assessment. There are 20 loans, representing 33% of the pool, 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) monthly reporting package. As part of its 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 realized loss totaling $10.4 million (average loss severity of 40%). There are five loans, representing 14% of the pool, in special servicing. The largest specially serviced loan is the Westin Portfolio Loan ($103.4 million -- 9.2% of the pool), which is secured by two Westin Hotels -- the Westin La Paloma, a 487-key full-service hotel in Tucson, Arizona and the Westin Hilton Head, a 412-key full-service ocean front hotel in Hilton Head, South Carolina. The loan represents a 50.2% pari-passu interest in a $205.8 million loan that is also held within JPMCC 2008-C2. The loan was transferred to special servicing in October 2008 due to imminent default and was modified during bankruptcy court proceedings. Moody's has estimated an aggregate $105.7 million loss (69% average expected loss) for all five specially serviced loans. Moody's has assumed a high default probability for eight poorly performing loans representing 11% of the pool and has estimated a $24.5 million aggregate loss (20% expected loss based on a 50% probability of default) from these troubled loans. Moody's was provided with full year 2011 operating results for 98% of the performing pool and partial year 2012 operating results for 30 of the performing pool. Excluding specially serviced and troubled loans, Moody's weighted average conduit LTV is 115% compared to 114% at last full review. Moody's net cash flow reflects a weighted average haircut of 10.3% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.6%. Excluding specially serviced and troubled loans, Moody's actual and stressed conduit DSCRs are 1.16X and 0.95X, respectively, compared to 1.19X and 0.97X, respectively, at last full review. Moody's actual DSCR is based on Moody's net cash flow (NCF) 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 28% of the pool balance. The largest loan is the American Cancer Society Plaza Loan ($134.7 million -- 12.0% of the pool), which is secured by a 996,000 square foot (SF) office building located in Atlanta, Georgia. The property was 83% leased as of March 2012 compared to 82% leased at last review. Despite stable occupancy, financial performance has declined due to a decrease in base rents. The loan was interest-only throughout the first 48-months of its 10-year term and now amortizes on a 360-month schedule with a September 2017 maturity. Moody's LTV and stressed DSCR are 150% and 0.7X, respectively, compared to 142% and 0.74X at last review. The second largest loan is the Block at Orange Loan ($108.4 million -- 9.7% of the pool), which is secured by a 701,171 SF outdoor outlet mall built in 1998 and located in Orange, California. The loan represents a 50.0% pari-passu interest in a $216.8 million loan that is also held within JPMCC 2008-C2. As of March 2012 the property was 91% leased compared to 89% leased at last review. The benefits of recent leasing activity have yet to be fully reflected in the property's financial performance resulting in a decline between 2010 and 2011 reported financial results. The loan now also amortizes on a 360-month schedule and matures in October 2014. Performance is inline with Moody's previous analysis. Moody's LTV and stressed DSCR are 115% and 0.82X, respectively, compared to 120% and 0.79X at last review. The third largest loan is the Gurnee Mills Loan ($75.0 million -- 6.7% of the pool), which is secured by a 1.8 million SF mall (1.55 million SF serve as collateral) built in 1991 and located fifty miles between Chicago and Milwaukee in Gurnee, Illinois. The loan represents a 23.4% pari-passu interest in a $321.0 million loan that is also held within JPMCC 2007-CIBC20. The loan is interest- only through its 10-year term and matures in July 2017. As of March 2012 the property was 93% occupied versus 84% occupied at last review. Moody's LTV and stressed DSCR are 123% and 0.77X, respectively, compared to 128% and 0.74X at last review. JP MORGAN 2012-FL2: Moody's Assigns 'Ba2' Rating to Cl. E Certs. ---------------------------------------------------------------- Moody's Investors Service has assigned ratings to seven classes of CMBS securities, issued by JPMCC 2012-FL2 Commercial Mortgage Pass-Through Certificates. Cl. A, Definitive Rating Assigned Aaa (sf) Cl. X-CP, Definitive Rating Assigned A3 (sf) Cl. X-EXT, Definitive Rating Assigned B2 (sf) Cl. B, Definitive Rating Assigned Aa2 (sf) Cl. C, Definitive Rating Assigned A2 (sf) Cl. D, Definitive Rating Assigned Baa3 (sf) Cl. E, Definitive Rating Assigned Ba2 (sf) RATINGS RATIONALE The Certificates are collateralized by six floating rate loans secured by 14 properties. The ratings are based on the collateral and the structure of the transaction. Moody's CMBS ratings methodology combines both commercial real estate and structured finance analysis. Based on commercial real estate analysis, Moody's determines the credit quality of each mortgage loan and calculates an expected loss on a loan specific basis. Under structured finance, the credit enhancement for each certificate typically depends on the expected frequency, severity, and timing of future losses. Moody's also considers a range of qualitative issues as well as the transaction's structural and legal aspects. The credit risk of loans is determined primarily by two factors: 1) Moody's assessment of the probability of default, which is largely driven by each loan's DSCR, and 2) Moody's assessment of the severity of loss upon a default, which is largely driven by each loan's LTV ratio. The Moody's Stressed DSCR for the Pooled Trust is 1.69X which is higher than the 2007 large transaction average of 1.63X. Moody's LTV ratio for the Pooled Trust is 59.9%, which is lower than the 2007 large loan transaction average of 63.3%. Moody's also considers both loan level diversity and property level diversity when selecting a ratings approach. With respect to loan level diversity, the pool's loan level Herfindahl score is 4.9. The score is consistent with Herfindahl scores represented by large loan, multi-borrower transactions previously rated by Moody's. With respect to property level diversity, the pool's property level Herfindahl score is 5.5. The transaction's property diversity profile is higher than most previously rated large loan multi-borrower transactions. Moody's grades properties on a scale of 1 to 5 (best to worst) and considers those grades when assessing the likelihood of debt payment. The factors considered include property age, quality of construction, location, market, and tenancy. The pool's weighted average property quality grade is 1.9, which is low compared to other deals rated by Moody's since 2009. The low weighted average grade is indicative of the strong market composition of the pool and the institutional investor quality of underlying assets in the deal. The methodologies used in this rating were "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000, and "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's review incorporated the use of the excel-based Large Loan Model v 8.1. 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 analysis also uses the CMBS IO calculator v 1.0 which references the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit estimates; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type corresponding to an IO type as defined in the published methodology. The V Score for this transaction is assessed as Medium, the same as the V score assigned to the U.S. Single Borrower CMBS sector. This reflects typical volatility with respect to the critical assumptions used in the rating process as well as an average disclosure of securitization collateral and ongoing performance. 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 Moody's value of the collateral used in determining the initial rating were decreased by 4%, 12%, or 20%, the model-indicated rating for the currently rated Aaa class would be Aa1; Aa2; and A1. 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. These ratings: (a) are based solely on information in the public domain and/or information communicated to Moody's by the issuer at the date it was prepared and such information has not been independently verified by Moody's; (b) must be construed solely as a statement of opinion and not a statement of fact or an offer, invitation, inducement or recommendation to purchase, sell or hold any securities or otherwise act in relation to the issuer or any other entity or in connection with any other matter. Moody's does not guarantee or make any representation or warranty as to the correctness of any information, rating or communication relating to the issuer. Moody's shall not be liable in contract, tort, statutory duty or otherwise to the issuer or any other third party for any loss, injury or cost caused to the issuer or any other third party, in whole or in part, including by any negligence (but excluding fraud, dishonesty and/or willful misconduct or any other type of liability that by law cannot be excluded) on the part of, or any contingency beyond the control of, Moody's, or any of its employees or agents, including any losses arising from or in connection with the procurement, compilation, analysis, interpretation, communication, dissemination, or delivery of any information or rating relating to the issuer. KINGSLAND I: S&P Hikes Rating on Class D Notes to 'BB-'; Off Watch ------------------------------------------------------------------ Standard & Poor's Ratings Services raised and removed from CreditWatch with positive implications its ratings on the class A- 1a, A-1b, A-2, B-1, B-2, C-1, C-2, and D notes from Kingsland I Ltd., a collateralized loan obligation (CLO) transaction managed by Kingsland Capital Management LLC. "The rating actions follow our performance review of the transaction and primarily reflect $32.5 million in paydowns on the class A-1a and A-1b notes, to 87% of their original balances. The paydowns have led to a significant increase (2.1% on average) in overcollateralization (O/C) available to support the notes since our March 2011 rating actions, when we raised our ratings on all classes of notes," S&P said. "In addition, the percentage of investment grade ('BBB-' or higher) obligations held in the transaction's underlying portfolio increased during this period. As of August 2012, the transaction held $67.2 million (or 23.1%) in investment-grade assets, up from $27.8 million (or 8.1%) in investment-grade assets as of March 2011. Another positive factor in our analysis includes the reduction of the weighted-average life of the asset portfolio," S&P said. "We will continue to review our ratings on the notes and assess whether, in our view, the ratings remain consistent with the credit enhancement available to support them and take rating actions as we deem necessary," S&P said. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATING AND CREDITWATCH ACTIONS Kingsland I Ltd. Rating Rating Class To From A-1a AAA (sf) AA+/Watch Pos A-1b AAA (sf) AA+/Watch Pos A-2 AAA (sf) AA-/Watch Pos B-1 AA+ (sf) A-/Watch Pos B-2 AA+ (sf) A-/Watch Pos C-1 BBB- (sf) B+/Watch Pos C-2 BBB- (sf) B+/Watch Pos D BB- (sf) CCC/Watch Pos LATITUDE CLO II: S&P Affirms 'CCC-' Rating on Class D Notes ----------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on the class A-1, A-2, B, C, and D notes from Latitude CLO II Ltd., a collateralized loan obligation (CLO) transaction managed by Lufkin Advisors LLC. "At the same time, we removed our ratings on the class B, C, and D notes from CreditWatch with positive implications," S&P said. "We affirmed our ratings on all the notes to reflect the credit support available at the current rating levels," S&P said. "We placed the class B, C, and D notes on CreditWatch positive on June 18, 2012, due to improvement in the credit quality of the collateral pool. According to the Aug. 20, 2012, trustee report, the transaction held $14.6 million in defaulted assets, down from $22.3 million noted in the December 2010 trustee report," S&P said. "Additionally, as of the August 2012 trustee report, approximately 8.4% of the assets in the collateral pool have maturity dates that are after the legal final maturity of the transaction in December 2018. Exposure to these long-dated assets could leave the transaction subject to potential market value risk because collateral manager may need to liquidate these securities to pay down the notes on their final maturity date. We took this into account in this rating action," S&P said. Standard & Poor's will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it deems necessary. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATINGS AND CREDITWATCH ACTIONS Latitude CLO II Ltd. Class Rating To From B BBB+ (sf) BBB+ (sf)/Watch Pos C BB (sf) BB (sf)/Watch Pos D CCC- (sf) CCC- (sf)/Watch Pos RATINGS AFFIRMED Latitude CLO II Ltd. Class Rating A-1 AAA (sf) A-2 AA+ (sf) LATITUDE CLO III: S&P Hikes Rating on Class F Notes to 'BB' ----------------------------------------------------------- Standard & Poor's Ratings Services raised and removed from CreditWatch with positive implications its ratings on the class A, B, C, D, E, and F notes from Latitude CLO III Ltd., a U.S. collateralized loan obligation (CLO) transaction managed by Lufkin Advisors LLC. "The upgrades reflect an improvement in the credit quality of the underlying assets since our June 2011 rating actions," S&P said. "According to the August 20, 2012, trustee report, the transaction held $2.99 million in defaulted assets, down from $7.89 million noted in the April 4, 2011, trustee report, which we used for our June 2011 rating actions," S&P said. "Similarly, the amount of 'CCC' rated collateral held in the transaction's underlying portfolio declined during this period. According to the August 2012 trustee report, the transaction held $22.95 million in 'CCC' rated collateral, down from $26.84 million noted in the April 2011 trustee report," S&P said. "Additional improvements in the transaction over the same time period include an increase in the class C, D, E, and F overcollateralization (O/C) ratio tests and an increase in the weighted average spread," S&P said. Standard & Poor's notes that the transaction is currently passing its interest diversion test - which is the class F O/C ratio measured at a higher level (than the class F O/C test) in the interest section of the waterfall. The transaction is structured such that if it fails this test during the reinvestment period, which is scheduled to end April 2013, the collateral manager may reinvest this amount into additional collateral. The transaction has not failed this test since the June 2011 rating actions. According to the August 2012 trustee report, the interest diversion test result was 109.59%, compared with a required minimum of 105.00%. "Our review of this transaction included a cash flow analysis, based on the portfolio and transaction as reflected in the trustee report, to estimate future performance. In line with our criteria, our cash flow scenarios applied forward-looking assumptions on expected timing and pattern of defaults, and recoveries upon default, under various interest rate and macroeconomic scenarios. In addition, our analysis considered the ability of the transaction to pay timely interest and/or ultimate principal to each of the rated tranches. The results of the cash flow analysis demonstrated, in our view, that all of the rated outstanding classes have adequate credit enhancement available at the rating levels associated with this rating action," S&P said. Standard & Poor's will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it deems necessary. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com/985.pdf RATING AND CREDITWATCH ACTIONS Latitude CLO III Ltd. Rating Class To From A AAA (sf) AA+ (sf)/Watch Pos B AA+ (sf) AA (sf)/Watch Pos C AA (sf) A+ (sf)/Watch Pos D A (sf) BBB+ (sf)/Watch Pos E BBB (sf) BB+ (sf)/Watch Pos F BB (sf) B+ (sf)/Watch Pos LB-UBS 2005-C2: Fitch Lowers Three Certificate Classes to 'Csf' --------------------------------------------------------------- Fitch Ratings has downgraded nine classes and removed from Rating Watch Negative three classes of LB-UBS Commercial Mortgage Trust 2005-C2 due to continued deterioration of performance. Fitch has affirmed the remaining six classes, including the 'AAA' rated classes. The downgrades reflect an increase in actual and expected losses across the pool since last review. Fitch modeled losses of 14.17% of the outstanding pool. The expected losses of the original pool are 10.03%, which includes 2.29% in losses realized to date. Fitch designated 30 loans (41.43% of the pool balance) as Loans of Concern, which include 13 specially serviced loans (14.65%). As of the August 2012 distribution date, the pool's aggregate principal balance has been reduced by 45.38% (including realized losses) to $1.06 billion from $1.94 billion at issuance. Four loans (6.55%) are currently defeased. Interest shortfalls are affecting classes D through S. The largest contributor to Fitch-modeled losses is attributed to the Woodbury Office Portfolio II B-note (4.85% of the pool balance). The loan is secured by 22 office properties totaling 1.1 million square feet (sf) located in Long Island, NY. The loan transferred in January 2010 for imminent default. The loan was modified in August 2011 while in special servicing. Terms of the modification included an extension to the original loan term and bifurcation of the loan into a senior ($104.5 million) and junior ($51.4 million) component. Although losses are not expected imminently, any recovery to the subject B-note is contingent upon full recovery to the A-note proceeds at the loan's maturity in December 2015. Unless collateral performance improves, recovery to the B-note component is unlikely. The next largest contributor to Fitch-modeled losses is the Woodbury Office Portfolio I B-note (2.64%), which is secured by 10 office properties containing approximately 480,000sf, located in Long Island, NY. The loan transferred to the special servicer in January 2010 when the borrower had requested a modification of the loan terms, including an extension of the April 2010 maturity date; the loan matured in April 2010 without repayment. The loan was modified in August 2011 while in special servicing. Terms of the modification included an extension to the original loan term and bifurcation of the loan into a senior ($35.5 million) and junior ($28 million) component. Although losses are not expected imminently, any recovery to the subject B-note is contingent upon full recovery to the A-note proceeds at the loan's maturity in December 2015. Unless collateral performance improves, recovery to the B-note component is unlikely. The third largest contributor to Fitch-modeled losses is the Park 80 West B-Note (2.64%) which is secured by a two-building, 505,000sf office complex located in Saddle Brook, NJ. The loan transferred to special servicing in December 2009 due to imminent default. The loan was modified in March 2012 while in special servicing. Terms of the modification included a bifurcation of the loan into a senior ($72 million) and junior ($28 million) component. Although losses are not expected imminently, any recovery to the subject B-note is contingent upon full recovery to the A-note proceeds at the loan's maturity in February 2015. Unless collateral performance improves, recovery to the B-note component is unlikely. Fitch has downgraded the following classes; removed classes A-J, B, and C from Rating Watch Negative; and assigned Rating Outlooks and Recover Estimates (REs) as indicated: -- $121.7 million class A-J to 'Asf' from 'AAsf'; Negative Outlook; -- $13.9 million class B to 'BBBsf' from 'Asf'; Negative Outlook; -- $29.2 million class C to 'BBsf' from 'BBB-sf'; Negative Outlook; -- $38.9 million class D to 'CCCsf' from 'Bsf'; RE 80%; -- $41.4 million class E to 'CCsf' from 'CCCsf'; RE 0%; -- $17 million class F to 'CCsf' from 'CCCsf'; RE 0%; -- $17 million class G to 'Csf' from 'CCsf'; RE 0%; -- $17 million class H to 'Csf' from 'CCsf'; RE 0%; -- $29.2 million class J to 'Csf' from 'CCsf'; RE 0%. Fitch also affirms the following classes as indicated: -- $209.4 million class A-4 at 'AAAsf'; Outlook Stable; -- $36.3 million class A-AB at 'AAAsf'; Outlook Stable; -- $470.7 million class A-5 at 'AAAsf'; Outlook Stable; -- $17 million class K at 'Csf'; RE 0%; -- $1.8 million class L at 'Dsf'; RE 0%; -- Class M at 'Dsf'; RE 0%. Classes A-1, A-2 and A-3 have paid in full. The balances for class M and the unrated classes N, P, Q and S have been reduced to zero due to realized losses. Fitch had previously withdrawn the rating on the interest-only classes X-CP and X-CL. LB-UBS 2005-C2: Moody's Cuts Ratings on 2 Cert. Classes to 'C' -------------------------------------------------------------- Moody's Investors Service (Moody's) downgraded the ratings of eight classes and affirmed seven classes of LB-UBS Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2005-C2 as follows: Cl. A-4, Affirmed at Aaa (sf); previously on Apr 25, 2005 Definitive Rating Assigned Aaa (sf) Cl. A-AB, Affirmed at Aaa (sf); previously on Apr 25, 2005 Definitive Rating Assigned Aaa (sf) Cl. A-5, Affirmed at Aaa (sf); previously on Dec 17, 2010 Confirmed at Aaa (sf) Cl. A-J, Downgraded to Baa2 (sf); previously on Jun 15, 2012 Downgraded to A3 (sf) and Placed Under Review for Possible Downgrade Cl. B, Downgraded to Ba1 (sf); previously on Jun 15, 2012 Downgraded to Baa2 (sf) and Placed Under Review for Possible Downgrade Cl. C, Downgraded to B1 (sf); previously on Jun 15, 2012 Downgraded to Ba2 (sf) and Placed Under Review for Possible Downgrade Cl. D, Downgraded to B3 (sf); previously on Jun 15, 2012 Downgraded to B1 (sf) and Placed Under Review for Possible Downgrade Cl. E, Downgraded to Caa3 (sf); previously on Nov 10, 2011 Downgraded to Caa1 (sf) Cl. F, Downgraded to Ca (sf); previously on Nov 10, 2011 Downgraded to Caa2 (sf) Cl. G, Downgraded to C (sf); previously on Nov 10, 2011 Downgraded to Caa3 (sf) Cl. H, Downgraded to C (sf); previously on Nov 10, 2011 Downgraded to Ca (sf) Cl. J, Affirmed at C (sf); previously on Dec 17, 2010 Downgraded to C (sf) Cl. K, Affirmed at C (sf); previously on Dec 17, 2010 Downgraded to C (sf) Cl. L, Affirmed at C (sf); previously on Dec 17, 2010 Downgraded to C (sf) Cl. X-CL, Affirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) Ratings Rationale Moody's previously downgraded four classes and placed them on review for possible downgrade on June 15, 2010. This action concludes that review. The downgrades are due to higher expected losses from troubled and specially serviced loans as well as anticipated increased interest shortfalls from modified loans. The affirmations of the principal classes are due to key parameters, including Moody's LTV ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), 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. The rating of the IO Class, Class X-CL, is consistent with the expected credit performance of its referenced classes and thus is affirmed. Moody's rating action reflects a cumulative base expected loss of approximately 14.5% of the current deal balance. At last full review, Moody's cumulative base expected loss was approximately 10%. Moody's provides a current list of base losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255 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. The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of assumption uncertainty are the extent of growth in the current macroeconomic environment and commercial real estate property markets. Commercial real estate property values are continuing to move in a positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with eight straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Slow recovery in the office sector continues with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by discounting and promotions. However, rising wages and reduced unemployment, along with increased consumer confidence, is helping to spur consumer spending resulting in increased sales. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario maintains its forecast of relatively robust growth in the US and an expectation of a mild recession in the euro area for 2012. Downside risks remain significant, and elevated downside risks and their materialization could pose a serious threat to the outlook. Major downside risks include: a deeper than expected recession in the euro area; the potential for a hard landing in major emerging markets; an oil supply shock; and material fiscal tightening in the US given recent political gridlock. Healthy but below-trend growth in GDP is expected through the rest of this year and next with risks trending to the downside. The methodologies used in this rating were "Moody's Approach to Rating Fusion U.S. CMBS Transactions" published in April 2005, "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000, and "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's review incorporated the use of the Excel-based CMBS Conduit Model v 2.61 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) 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 (sf) level are driven by a pay down analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), 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 (sf) and B2 (sf), 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 underlying ratings is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit assessment 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 assessments in the same transaction. Moody's review also incorporated the CMBS IO calculator ver1.1 which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit estimates; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type corresponding to an IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point . For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator ver1.1 would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. 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 12 compared to 13 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 8.4 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 (CMBS) transactions. Moody's monitors transactions on a monthly basis through a review utilizing MOST(R) (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior review is summarized in a press release dated June 15, 2012. Moody's prior full transaction review is summarized in a press release dated November 10, 2011. Deal Performance As of the August 17, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 45% to $1.06 billion from $1.94 billion at securitization. The Certificates are collateralized by 80 mortgage loans ranging in size from less than 1% to 19% of the pool, with the top ten loans (excluding defeasance) representing 78% of the pool. The pool includes three loans with investment-grade credit assessments, representing 21% of the pool. Four loans, representing approximately 7% of the pool, are defeased and are collateralized by U.S. Government securities. Twenty-three loans, representing 52% 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) monthly reporting package. As part of its ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Sixteen loans have liquidated from the pool, resulting in an aggregate realized loss of $44 million (17% average loan loss severity). Currently, 13 loans, representing 15% of the pool, are in special servicing. The largest specially serviced loan is the senior portion of the Park 80 West Loan ($72 million -- 7% of the pool), which is secured by a 490,000 square foot Class A office property located in Saddle Brook, New Jersey, a suburb of New York City. The loan was modified on March 26, 2012 with an A/B Note structure. The modification split the former $100 million interest-only loan into a $72 million A-Note and a $28 million B- Note. The A-Note continues to pay interest at the original contract rate, while interest on the B-Note is accrued and deferred until the occurrence of a capital event. Property occupancy was 72% at year-end 2011 reporting. The special servicer expects the senior loan to return to the master servicer. The remaining 11 specially serviced loans are secured by a mix of commercial, multifamily and mobile home properties. Moody's estimates an aggregate $47 million loss (32% expected loss overall) for all specially serviced loans. Moody's has assumed a high default probability for seven poorly- performing loans representing 11% of the pool. Moody's analysis attributes to these troubled loans an aggregate $85 million loss (75% expected loss severity based on an 85% probability default). Moody's was provided with full-year 2011 and partial year 2012 operating results for 97% and 85% of the performing pool, respectively. Excluding troubled loans, Moody's weighted average LTV is 103% compared to 97% at last full review. Moody's net cash flow reflects a weighted average haircut of 6.6% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.1%. Excluding troubled loans, Moody's actual and stressed DSCRs are 1.43X and 0.99X, respectively, compared to 1.48X and 1.05X at last review. Moody's actual DSCR is based on Moody's net cash flow (NCF) 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 assessment is the 909 Third Avenue Loan ($201 million -- 19% of the pool), which is secured by a 32- story office tower in the Third Avenue office submarket of Midtown Manhattan. The property was 92% leased as of March 2012 compared to 90% in December 2010. The largest tenant is the US Postal Service, which leases 492,000 square feet (38% of property NRA) on the building's lower levels. The lease is scheduled to expire in October 2013, with an option to renew. Moody's concern about significant potential near-term lease rollover is tempered by recent leasing activity at the property and the below-market in- place rents currently enjoyed by the Postal Service. The loan sponsor is Vornado. Moody's credit assessment and stressed DSCR are Baa3 and 1.12X, respectively, compared to Baa3 and 1.07X at last review. The second-largest loan with a credit assessment is the Hartz Fee Portfolio Loan ($14 million -- 1% of the pool), which is secured by the leased fee interest in land improved with three commercial properties in Secaucus, New Jersey, 6 miles west of Midtown Manhattan. The improvements include two limited service hotels and one single-tenant retail building. The ground leases include rent steps. Moody's current credit assessment and stressed DSCR are A2 and 1.32X, respectively, the same as at last review. The third loan with a credit assessment is the 895 Broadway Loan ($13 million -- 1% of the pool), which is secured by a 5-story office property in the Midtown South office submarket of New York City. The property is 100% leased, which is unchanged since Moody's last review. Leases for 100% of the building are scheduled to expire in December 2014. Moody's analysis reflects a stabilized cash flow based on current market rent and vacancy levels. Moody's current credit assessment and stressed DSCR are A2 and 1.92X respectively, compared to A2 and 1.84X at last review. The top three performing conduit loans represent 27% of the pool. The largest loan is the Woodbury Office Portfolio ($140 million -- 13% of the pool), which consists of two-cross collateralized senior loans secured by 32 primarily office properties in suburban Long Island, New York. The Woodbury I loan group includes ten properties which were 60% leased at year-end 2011. The Woodbury II loan group includes 22 properties which were 68% leased at year- end 2011. RXR Realty, the loan sponsor, gained control of the portfolio in 2010 through a foreclosure of the mezzanine position. The loans were modified in October 2011 into an A/B Note structure whereby the two A-Notes continue to pay interest at the original contract rate and interest is accrued for the two B-Notes. The Woodbury I and II loans were cross-collateralized as part of the loan modification. The total B-Note balance is currently $79 million. Moody's current A-Note LTV and stressed DSCR are 106% and 0.92X, respectively, compared to 90% and 1.08X at last review. The second-largest loan is the Civica Office Commons Loan ($114 million -- 11% of the pool), which is secured by an 8-story Class A office complex located in downtown Bellevue, Washington, 10 miles east of Seattle. The property was 98% leased as of year-end 2011 reporting, compared to 95% at Moody's last review. The largest tenants are Wells Fargo & Company (Moody's senior unsecured rating A2, negative outlook), Waggener Edstrom Worldwide and Microsoft Corporation (Moody's senior unsecured rating Aaa, stable outlook). The loan sponsor is Brickman, a real estate investment group based in New York City. Moody's current LTV and stressed DSCR are 119% and 0.82X, respectively, compared to 114% and 0.85X at last review. The third-largest loan is the North Plaza Shopping Center Loan ($30 million -- 3% of the pool), which is secured by a 340,000 square-foot retail center located in Parkville, Maryland, a suburb of Baltimore. The anchors are Kmart, Ross Dress for Less, and Safeway. Occupancy as of year-end 2011 was 98%. Although Moody's analysis incorporates a stressed cash flow due to concerns about the continued tenancy of Kmart, performance is inline with Moody's previous review and the loan is benefitting from amortization. Moody's current LTV and stressed DSCR are 97% and, 0.95X respectively, compared to 102% and 0.87X at last review. LB-UBS 2008-C1: Moody's Cuts Ratings on 3 Certs. to 'C' ------------------------------------------------------- Moody's Investors Service downgraded the ratings of nine classes and affirmed seven classes of LB UBS Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2008-C1 as follows: Cl. A-AB, Affirmed at Aaa (sf); previously on June 12, 2008 Definitive Rating Assigned Aaa (sf) Cl. A-2, Affirmed at Aaa (sf); previously on June 12, 2008 Definitive Rating Assigned Aaa (sf) Cl. A-2FL, Affirmed at Aaa (sf); previously on June 12, 2008 Definitive Rating Assigned Aaa (sf) Cl. A-M, Downgraded to Baa1 (sf); previously on November 18, 2010 Downgraded to Aa3 (sf) Cl. A-J, Downgraded to B2 (sf); previously on November 18, 2010 Downgraded to Ba1 (sf) Cl. B, Downgraded to Caa1 (sf); previously on November 18, 2010 Downgraded to Ba3 (sf) Cl. C, Downgraded to Caa2 (sf); previously on November 18, 2010 Downgraded to B3 (sf) Cl. D, Downgraded to Caa3 (sf); previously on November 18, 2010 Downgraded to Caa1 (sf) Cl. E, Downgraded to Ca (sf); previously on November 18, 2010 Downgraded to Caa3 (sf) Cl. F, Downgraded to C (sf); previously on November 18, 2010 Downgraded to Ca (sf) Cl. G, Downgraded to C (sf); previously on November 18, 2010 Downgraded to Ca (sf) Cl. H, Downgraded to C (sf); previously on November 18, 2010 Downgraded to Ca (sf) Cl. J, Affirmed at C (sf); previously on November 18, 2010 Downgraded to C (sf) Cl. K, Affirmed at C (sf); previously on November 18, 2010 Downgraded to C (sf) Cl. L, Affirmed at C (sf); previously on November 18, 2010 Downgraded to C (sf) Cl. X, Affirmed at Ba3 (sf); previously on February 22, 2012 Downgraded to Ba3 (sf) Ratings Rationale The downgrades are due to higher realized losses from specially serviced loans. The affirmations of the principal classes are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), 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. The rating of the IO Class, Class X, is consistent with the expected credit performance of its referenced classes and thus is affirmed. Moody's rating action reflects a cumulative base expected loss of 10.4% of the current balance, the same as at last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255 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 extent of growth in the current macroeconomic environment and commercial real estate property markets. Commercial real estate property values are continuing to move in a positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with eight straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Slow recovery in the office sector continues with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by discounting and promotions. However, rising wages and reduced unemployment, along with increased consumer confidence, is helping to spur consumer spending resulting in increased sales. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario maintains its forecast of relatively robust growth in the US and an expectation of a mild recession in the euro area for 2012. Downside risks remain significant, and elevated downside risks and their materialization could pose a serious threat to the outlook. Major downside risks include: a deeper than expected recession in the euro area; the potential for a hard landing in major emerging markets; an oil supply shock; and material fiscal tightening in the US given recent political gridlock. Healthy but below-trend growth in GDP is expected through the rest of this year and next with risks trending to the downside. The methodologies used in this rating were " Moody's Approach to Rating Fusion U.S. CMBS Transactions" published in April 2005, "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012, and "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.61 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) 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 (sf) level are driven by a pay down analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), 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 (sf) and B2 (sf), 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 assessments 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 assessments in the same transaction. Moody's review also incorporated the CMBS IO calculator ver1.1 which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit assessments; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type corresponding to an IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point . For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator ver1.1 would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. 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 15 compared to 16 at last review. In cases where the Herf falls below 20, Moody's employs also the large loan/single borrower methodology. This methodology uses the excel-based Large Loan Model v 8.4. 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 (CMBS) transactions. Moody's monitors transactions on a monthly basis through a review utilizing MOST(R) (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated September 15, 2011. Deal Performance As of the August 17, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 9% to $918.4 million from $1.00 billion at securitization. The Certificates are collateralized by 60 mortgage loans ranging in size from less than 1% to 15% of the pool. There is one credit assessment loan, representing 11% of the pool. One loan representing less than 1% has defeased and is secured by U.S. Government securities. Eight loans, representing 8% 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) monthly reporting package. As part of its ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Thirteen loans have been liquidated from the pool, resulting in an aggregate realized loss of $36.6 million (70% loss severity). This is an increase from $7.5 million in realized losses at last review. Currently six loans, representing 10% of the pool, are in special servicing. The largest specially serviced loan is the Sutton Plaza Loan ($26.1 million - 2.8% of the pool), which is secured by a retail property located in Mount Olive Township, New Jersey. The loan transferred to special servicing in January 2011 as the result of monetary default. The property was formerly anchored by A&P which vacated after the company filed for bankruptcy. A receiver was appointed in May 2011 and the servicer continues to pursue foreclosure. The second largest specially serviced loan is the Memphis Retail Portfolio Loan ($25.1 million--2.7% of the pool). The loan is secured by a retail portfolio consisting of five properties located around Collierville, Tennessee, approximately 25 miles east of Memphis. The loan transferred to special servicing in April 2011 as the result of monetary default. A receiver was appointed in August 2011 and the servicer continues to pursue foreclosure. The remaining specially serviced loans are represented by a mix of property types. Moody's has estimated an aggregate $39.1 million loss (45% expected loss on average) for the specially serviced loans. Moody's has assumed a high default probability for five poorly performing loans representing 6% of the pool and has estimated an aggregate $13.4 million loss (25% expected loss based on a 54% probability default) from these troubled loans. Moody's was provided with full year 2010 and partial year 2011 operating results for 100% and 99% of the performing pool respectively. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 108% compared to 106% 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 9.4%. Excluding specially serviced and troubled loans, Moody's actual and stressed DSCRs are 1.28X and 0.99X, respectively, compared to 1.27X and 0.97X at last full review. Moody's actual DSCR is based on Moody's net cash flow (NCF) 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 the credit assessment is the Chevy Chase Center Loan ($100.5 million -- 10.9% of the pool), which is secured by a 397,744 square foot (SF) mixed-use property located in Chevy Chase, Maryland. Office space represents 56% of the net rentable area (NRA) with retail space representing the remainder of the property. The largest tenant is The Mills Limited Partnership, which leases 51% of the NRA through March 2016. As of April 2012, the property was 94% leased compared to 97% at last review. The loan fully amortizes on a 240-month schedule and matures in November 2026. Moody's current credit assessment and stressed DSCR are Baa3 and 1.42X, respectively, compared to Baa3 and 1.38X at last review. The top three performing conduit loans represent 33% of the pool. The largest conduit loan is the Westfield Southlake Loan ($140.0 million -- 15.2% of the pool), which is secured by the borrower's interest in a 1.4 million SF regional mall located in Merrillville, Indiana. The mall is anchored by Sears (not part of the collateral), J.C. Penney, and Macy's (not part of the collateral). The property was 96% leased as of March 2012, similar to at last review. The loan is interest-only for its entire ten- year term maturing in January 2018. Moody's LTV and stressed DSCR are 92% and 1.03X, respectively, compared to 96% and 0.99X at last review. The second largest conduit loan is the Regions Harbert Plaza Loan ($88.7 million -- 9.7% of the pool), which is secured by a 613,800 SF office property built in 1989 and located in downtown Birmingham, Alabama. The largest tenants include Regions Bank, which leases 35% of the NRA through December 2017, and Balch & Bingham LLP, which leases 23% of the NRA through October 2022. The property was 97% leased as of July 2012, essentially the same as at last review. Performance remains stable. The loan had a 24- month interest only period but is currently amortizing on a 360- month schedule maturing in March 2018. Moody's LTV and stressed DSCR are 97% and 1.09X, respectively, compared to 97% and 1.08X at last review. The third largest conduit loan is the Westin Charlotte Loan ($71.9 million -- 7.8% of the pool), which is a pari-passu interest in a $176.9 million first mortgage loan. The loan is secured by a 26- story, 700-room full service hotel located in Charlotte, North Carolina. Property performance has improved since last review. The loan had a 12-month interest only period but is now amortizing on a 360-month schedule maturing in January 2018. Moody's LTV and stressed DSCR are 157% and 0.74X, respectively, compared to 171% and 0.68X at last review. LCM XII: S&P Assigns Prelim. 'BB' Rating on $18MM Class E Notes --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to LCM XII L.P./LCM XII LLC's $465.25 million floating- rate notes. The note issuance is a collateralized loan obligation securitization backed by a revolving pool consisting primarily of broadly syndicated senior secured loans. The preliminary ratings are based on information as of Sept. 18, 2012. 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 credit enhancement provided to the preliminary rated notes through the subordination of cash flows that are payable to the subordinated notes. -- The transaction's credit enhancement, which is sufficient to withstand the defaults applicable for the supplemental tests (not counting excess spread), and cash flow structure, which can withstand the default rate projected by Standard & Poor's CDO Evaluator model, as assessed by Standard & Poor's using the assumptions and methods outlined in its corporate collateralized debt obligation (CDO) criteria. -- The transaction's legal structure, which is expected to be bankruptcy remote. -- The diversified collateral portfolio, which consists primarily of broadly syndicated speculative-grade senior secured term loans. -- The asset manager's experienced management team. -- The timely interest and ultimate principal payments on the preliminary rated notes, which S&P assessed using its cash flow analysis and assumptions commensurate with the assigned preliminary ratings under various interest-rate scenarios, including LIBOR ranging from 0.34%-12.26%. -- The transaction's overcollateralization and interest coverage tests, a failure of which will lead to the diversion of interest and principal proceeds to reduce the balance of the rated notes outstanding. -- The transaction's interest reinvestment test, a failure of which during the reinvestment period will lead to the reclassification of excess interest proceeds that are available prior to paying subordinated management fees, uncapped administrative expenses, and limited partnership (L.P.) certificate payments to the principal proceeds for the purchase of collateral assets or, at the asset manager's discretion (subject to the majority consent of the L.P. certificates), to reduce the balance of the rated notes outstanding sequentially. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com/979.pdf PRELIMINARY RATINGS ASSIGNED LCM XII L.P./LCM XII LLC Class Rating Amount mil. $) X AAA (sf) 4.00 A AAA (sf) 321.25 B AA (sf) 62.50 C (deferrable) A (sf) 35.75 D (deferrable) BBB (sf) 23.75 E (deferrable) BB (sf) 18.00 Subordinated notes (L.P. certificates) NR 53.00 NR-Not rated. LEHMAN BROTHERS 2007-2: Moody's Cuts Rating on B Tranche to Caa3 ---------------------------------------------------------------- Moody's Investors Service has downgraded 11 tranches issued in the Lehman Brothers 2006-2 and 2007-2 securitizations of small business loans. The deals are serviced by Ocwen Loan Servicing, LLC. Commercial real estate secures the small business loans. Ratings Rationale The downgrades are due to sustained high levels of delinquencies combined with consistent net charge-offs that have decreased the amount of available credit enhancement to cover future losses. Since the last rating actions in September 2011, cumulative net loss increased to 12.6% from 10.6% of the original pool balance for the 2006-2 deal. For the 2007-2 deal, cumulative net losses increased to 10.3% from 6.7% of the original pool balance. Loans 60 days or more past due (including foreclosure and REO) increased to 22.9% from 17.7% of the outstanding pool balance for the 2006-2 deal. For the 2007-2 deal, delinquencies have remained relatively constant at 22% to23% of the outstanding pool balance. Since the last rating action, hard credit enhancement for junior- most Class A tranches in the 2006-2 deal has increased to 26% from 20% as the deal delevers and protects the senior notes. Hard credit enhancement for the junior-most Class A tranches in the 2007-2 deal has remained around 21% to 22% while Moody's loss projection has increased slightly, prompting slight downgrades to some of the Class A tranches in the 2007-2 deal. The methodology is described as follows: The methodology used in this rating action included projections of the expected losses and analysis of the available credit enhancement. In forecasting expected losses, Moody's has evaluated the roll rate behavior of loans in small business ABS pools and has generally assumed the same behavior will continue for approximately 15 to 18 months, the amount of time Moody's projects a continued stressful environment for these loans. After this stress period, Moody's has assumed that roll rates will improve to levels more consistent with historical norms. The projected lifetime net losses are 20.9% and 20.8%, of the original pool balance for the 2006-2 and 2007-2 deals, respectively. The Aaa volatility proxies are 46% for both the 2006-2 and 2007-2 deals. Determining factors for the Aaa volatility proxies were the credit quality of the collateral pool, the historical variability in losses experienced by the issuer, the servicer quality as well as the industrial, geographical and obligor concentrations. At termination (including optional termination at or after 10% pool factor), losses will be allocated reverse sequentially to the subordinate notes and then pro-rata to all Class A tranches, regardless of in which subpool the loss occurred. Primary sources of assumption uncertainty are the general economic environment, commercial property values, and the ability of small businesses to recover from the recession. If the lifetime expected loss increases by 10%, then the tranches may be further downgraded. Other methodologies and factors that may have been considered in the process of rating these transactions can also be found on Moody's website. Further information on Moody's analysis of this transaction is available on www.moodys.com. The complete rating actions are as follows: Issuer: Lehman Brothers Small Balance Commercial Mortgage Pass- Through Certificates, Series 2006-2 Cl. M3, Downgraded to B2 (sf); previously on Mar 13, 2011 Downgraded to B1 (sf) Cl. B, Downgraded to Caa1 (sf); previously on Mar 13, 2011 Confirmed at B2 (sf) Issuer: Lehman Brothers Small Balance Commercial Mortgage Pass- Through Certificates, Series 2007-2 Cl. 1A3, Downgraded to A3 (sf); previously on Mar 13, 2011 Downgraded to A1 (sf) Cl. 1A4, Downgraded to A3 (sf); previously on Mar 13, 2011 Downgraded to A1 (sf) Cl. 2A3, Downgraded to A3 (sf); previously on Mar 13, 2011 Downgraded to A1 (sf) Cl. M1, Downgraded to Ba2 (sf); previously on Mar 13, 2011 Downgraded to Baa3 (sf) Cl. M2, Downgraded to B2 (sf); previously on Mar 13, 2011 Downgraded to Ba3 (sf) Cl. M3, Downgraded to B3 (sf); previously on Mar 13, 2011 Downgraded to B1 (sf) Cl. M4, Downgraded to Caa1 (sf); previously on Mar 13, 2011 Downgraded to B2 (sf) Cl. M5, Downgraded to Caa2 (sf); previously on Mar 13, 2011 Downgraded to B3 (sf) Cl. B, Downgraded to Caa3 (sf); previously on Mar 13, 2011 Downgraded to Caa1 (sf) LONG BEACH: Moody's Upgrades Rating on One RMBS Tranche to 'Ca' --------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on three tranches and confirmed the ratings on two tranches from three subprime RMBS transactions issued by Long Beach Mortgage Loan Trust. The collateral backing these transactions are subprime residential mortgage loans. Complete rating actions are as follows: Issuer: Long Beach Mortgage Loan Trust 2005-1 Cl. M-2, Upgraded to Ba2 (sf); previously on May 30, 2012 B2 (sf) Placed Under Review for Possible Upgrade Cl. M-3, Upgraded to Ca (sf); previously on May 30, 2012 C (sf) Placed Under Review for Possible Upgrade Issuer: Long Beach Mortgage Loan Trust 2005-2 Cl. M-3, Confirmed at A3 (sf); previously on May 30, 2012 A3 (sf) Placed Under Review for Possible Upgrade Cl. M-4, Upgraded to B3 (sf); previously on May 30, 2012 Caa1 (sf) Placed Under Review for Possible Upgrade Issuer: Long Beach Mortgage Loan Trust 2005-WL1 Cl. III-M1, Confirmed at B3 (sf); previously on May 30, 2012 B3 (sf) Placed Under Review for Possible Upgrade Ratings Rationale The actions are a result of the recent performance of Subprime pools originated after 2005 and reflect Moody's updated loss expectations on these pools. The upgrades in the rating action are a result of improving performance and/or structural features resulting in lower expected losses for certain bonds than previously anticipated. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. Moody's adjusts the methodologies noted above for Moody's current views on loan modifications. As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. 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) (SFW), 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 extended foreclosure timelines by servicers is taken into consideration when assigning ratings. The above methodology only applies to pools with at least 40 loans and a pool factor of greater than 5%. Moody's may withdraw its rating when the pool factor drops below 5% and the number of loans in the pool declines to 40 loans or lower unless specific structural features allow for a monitoring of the transaction (such as a credit enhancement floor). The primary sources of assumption uncertainty are Moody's central macroeconomic forecast and performance volatility as a result of servicer-related activity such as modifications. The unemployment rate fell from 9.1% in June 2011 to 8.2% in June 2012. Moody's forecasts a further drop to 7.8% by the end of 2Q 2013. Moody's expects housing prices to remain stable through the remainder of 2012 before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer activity such as modification-related principal forgiveness and interest rate reductions. Any change resulting from servicing transfers or other policy or regulatory change can also impact the performance of these transactions . A list of these actions including CUSIP identifiers may be found at http://moodys.com/viewresearchdoc.aspx?docid=PBS_SF297395 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF198689 MADISON PARK I: S&P Affirms 'BB+' Rating on Class E Notes --------------------------------------------------------- Standard & Poor's Ratings Services raised and removed from CreditWatch positive its ratings on five classes of notes from Madison Park Funding I Ltd., a collateralized loan obligation (CLO) transaction managed by CSFB Alternative Capital Inc. "We also affirmed and removed from CreditWatch positive our rating on one class," S&P said. "The upgrades reflect the paydowns to the class A notes and the increase in the overcollateralization (O/C) levels since the February 2011 rating actions. Since that time, the transaction has exited its reinvestment period and the class A note has paid down by $197.33 million to 56% of its initial rated balance while the class A par value ratio has increased to 157.80% from 136.95%," S&P said. "Although the senior note paydowns increased the ratio of the class E par value test, the transaction also saw an increase in the amount of defaulted securities. The balance of defaulted assets increased to $13.77 million from $10.24 million in January 2011. We affirmed our rating on the class E notes as their credit support was commensurate with their current rating," S&P said. "We will continue to review our ratings on the notes and assess whether, in our view, the ratings remain consistent with the credit enhancement available," S&P said. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATING ACTIONS Madison Park Funding I Ltd. Rating To From A-VF AAA (sf) AA+ (sf)/Watch Pos A-T AAA (sf) AA+ (sf)/Watch Pos B AAA (sf) AA (sf)/Watch Pos C AA- (sf) A (sf)/Watch Pos D BBB+ (sf) BBB (sf)/Watch Pos E BB+ (sf) BB+ (sf)/Watch Pos MADISON PARK IV: S&P Affirms 'BB' Rating on Class E Notes --------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on two classes of notes from Madison Park Funding IV Ltd., a collateralized loan obligation (CLO) transaction backed by corporate loans, and affirmed its ratings on five other classes. "At the same time, we removed two of the raised ratings and four of the affirmed ratings from CreditWatch with positive implications, where we placed them on June 18, 2012," S&P said. "This transaction is currently in its reinvestment period, which is expected to continue until March 2014. The upgrades reflect the increase in the transaction's overcollateralization (O/C) since our February 2011 rating actions. Due to this and other factors, the O/C ratios increased for the class A/B, C, D, and E notes," S&P said. The rating affirmations on the class A-1A, B, C, D, and E notes reflect credit support commensurate with the current rating levels. 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 it deems necessary. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATING AND CREDITWATCH ACTIONS Madison Park Funding IV Ltd. Rating Class To From A-1b AAA (sf) AA+ (sf)/Watch Pos A-2 AAA (sf) AA+ (sf)/Watch Pos B AA (sf) AA (sf)/Watch Pos C A (sf) A (sf)/Watch Pos D BBB (sf) BBB (sf)/Watch Pos E BB (sf) BB (sf)/Watch Pos RATING AFFIRMED Madison Park Funding IV Ltd. Class Rating A-1a AAA (sf) MAGNETITE VI: S&P Gives 'BB' Rating on Class E Deferrable Notes --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its ratings to Magnetite VI Ltd./Magnetite VI Corp.'s $369.75 million floating- rate notes. The note issuance is a collateralized loan obligation securitization backed by a revolving pool consisting primarily of broadly syndicated senior secured loans. The ratings reflect S&P's view of: The credit enhancement provided to the rated notes through the subordination of cash flows that are payable to the subordinated notes. The transaction's credit enhancement, which is sufficient to withstand the defaults applicable for the supplemental tests (not counting excess spread), and cash flow structure, which can withstand the default rate projected by Standard & Poor's CDO Evaluator model, as assessed by Standard & Poor's using the assumptions and methods outlined in its corporate collateralized debt obligation criteria. The transaction's legal structure, which is expected to be bankruptcy remote. The diversified collateral portfolio, which primarily comprises broadly syndicated speculative-grade senior secured term loans. The asset manager's experienced management team. "Our projections regarding the timely interest and ultimate principal payments on the rated notes, which we assessed using our cash flow analysis and assumptions commensurate with the assigned ratings under various interest-rate scenarios, including LIBOR ranging from 0.34%-13.84%," S&P said. The transaction's overcollateralization and interest coverage tests, a failure of which will lead to the diversion of interest and principal proceeds to reduce the balance of the rated notes outstanding. The transaction's reinvestment overcollateralization test, a failure of which will lead to the reclassification of excess interest proceeds that are available prior to paying uncapped administrative expenses and fees, subordinated hedge and synthetic security termination payments, portfolio manager incentive fees, and subordinated note payments to principal proceeds for the purchase of additional collateral assets during the reinvestment period. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com/966.pdf RATINGS ASSIGNED Magnetite VI Ltd./Magnetite VI Corp. Class Rating Amount (mil. $) X AAA (sf) 2.00 A AAA (sf) 245.75 B AA (sf) 51.50 C (deferrable) A (sf) 32.50 D (deferrable) BBB (sf) 20.00 E (deferrable) BB (sf) 18.00 Subordinated notes NR 46.00 NR--Not rated. MORGAN STANLEY 2007-TOP27: Losses Cue Fitch to Lower Ratings ------------------------------------------------------------ Fitch Ratings has downgraded seven and affirmed 15 classes of Morgan Stanley Capital I Trust, commercial mortgage pass-through certificates, series 2007-TOP27 (MSCI 2007-TOP27). The downgrades reflect realized losses and an increase in Fitch- modeled losses across the pool since the last review. Fitch modeled losses of 4.7% for the remaining pool (modeled losses are 5.9% of the original pool, including losses incurred to date). The increase in modeled losses is attributable to updated values on specially-serviced loans and the deterioration in performance on other Fitch Loans of Concern not in the top 15. The smaller- than-average class sizes make the junior classes more susceptible to downgrades. Classes K through P have been reduced to zero and class J impacted due to realized losses. As of the August 2012 distribution date, the pool's aggregate principal balance has been reduced by 15.4% (to $2.30 billion from $2.72 billion at issuance), of which 13.5% was due to paydowns and 1.9% was due to realized losses. There are no defeased loans. Fitch has designated 49 loans (19%) as Fitch Loans of Concern, which includes 10 specially-serviced loans (4.3%). Of the loans in special servicing, two loans (1.2%) were real-estate owned (REO), three loans (1.9%) were in foreclosure, one loan (0.2%) was greater than 90 days delinquent, one loan (0.2%) was 30 days delinquent, two loans (0.6%) were non-performing matured balloons, and one loan (0.2%) remains current. The largest contributor to modeled losses is a specially serviced loan (0.6%) secured by a 141,667 square foot mixed-use property located in Glen Burnie, MD. The loan was transferred to special servicing in May 2009 due to the borrower's failure to remit debt service payments. The asset became REO in March 2012. Property management is working on stabilizing the property and increasing occupancy. As of the July 2012 rent roll, the property was 64% occupied. The next largest contributor to modeled losses is a specially serviced loan (0.6%) initially secured by three supermarket- anchored retail properties totaling 193,566 square feet (sf) located in Aurora, Bridgeview, and Joliet, IL. The loan was transferred to special servicing in March 2009 due to payment default. The asset became REO in December 2010. One of the properties was sold in July 2012, while the other two are being marketed for sale, according to the special servicer. The two remaining properties are both fully vacant. The third contributor to modeled losses is a loan (1%) secured by two office buildings totaling 138,512 sf located in Reston, VA. At issuance, the combined occupancy was 100%. The property previously suffered occupancy declines due a prior tenant that initially occupied 37% of the total net rentable area (NRA) vacating upon its lease expiration and another tenant that reduced its NRA at the property. Occupancy has since improved to 95% as of June 2012 from 52% one year earlier due to one of the existing tenants at the property executing a lease in early 2012 for an additional 41% of the total portfolio NRA. The loan remains current. Fitch has downgraded the following classes as indicated: -- $190.6 million class A-J to 'Asf' from 'AAsf'; Outlook Negative; -- $54.5 million class B to 'BBB-sf' from 'BBBsf'; Outlook Negative; -- $30.6 million class C to 'Bsf' from 'BBsf'; Outlook Negative; -- $30.6 million class D to 'CCCsf' from 'Bsf'; RE 100%; -- $23.8 million class E to 'CCCsf' from 'B-sf'; RE 40%; -- $23.8 million class F to 'CCsf' from 'CCCsf'; RE 0%; -- $30.6 million class G to 'Csf' from 'CCsf'; RE 0%. In addition, Fitch has affirmed the following classes as indicated: -- $256.9 million class A-1A at 'AAAsf'; Outlook Stable; -- $31.6 million class A-2 at 'AAAsf'; Outlook Stable; -- $137.4 million class A-3 at 'AAAsf'; Outlook Stable; -- $110 million class A-AB at 'AAAsf'; Outlook Stable; -- $1.1 billion class A-4 at 'AAAsf'; Outlook Stable; -- $172.3 million class A-M at 'AAAsf'; Outlook Stable; -- $100 million class A-MFL at 'AAAsf'; Outlook Stable; -- $23.8 million class H at 'Csf'; RE 0%; -- $1.6 million class J at 'Dsf'; RE 0%; -- $0 class K at 'Dsf'; RE 0%; -- $0 class L at 'Dsf'; RE 0%; -- $0 class M at 'Dsf'; RE 0%; -- $0 class N at 'Dsf'; RE 0%; -- $0 class O at 'Dsf'; RE 0%; -- $50.2 million class AW34 at 'AAAsf'; Outlook Stable. MORGAN STANLEY 2007-11: S&P Withdraws 'CCC-' Rating on Notes ------------------------------------------------------------ Standard & Poor's Ratings Services withdrew its rating on the notes issued by Morgan Stanley ACES SPC's series 2007-11, a synthetic corporate investment-grade collateralized debt obligation (CDO) transaction. The rating withdrawal follows the redemption of the notes. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATING WITHDRAWN Morgan Stanley ACES SPC Series 2007-11 Rating Class To From Note NR CCC- (sf) NR-Not rated. MORGAN STANLEY 2011-C4: Moody's Corrects April 2 Rating Release --------------------------------------------------------------- Moody's Investors Service has issued a correction to the April 2, 2012 rating release on thirteen CMBS Classes of MSC 2012-C4. Moody's has corrected the headline to reference MSC 2012-C4 instead of MSC 2011-C4. In addition, in the first sentence of the tenth paragraph of the Ratings Rationale section, the version of the CMBS Conduit Model was corrected to v2.60. Revised release follows. Approximately $1.09 Billion of Structured Securities Affected Moody's Investors Service has assigned ratings to thirteen classes of CMBS securities, issued by Morgan Stanley Capital I Trust 2012- C4, Commercial Mortgage Pass-Through Certificates Series 2012-C4. Cl. A-1, Definitive Rating Assigned Aaa (sf) Cl. A-2, Definitive Rating Assigned Aaa (sf) Cl. A-3, Definitive Rating Assigned Aaa (sf) Cl. A-4, Definitive Rating Assigned Aaa (sf) Cl. A-S, Definitive Rating Assigned Aaa (sf) Cl. B, Definitive Rating Assigned Aa2 (sf) Cl. C, Definitive Rating Assigned A2 (sf) Cl. D, Definitive Rating Assigned Baa1 (sf) Cl. E, Definitive Rating Assigned Baa3 (sf) Cl. F, Definitive Rating Assigned Ba2 (sf) Cl. G, Definitive Rating Assigned B2 (sf) Cl. X-A, Definitive Rating Assigned Aaa (sf) Cl. X-B, Definitive Rating Assigned Ba3 (sf) Ratings Rationale The Certificates are collateralized by 38 fixed rate loans secured by 77 properties. The ratings are based on the collateral and the structure of the transaction. Moody's CMBS ratings methodology combines both commercial real estate and structured finance analysis. Based on commercial real estate analysis, Moody's determines the credit quality of each mortgage loan and calculates an expected loss on a loan specific basis. Under structured finance, the credit enhancement for each certificate typically depends on the expected frequency, severity, and timing of future losses. Moody's also considers a range of qualitative issues as well as the transaction's structural and legal aspects. The credit risk of loans is determined primarily by two factors: 1) Moody's assessment of the probability of default, which is largely driven by each loan's DSCR, and 2) Moody's assessment of the severity of loss upon a default, which is largely driven by each loan's LTV ratio. The Moody's Actual DSCR of 1.57X is higher than the 2007 conduit/fusion transaction average of 1.31X. The Moody's Stressed DSCR of 1.18X is higher than the 2007 conduit/fusion transaction average of 0.92X. Moody's Trust LTV ratio of 90.5% is lower than the 2007 conduit/fusion transaction average of 110.6%. Moody's Total LTV ratio (inclusive of subordinated debt) of 96.0% is also considered when analyzing various stress scenarios for the rated debt. Moody's also considers both loan level diversity and property level diversity when selecting a ratings approach. With respect to loan level diversity, the pool's loan level (includes cross collateralized and cross defaulted loans) Herfindahl Index is 19.2. The transaction's loan level diversity is lower than the band of Herfindahl scores found in most multi-borrower transactions issued since 2009. With respect to property level diversity, the pool's property level Herfindahl Index is 26.1. The transaction's property diversity profile is in-line with the indices calculated in most multi-borrower transactions issued since 2009. This deal has a super-senior Aaa class with 30% credit enhancement. Although the additional enhancement offered to the senior most certificate holders provides additional protection against pool loss, the super-senior structure is credit negative for the certificate that supports the super-senior class. If the support certificate were to take a loss, the loss would have the potential to be quite large on a percentage basis. Thin tranches need more subordination to reduce the probability of default in recognition that their loss-given default is higher. This adjustment helps keep expected loss in balance and consistent across deals. The transaction was structured with additional subordination at class A-S to mitigate the potential increased severity to class A-S. Moody's also grades properties on a scale of 1 to 5 (best to worst) and considers those grades when assessing the likelihood of debt payment. The factors considered include property age, quality of construction, location, market, and tenancy. The pool's weighted average property quality grade is 2.20, which is in-line with the indices calculated in most multi-borrower transactions since 2009. The methodologies used in this rating were "Moody's Approach to Rating Fusion U.S. CMBS Transactions" published in April 2005, and "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's analysis employs the excel-based CMBS Conduit Model v2.60 which derives credit enhancement levels based on an aggregation of adjusted loan level proceeds derived from Moody's loan level DSCR and LTV ratios. Major adjustments to determining proceeds include loan structure, property type, sponsorship and diversity. Moody's analysis also uses the CMBS IO calculator ver1.0 which references the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit estimates; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type corresponding to an IO type as defined in the published methodology. The V Score for this transaction is assessed as Low/Medium, the same as the V score assigned to the U.S. Conduit and CMBS sector. This reflects typical volatility with respect to the critical assumptions used in the rating process as well as an average disclosure of securitization collateral and ongoing performance. 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 Moody's value of the collateral used in determining the initial rating were decreased by 5%, 14%, or 23%, the model-indicated rating for the currently rated Super Senior Aaa classes and the rated Aaa A-S class would be Aaa, Aa1; Aaa,Aa2; and Aa1, Aa2. 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. These ratings: (a) are based solely on information in the public domain and/or information communicated to Moody's by the issuer at the date it was prepared and such information has not been independently verified by Moody's; (b) must be construed solely as a statement of opinion and not a statement of fact or an offer, invitation, inducement or recommendation to purchase, sell or hold any securities or otherwise act in relation to the issuer or any other entity or in connection with any other matter. Moody's does not guarantee or make any representation or warranty as to the correctness of any information, rating or communication relating to the issuer. Moody's shall not be liable in contract, tort, statutory duty or otherwise to the issuer or any other third party for any loss, injury or cost caused to the issuer or any other third party, in whole or in part, including by any negligence (but excluding fraud, dishonesty and/or willful misconduct or any other type of liability that by law cannot be excluded) on the part of, or any contingency beyond the control of, Moody's, or any of its employees or agents, including any losses arising from or in connection with the procurement, compilation, analysis, interpretation, communication, dissemination, or delivery of any information or rating relating to the issuer. NORTH STREET 2003-5: S&P Withdraws 'BB-' Rating on Class B-2 Notes ------------------------------------------------------------------ Standard & Poor's Ratings Services withdrew its ratings on the class B-1 and B-2 notes issued by North Street Referenced Linked Notes 2003-5 Ltd., a synthetic high-grade SF collateralized debt obligation (CDO) transaction. The rating withdrawal follows the complete redemption of the notes due to optional swap reduction notice received. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATINGS WITHDRAWN North Street Referenced Linked Notes 2003-5 Ltd. Rating Class To From B-1 NR BB+ (sf) B-2 NR BB- (sf) NR-Not rated. NORTHWOODS CAPITAL IV: S&P Affirms 'BB+' Rating on 3 Note Classes ----------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-1a, A-1b, A-2, and B notes from Northwoods Capital IV Ltd. and the C notes from Northwoods Capital VI Ltd. and removed them from CreditWatch positive. The two deals are U.S. collateralized loan obligation (CLO) transactions managed by Angelo, Gordon & Company L.P. "At the same time, we affirmed our ratings on the class C-1, C-2, C-3, Type II, and Type IV notes from Northwoods Capital IV Ltd. and removed three of them from CreditWatch positive, where we placed them on June 18, 2012. We also affirmed our ratings on the class A-1, A-2, and B notes from Northwoods Capital VI Ltd.," S&P said. "The upgrades from Northwoods Capital IV Ltd. mainly reflect paydowns to the class A-1a and A-1b notes, which are paid pro rata. Since our June 2011 rating actions, when we upgraded most of the notes, the transaction has paid down the class A-1a and A-1b notes by a total of approximately $80.4 million, reducing their outstanding note balances to 74.13% of their original balances at issuance. As a result, the credit enhancement available to support the notes has improved," S&P said. "Furthermore, the upgrades also reflect the improved performance of the transaction's underlying asset portfolio since June 2011. As of the July 2012 trustee report, the transaction had $15.23 million of defaulted assets. This was down from the $24.77 million in June 2011," S&P said. "We upgraded the class C notes from Northwoods Capital VI Ltd. to reflect the improvement in the underlying asset portfolio since our March 2011 rating actions. The amount of 'CCC' rated assets and defaulted assets have decreased over that time. As of the August 2012 trustee report, the amount of defaulted assets was $8.42 million, down from $28.16 million in February 2011. The transaction remains in its reinvestment period until April 2013," S&P said. "We affirmed our ratings on the class C-1, C-2, C-3, Type II, and Type IV notes from Northwoods Capital IV Ltd. and the A-1, A-2, and B notes from Northwoods Capital VI Ltd. to reflect the credit support available at the current rating levels. The affirmations on the Northwoods Capital IV Ltd. transaction were driven by the application of the largest obligor default test, a supplemental stress test we introduced as part of our 2009 corporate criteria update. The Type II and Type IV notes are combination notes of the class C-2 notes and equity and the class C-3 notes and equity," S&P said. Standard & Poor's will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it deems necessary. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATING AND CREDITWATCH ACTIONS Northwoods Capital IV Ltd. Rating Class To From A-1a AAA (sf) AA+ (sf)/Watch Pos A-1b AAA (sf) AA+ (sf)/Watch Pos A-2 AA+ (sf) AA (sf)/Watch Pos B A+ (sf) BBB+ (sf)/Watch Pos C-1 BB+ (sf) BB+ (sf)/Watch Pos C-2 BB+ (sf) BB+ (sf)/Watch Pos C-3 BB+ (sf) BB+ (sf)/Watch Pos Northwoods Capital VI Ltd. Rating Class To From C BB (sf) BB- (sf)/Watch Pos RATINGS AFFIRMED Northwoods Capital IV Ltd. Class Rating Type II BB+ (sf) Type IV BB+ (sf) Northwoods Capital VI Ltd. Class Rating A-1 AA+ (sf) A-2 AA (sf) B A (sf) NORTHWOODS CAPITAL V: S&P Lifts Ratings on 2 Note Classes to 'BB-' ------------------------------------------------------------------ Standard & Poor's Ratings Services raised its ratings on the class A-2, C-1, and C-2 notes from Northwoods Capital V Ltd., a cash flow collateralized loan obligation (CLO) transaction managed by Angelo, Gordon & Co. L.P. "At the same time, we affirmed our ratings on the class A-1a, A-1b, and B notes. We also removed our ratings on the class A-2, B, C-1, and C-2 notes from CreditWatch with positive implications," S&P said. "The upgrades reflect an improvement in the credit quality of the underlying assets. The amount of defaulted obligations held in the transaction's underlying portfolio declined since our March 2011 rating actions, when we raised our ratings on all six classes of notes. As of August 2012, the transaction held $7.3 million in defaulted assets, down from $19.5 million in the February 2011 trustee report, which we referenced for our March 2011 rating actions," S&P said. Additional improvements in the transaction over the same time period include an increase in the class A, B, and C overcollateralization (O/C) ratio tests. "The largest obligor default test was the driving factor of the affirmation on the class B notes. The largest obligor default test is a supplemental stress test we introduced as part of our 2009 corporate criteria update. The rating affirmations on class A-1a and A-1b reflect sufficient credit enhancement at the 'AA+' rating level," S&P said. The transaction is still in its reinvestment period and the rated classes have their original principal balances outstanding. Standard & Poor's will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it deems necessary. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATINGS AND CREDITWATCH ACTIONS Northwoods Capital V Ltd. Class Rating To From A-2 AA (sf) AA- (sf)/Watch Pos B BBB+ (sf) BBB+ (sf)/Watch Pos C-1 BB- (sf) B+ (sf)/Watch Pos C-2 BB- (sf) B+ (sf)/Watch Pos RATINGS AFFIRMED Northwoods Capital V Ltd. Class Rating A-1a AA+ (sf) A-1b AA+ (sf) NUCO2 FUNDING: Fitch Affirms 'BB' Rating on $75-Mil. Notes ---------------------------------------------------------- Fitch Ratings affirms NuCO2 Funding LLC, series 2008-1 notes as follows: -- $75,000,000 class B at 'BB', Outlook Stable. Fitch's affirmation reflects trust performance within initial rating expectations. Since issuance, NuCO2 has strengthened its industry position and improved trust interest coverage and leverage. As of the August 2012 payment date, customer locations have increased by 33.26% to 154,712. Revenues on a trailing 12-month basis have increased 54.4% to $208.1 million when compared to Dec. 31, 2007. NuCO2's three-month and 12-month interest coverage ratios on the senior debt were 3.56 times (x) and 3.41x, respectively. These coverage ratios compare favorably to the original three-month interest coverage ratio of 2.59x when first reported in June 2008. Fitch expects trust performance to remain stable, as additional revenues attributable to NuCO2's ongoing acquisition strategy and organic growth will be available to service the additional debt and maintain coverage and leverage metrics. However, Fitch expects future growth to be somewhat constrained due to the limited acquisition opportunities available, as NuCO2 has already acquired the majority of their largest competitors. Fitch's Stable Outlook reflects the trust's expected continued performance despite the challenging economic and restaurant environment, because of the unique nature of its product and business model. Over the remaining term of the securitization, Fitch will continually monitor NuCO2's performance. Any material change in Fitch's assessment or assumptions could affect the ratings of the trust. The notes are backed by cash flows generated by substantially all of NuCO2's business activities, which are primarily the leasing of bulk carbon dioxide systems and the distribution of carbon dioxide (CO2) to quick service restaurants (QSRs) and other retailers of fountain beverages in the United States. OCTAGON INVESTMENT XII: S&P Affirms 'BB-' Rating on Class E Notes ----------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on Octagon Investment Partners XII Ltd./Octagon Investment Partners XII LLC's $321.00 million floating- and fixed-rate notes following the transaction's effective date as of June 15, 2012. "Most U.S. cash flow collateralized debt obligations (CLOs) close before purchasing the full amount of their targeted level of portfolio collateral. On the closing date, the collateral manager typically covenants to purchase the remaining collateral within the guidelines specified in the transaction documents to reach the target level of portfolio collateral. Typically, the CLO transaction documents specify a date by which the targeted level of portfolio collateral must be reached. The 'effective date' for a CLO transaction is usually the earlier of the date on which the transaction acquires the target level of portfolio collateral, or the date defined in the transaction documents. Most transaction documents contain provisions directing the trustee to request the rating agencies that have issued ratings upon closing to affirm the ratings issued on the closing date after reviewing the effective date portfolio (typically referred to as an 'effective date rating affirmation')," S&P said. "An effective date rating affirmation reflects our opinion that the portfolio collateral purchased by the issuer, as reported to us by the trustee and collateral manager, in combination with the transaction's structure, provides sufficient credit support to maintain the ratings that we assigned on the transaction's closing date. The effective date reports provide a summary of certain information that we used in our analysis and the results of our review based on the information presented to us," S&P said. "We believe the transaction may see some benefit from allowing a window of time after the closing date for the collateral manager to acquire the remaining assets for a CLO transaction. This window of time is typically referred to as a 'ramp-up period.' Because some CLO transactions may acquire most of their assets from the new issue leveraged loan market, the ramp-up period may give collateral managers the flexibility to acquire a more diverse portfolio of assets," S&P said. "For a CLO that has not purchased its full target level of portfolio collateral by the closing date, our ratings on the closing date and prior to our effective date review are generally based on the application of our criteria to a combination of purchased collateral, collateral committed to be purchased, and the indicative portfolio of assets provided to us by the collateral manager, and may also reflect our assumptions about the transaction's investment guidelines. This is because not all assets in the portfolio have been purchased," S&P said. "When we receive a request to issue an effective date rating affirmation, we perform quantitative and qualitative analysis of the transaction in accordance with our criteria to assess whether the initial ratings remain consistent with the credit enhancement based on the effective date collateral portfolio. Our analysis relies on the use of CDO Evaluator to estimate a scenario default rate at each rating level based on the effective date portfolio, full cash flow modeling to determine the appropriate percentile break-even default rate at each rating level, the application of our supplemental tests, and the analytical judgment of a rating committee," S&P said. "In our published effective date report, we discuss our analysis of the information provided by the transaction's trustee and collateral manager in support of their request for effective date rating affirmation. In most instances, we intend to publish an effective date report each time we issue an effective date rating affirmation on a publicly rated U.S. cash flow CLO," S&P said. "On an ongoing basis after we issue an effective date rating affirmation, we will periodically review whether, in our view, the current ratings on the notes remain consistent with the credit quality of the assets, the credit enhancement available to support the notes, and other factors, and take rating actions as we deem necessary," S&P said. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATINGS AFFIRMED Octagon Investment Partners XII Ltd./Octagon Investment Partners XII LLC Class Rating Amount (mil. $) A AAA (sf) 223.00 B-1 AA (sf) 22.00 B-2 AA (sf) 22.00 C (deferrable) A (sf) 18.50 D (deferrable) BBB (sf) 17.50 E (deferrable) BB- (sf) 18.00 RACE POINT VI: S&P Affirms 'BB' Rating on Class E Deferrable Notes ------------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its ratings on Race Point VI CLO Ltd./Race Point VI CLO Corp.'s $370.00 million floating-rate notes following the transaction's effective date as of July 19, 2012. "Most U.S. cash flow collateralized debt obligations (CLOs) close before purchasing the full amount of their targeted level of portfolio collateral. On the closing date, the collateral manager typically covenants to purchase the remaining collateral within the guidelines specified in the transaction documents to reach the target level of portfolio collateral. Typically, the CLO transaction documents specify a date by which the targeted level of portfolio collateral must be reached. The 'effective date' for a CLO transaction is usually the earlier of the date on which the transaction acquires the target level of portfolio collateral, or the date defined in the transaction documents. Most transaction documents contain provisions directing the trustee to request the rating agencies that have issued ratings upon closing to affirm the ratings issued on the closing date after reviewing the effective date portfolio (typically referred to as an 'effective date rating affirmation')," S&P said. "An effective date rating affirmation reflects our opinion that the portfolio collateral purchased by the issuer, as reported to us by the trustee and collateral manager, in combination with the transaction's structure, provides sufficient credit support to maintain the ratings that we assigned on the transaction's closing date. The effective date reports provide a summary of certain information that we used in our analysis and the results of our review based on the information presented to us," S&P said. "We believe the transaction may see some benefit from allowing a window of time after the closing date for the collateral manager to acquire the remaining assets for a CLO transaction. This window of time is typically referred to as a 'ramp-up period.' Because some CLO transactions may acquire most of their assets from the new issue leveraged loan market, the ramp-up period may give collateral managers the flexibility to acquire a more diverse portfolio of assets," S&P said. "For a CLO that has not purchased its full target level of portfolio collateral by the closing date, our ratings on the closing date and prior to our effective date review are generally based on the application of our criteria to a combination of purchased collateral, collateral committed to be purchased, and the indicative portfolio of assets provided to us by the collateral manager, and may also reflect our assumptions about the transaction's investment guidelines. This is because not all assets in the portfolio have been purchased," S&P said. "When we receive a request to issue an effective date rating affirmation, we perform quantitative and qualitative analysis of the transaction in accordance with our criteria to assess whether the initial ratings remain consistent with the credit enhancement based on the effective date collateral portfolio. Our analysis relies on the use of CDO Evaluator to estimate a scenario default rate at each rating level based on the effective date portfolio, full cash flow modeling to determine the appropriate percentile break-even default rate at each rating level, the application of our supplemental tests, and the analytical judgment of a rating committee," S&P said. "In our published effective date report, we discuss our analysis of the information provided by the transaction's trustee and collateral manager in support of their request for effective date rating affirmation. In most instances, we intend to publish an effective date report each time we issue an effective date rating affirmation on a publicly rated U.S. cash flow CLO," S&P said. "On an ongoing basis after we issue an effective date rating affirmation, we will periodically review whether, in our view, the current ratings on the notes remain consistent with the credit quality of the assets, the credit enhancement available to support the notes, and other factors, and take rating actions as we deem necessary," S&P said. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATINGS AFFIRMED Race Point VI CLO Ltd./Race Point VI CLO Corp. Class Rating Amount (mil. $) X AAA (sf) 2.00 A AAA (sf) 243.00 B AA (sf) 60.00 C (deferrable) A (sf) 28.50 D (deferrable) BBB (sf) 19.25 E (deferrable) BB (sf) 17.25 NR-Not rated RASC SERIES: Moody's Confirms 'Caa2' Rating on Cl. M-3 Tranche -------------------------------------------------------------- Moody's Investors Service has confirmed the ratings of two tranches issued by RASC Series 2005-EMX2 Trust. The collateral backing this transaction are subprime residential mortgages. Complete rating actions are as follows: Issuer: RASC Series 2005-EMX2 Trust Cl. M-1, Confirmed at Aa3 (sf); previously on May 30, 2012 Aa3 (sf) Placed Under Review for Possible Downgrade Cl. M-3, Confirmed at Caa2 (sf); previously on May 30, 2012 Caa2 (sf) Placed Under Review for Possible Downgrade Ratings Rationale The actions are a result of the recent performance of Subprime pools originated after 2005 and reflect Moody's updated loss expectations on these pools. The methodologies used in this rating were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. Moody's adjusts the methodologies noted above for Moody's current view on loan modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. 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) (SFW), 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 extended foreclosure timelines by servicers is taken into consideration when assigning ratings. The above RMBS approach only applies to structures with at least 40 loans and a pool factor of greater than 5%. Moody's can withdraw its rating when the pool factor drops below 5% and the number of loans in the deal declines to 40 loans or lower. If, however, a transaction has a specific structural feature, such as a credit enhancement floor, that mitigates the risks of small pool size, Moody's can choose to continue to rate the transaction. The primary sources of assumption uncertainty are Moody's central macroeconomic forecast and performance volatility as a result of servicer-related activity such as modifications. The unemployment rate fell from 9.1% in June 2011 to 8.2% in June 2012. Moody's forecasts a further drop to 7.8% by the end of 2Q 2013. Moody's expects housing prices to remain stable through the remainder of 2012 before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer activity such as modification-related principal forgiveness and interest rate reductions. Any change resulting from servicing transfers or other policy or regulatory change can also impact the performance of these transactions. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF298039 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF198689 SALISBURY INT'L: S&P Withdraws 'CCC-' Rating on Class A Notes ------------------------------------------------------------- Standard & Poor's Ratings Services withdrew its rating on the series A notes issued by Salisbury International Investments Ltd.'s series 2005-5, a synthetic collateralized debt obligation of commercial mortgage-backed securities (CDO of CMBS) transaction. The rating withdrawal follows the cancellation of the notes. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATING WITHDRAWN Salisbury International Investments Ltd. Series 2005-5 Rating Class To From A NR CCC- (sf) NR-Not rated. SBA SENIOR: Moody's Rates New $300MM Incremental Term Loan 'Ba2' ---------------------------------------------------------------- Moody's Investors Service has assigned a Ba2 (LGD-3, 40%) rating to the proposed $300 million Incremental Term Loan B due 2019 to be issued by SBA Senior Finance II LLC ("SBAF"), an indirect wholly-owned subsidiary of SBA Communications Corporation ("SBAC" or "the company"). Proceeds are expected to be used to fund a portion of the cash consideration in connection with the $1.45 billion TowerCo acquisition, anticipated to close later this year, and for general corporate purposes. As part of the rating action, Moody's revised the Loss Given Default (LGD) point estimates on SBAF's existing senior secured facilities to Ba2 (LGD-3, 40%) from Ba2 (LGD-3, 41%), and on the senior unsecured notes at SBA Telecommunications, Inc. ("SBAT"), an indirect wholly-owned subsidiary of SBAC, to B1 (LGD-5, 79%) from B1 (LGD-5, 81%). The minor improvement in the point estimates primarily reflects the upsizing of the new 5.75% senior notes to $800 million from the originally planned $650 million raised at the SBAT level, which ranks behind the debt at SBAF in SBAC's capital structure. Moody's notes that the LGD assessments and point estimates for the individual debt instruments will likely be subject to further volatility depending on how the company refinances the maturing SBAC convertible debt due May 2013 ($535 million outstanding) and October 2014 ($500 million outstanding). Issuer: SBA Senior Finance II, LLC $300 Million Senior Secured Incremental Term Loan B - Ba2 (LGD-3, 40%) Ratings Rationale SBAC's Ba3 Corporate Family Rating (CFR) reflects the company's high adjusted debt to EBITDA leverage relative to peers, which is due in large part to debt-financed acquisitions, capital expenditures and increased stock buybacks. The rating does consider SBAC's scale as well as the stability of much of its revenue and cash flow generation, which are predominantly derived from contractual relationships with the largest wireless operators in the US. Moody's believes that the fundamentals of the wireless tower sector will remain favorable through the next several years. Finally, the rating reflects Moody's view that SBAC will likely temper its acquisition activity for the near term, as it gradually integrates the two large acquisitions of Mobilitie and TowerCo, both purchased this year. Moody's expects SBAC's adjusted debt to EBITDA leverage to remain above 9.0x (Moody's adjusted) levels at the end of 2012 due to the additional debt taken on as part of the TowerCo acquisition, before reducing to a range of 7.75x to 8.25x by 2014 through a combination of EBITDA growth and debt repayment. In addition, TowerCo has high exposure to the Sprint iDen towers which are scheduled to be decommissioned in 2015 and 2018. As a result, future revenue growth could be hampered if SBAC cannot offset the iDen revenue losses with revenue from new tenants or carriers augmenting their cell site equipment as they upgrade to fourth generation (4G) wireless networks. Moody's also notes that the individual debt instruments are subject to potential near-term variability especially if they are in close proximity to the expected loss assumptions underlying the rating breakpoints in Moody's Loss Given Default (LGD) rating framework for high-yield issuers, as well as dependent on the specific levels of debt at various legal entities. It is probable that further changes in the composition of the capital structure could lead to near-term ratings volatility among the individual instruments depending on how the company refinances upcoming SBAC debt maturities in 2013 and 2014. The senior secured debt of SBA Senior Finance II ("SBAF") are rated Ba2 and the senior unsecured notes at SBA Telecommunications, Inc ("SBAT") are rated B1 reflecting the perceived collateral coverage of these debt obligations relative to the overall waterfall of debts, including the securitizations. The SGL-3 liquidity rating reflects Moody's view that SBAC will have adequate liquidity over the next 12 to 18 months. SBAC will have sizable cash needs over the next year, as it needs to permanently fund the pending $1.45 billion TowerCo acquisition and the $535 million 1.875% convertible notes maturing May 2013. Moody's believes this could necessitate further capital raising activity over the next twelve months given that the TowerCo bridge loan is not permanent financing. On the other hand, if the convertible notes are converted to equity, SBAC should have ample liquidity over the next year. Moody's notes that if SBAC addresses the refinancing issues over the next twelve months, the liquidity rating could be upgraded. Moody's also expects the company to have ample cushion under its financial maintenance covenants. Rating Outlook The negative outlook reflects the additional risk that SBAC will face in restoring its financial profile that supports its Ba3 corporate family rating. Coming on the heels of the acquisition of Mobilitie in April, the purchase of TowerCo will raise SBAC's Moody's adjusted debt to EBITDA leverage above 9.0x. In addition, as the recently acquired properties have a lower tenancy ratio, the company's cash generation relative to debt will remain near the downgrade triggers until SBAC is able to add more wireless carriers on the newly acquired towers. What Could Change the Rating - DOWN Ratings could be downgraded if weakening industry fundamentals or SBAC's aggressive expansion plans result in the following Moody's adjusted key credit metrics on a sustained basis: debt to EBITDA over 8.5x, (EBITDA-Capex) to interest remaining in the 1x range and free cash flow to debt in the low single digits. What Could Change the Rating - UP While unlikely in the near-term, ratings may be considered for an upgrade if SBAC delivers the following Moody's adjusted key credit metrics on a sustained basis: debt to EBITDA of 7x, (EBITDA-Capex) to interest approaching 2x, and free cash flow to debt greater than 5%. The principal methodology used in rating SBA Communications Corporation was the Global Communications Infrastructure Industry Methodology published in June 2011. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. The assigned ratings are subject to review of final documentation and no material change in the terms and conditions of the transaction as advised to Moody's. SOUND POINT I: S&P Assigns Prelim 'BB' Rating on Class E Notes -------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Sound Point CLO I Ltd./Sound Point CLO I Inc.'s $359.25 million floating-rate notes. The note issuance is a CLO securitization backed by a revolving pool consisting primarily of broadly syndicated senior secured loans. The preliminary ratings are based on information as of Sept. 19, 2012. 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 credit enhancement provided to the preliminary rated notes through the subordination of cash flows that are payable to the subordinated notes. -- The transaction's credit enhancement, which is sufficient to withstand the defaults applicable for the supplemental tests (not including excess spread). -- The cash-flow structure, which can withstand the default rate projected by Standard & Poor's CDO Evaluator model, as assessed by Standard & Poor's using the assumptions and methods outlined in its corporate collateralized debt obligation (CDO) criteria. -- The transaction's legal structure, which is expected to be bankruptcy remote. -- The diversified collateral portfolio, which consists primarily of broadly syndicated speculative-grade senior secured term loans. -- The collateral manager's experienced management team. -- S&P's projections of the timely interest and ultimate Principal payments on the preliminary rated notes, which it assessed using its cash-flow analysis and assumptions commensurate with the assigned preliminary ratings under various interest-rate scenarios, including LIBOR ranging from 0.34% to 12.6%. -- The transaction's overcollateralization and interest coverage tests, a failure of which will lead to the diversion of interest and principal proceeds to reduce the balance of the rated notes outstanding. -- The transaction's interest diversion test, a failure of which during the reinvestment period will lead to the reclassification of up to 50% of available excess interest proceeds (before paying uncapped administrative expenses, subordinate and incentive management fees, expenses for refinancing and additional securities issued, expense reserve account top-up, hedge amounts, and subordinated note payments) to principal proceeds for the purchase of additional collateral assets or to pay principal on the notes sequentially, at the option of the collateral manager. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com/982.pdf PRELIMINARY RATINGS ASSIGNED Sound Point CLO I Ltd./Sound Point CLO I Inc. Class Rating Interest rate Amount (Mil. $) X AAA (sf) Three-month LIBOR 2.75 plus 1.00% A AAA (sf) Three-month LIBOR 250.25 plus 1.58% B AA (sf) Three-month LIBOR 36.75 plus 2.70% C (deferrable) A (sf) Three-month LIBOR 34.00 plus 3.30% D (deferrable) BBB (sf) Three-month LIBOR 19.00 plus 4.58% E (deferrable) BB (sf) Three-month LIBOR 16.50 plus 6.00% Subordinated notes NR N/A 40.75 SOUNDVIEW HOME: Moody's Lifts Ratings on Two Tranches to 'Caa1' --------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on five tranches from two subprime RMBS transactions issued by Soundview. The collateral backing these transactions are subprime residential mortgage loans. Complete rating actions are as follows: Issuer: Soundview Home Loan Trust 2005-1 Cl. M-3, Upgraded to Baa3 (sf); previously on May 30, 2012 Ba2 (sf) Placed Under Review for Possible Upgrade Cl. M-4, Upgraded to Caa1 (sf); previously on May 30, 2012 Caa3 (sf) Placed Under Review for Possible Upgrade Issuer: Soundview Home Loan Trust 2005-CTX1 Cl. M-1, Upgraded to A3 (sf); previously on May 30, 2012 Baa2 (sf) Placed Under Review for Possible Upgrade Cl. M-2, Upgraded to B1 (sf); previously on May 30, 2012 Caa1 (sf) Placed Under Review for Possible Upgrade Cl. M-3, Upgraded to Caa1 (sf); previously on May 30, 2012 Caa3 (sf) Placed Under Review for Possible Upgrade Ratings Rationale The actions are a result of the recent performance of Subprime pools originated after 2005 and reflect Moody's updated loss expectations on these pools. The upgrades in the rating action are a result of improving performance and/or structural features resulting in lower expected losses for certain bonds than previously anticipated. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. Moody's adjusts the methodologies noted above for Moody's current view on loan modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. 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) (SFW), 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 extended foreclosure timelines by servicers is taken into consideration when assigning ratings. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in April 2011 to 8.2% in June 2012. Moody's forecasts a further drop to 7.8% for 2013. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF298012 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF198689 SOUTHFORK CLO: S&P Affirms 'BB+' Rating on Class C Notes -------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on all eight classes of notes from Southfork CLO Ltd. "At the same time, we removed our ratings on five classes of notes from CreditWatch with positive implications. Southfork CLO Ltd. is a collateralized loan obligation (CLO) transaction that is managed by Highland Capital Management L.P.," S&P said. "We placed our ratings on various notes from this transaction on CreditWatch positive on June 18, 2012, due to the improvement in the credit quality of the assets in the collateral portfolio. As of the July 2012 trustee report, the balance of defaulted assets has decreased to $15.17 million from $28.53 million in May of 2011, while the class A overcollateralization ratio increased to 124.06% from 123.62%. Additionally, the transaction's reinvestment period ended in May 2012, and as of the August 2012 payment report, the transaction had paid down the class A-1 notes by $17 million," S&P said. "As of the July 2012 trustee report, the transaction held $104 million of long-dated assets that mature beyond the transaction's February 2017 legal final maturity. Exposure to these assets leaves the transaction subject to potential market value risk because the collateral manager may have to liquidate them to pay down the notes before the CLO transaction's final maturity date," S&P said. "Despite the improvements in this transaction's credit quality since our June 2011 rating actions, we affirmed and removed from CreditWatch our ratings on the five classes of notes due to market-value risk associated with the long-dated assets. We affirmed our ratings for the three class A-1 notes to reflect the credit support available at the current rating levels," S&P said. Standard & Poor's will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it deems necessary. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATING ACTIONS Southfork CLO Ltd. Rating Rating Class To From A-2 AA+ (sf) AA+ (sf)/Watch Pos A-3a AA- (sf) AA- (sf)/Watch Pos A-3b AA- (sf) AA- (sf)/Watch Pos B A- (sf) A- (sf)/Watch Pos C BB+ (sf) BB+ (sf)/Watch Pos RATINGS AFFIRMED Southfork CLO Ltd. Class Rating A-1a AAA (sf) A-1b AAA (sf) A-1g AAA (sf) STARTS (CAYMAN): S&P Withdraws 'B+' Rating on Class A1-D1 Notes --------------------------------------------------------------- Standard & Poor's Ratings Services withdrew its rating on class A1-D1 notes from STARTS (Cayman) Ltd.'s series 2006-2, an investment-grade synthetic corporate collateralized debt obligation (CDO) transaction. The rating withdrawal follows the repurchase of the notes on Sept. 11, 2012. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATING WITHDRAWN STARTS (Cayman) Ltd. Series 2006-2 Rating Class To From A1-D1 NR B+ (sf) NR-Not rated. STOCKTON PUBLIC: Fitch Keeps 'BB+' Ratings on Rating Watch Neg -------------------------------------------------------------- Fitch Ratings maintains the Rating Watch Negative on Stockton Public Finance Authority, California's (the authority) 'BB+' underlying ratings. Security The 2005 series A and series 2010A bonds are payable from installment payments made by the City of Stockton, California (the city) to the authority, with such installment payments secured by a senior lien pledge of net revenues of the city's water system (the system). The series 2009A and 2009B bonds are subordinate lien bonds and are secured by net system revenues after payment of senior lien obligations. The authority has assigned its rights to receive installment payments from the city to the trustee for the benefit of bondholders. Key Rating Drivers NEGATIVE WATCH MAINTAINED: With the city's petition for chapter 9 bankruptcy protection on June 28, Fitch remains concerned about potential event risks that may arise and could negatively impact the financial health of the system or the ability of the system to make full and timely payment to bondholders. These event risks continue to include, but are not limited to, the treatment of pledged revenues during bankruptcy proceedings and declaration by creditors of an event of default under the financing agreements. CITY ACTIONS IMPAIR SYSTEM CREDIT QUALITY: The city's actions in recent months, culminating with the bankruptcy filing in June, call into question the city's ultimate willingness to pay debt service on system obligations. While the system currently remains solvent and appears capable of meeting near-term obligations, various events of default have been triggered under the system's financing agreements, having exposed the system to possible bond acceleration. ADEQUATE OPERATIONS: System financial performance historically has been sound, and the system's current financial position appears adequate. ELEVATED LEVERAGE: The system maintains a high debt burden coupled with an extended amortization schedule. DEPRESSED SERVICE AREA: The service area has been significantly affected by weak economic and housing conditions. What Could Trigger A Downgrade DEVELOPMENTS AFFECTING THE SYSTEM: Fitch's ongoing review will consider both future actions by the city that could negatively affect the system as well as any developing external system pressures, including bankruptcy court rulings adversely affecting system bondholders as well as higher reset rates and bank bonds associated with the 2010A bonds. Depending on the nature of the event(s), the ratings on the system bonds could deteriorate rapidly and significantly from the current rating level. Credit Profile Negative Watch Reflects Ongoing Risks The Negative Watch primarily reflects Fitch's ongoing concerns regarding possible conditions both within and outside of the city government that may affect system operating results. These risks include, but are not limited to, treatment under the bankruptcy code of pledged revenues and allowable system operating and maintenance expenses related to the authority's debt as well as elevated reset rates and potential bank bonds associated with the 2010A bonds. Evidence or expectation of deteriorating system performance or increased system exposure to various risks would likely lead to deterioration of system credit quality, and such downward rating action(s) may be acute and rapid. City General Fund Drives Bankruptcy The city's general fund operations have faced severe financial weakness in recent years as a result of escalating budgetary costs coupled with deteriorating revenues stemming from a significant economic downturn within the city. As a result, the city initiated a neutral evaluation process with creditors in February for the purpose of obtaining concessions that would allow the city to balance its fiscal 2013 budget. The confidential mediation process concluded on June 25, 2012, as scheduled without providing sufficient cost reductions to balance the city's fiscal 2013 budget. As a result, the city council passed various resolutions at its June 26, 2012, meeting which included the adoption of a pendency plan (the plan), and on June 28, 2012, the city formally filed for Chapter 9 bankruptcy protection. The plan provides a balanced general fund budget for fiscal 2013, eliminating a $26 million gap through cost reductions to labor, retirees, debt and other obligations. The plan will serve as the city's fiscal 2013 budget while the city is under Chapter 9 bankruptcy protection. Water System Remains Solvent Despite the city's general fund fiscal problems, the system continues to perform largely as expected relative to projections at the time of the issuance of the 2010A bonds. This performance and Fitch's expectation of the protection of pledged revenues for system bondholders under bankruptcy proceedings that would allow continued performance on system obligations have limited deterioration in system credit quality to date. Nevertheless, the city's actions cannot be completely separated from the system's credit as they have exposed the system to bond acceleration risk and other potential risks. Consequently, the city's actions have had and will continue to have some direct bearing on the system's credit quality. For unaudited fiscal 2011 total debt service coverage (DSC) on system bonds equaled an estimated 1.3x, with the federal interest rate subsidy for related to the series 2009B Build America Bonds (BABs) treated as revenue as opposed to an offset to debt service. For the same period, the system maintained strong liquidity at 631 days cash while surplus net revenues covered depreciation expenses by nearly 3x. For fiscal 2012, revenues and expenses reportedly tracked close to budgeted figures. Consequently, based on budgeted net income, estimated debt service for the year, and treating the BABs subsidy as revenues, total DSC is expected at around 1.4x for the year. Unaudited cash balances are little changed from fiscal 2011. The city reports that the system maintained around $36 million in unrestricted cash as well as slightly more than $8 million in the system rate stabilization fund (RSF). For fiscal 2013, financial results are also forecasted to remain relatively favorable based on the plan adopted by the city council that includes implementation of a 10% rate increase; 2013 will be the final year of a package approved by the city council in 2009. Total DSC is projected at just under 1.2x, assuming weekly resets of the 2010A bonds at significantly higher amounts than historically achieved as well as treatment of the BABs subsidy as revenues. In determining fiscal 2013 net revenues, Fitch has assumed a net $1.5 million reduction in operating costs based on a budget amendment approved by the city council on September 11, 2012. Also, Fitch has assumed in its calculation a net increase in revenues of $3.6 million based on the same budget amendment. Of the increase in revenues, just over $3 million is attributable to transfers in from the RSF to meet the rate covenant. Elevated Debt Profile The system's debt profile is weak as a result of historical growth projects as well as because of Delta Water Supply Project (DWSP) costs. Construction related to the DWSP has been completed and is reportedly on budget. The project is operational and currently is in the testing phase, with no issues being reported. Overall, debt per customer and debt per capita are around 3x the national median. While improvement in the system's capital structure is expected over time, debt levels will continue to be a long-term concern as only 46% of principal amortizes within 20 years. Fitch maintains the following authority ratings on Rating Watch Negative: -- $55 million variable rate demand water revenue bonds, series 2010A (Delta Water Supply Project) 'BB+'; -- $24.2 million 2005 water revenue bonds, series A (Water System Capital Improvement Projects) 'BB+'; -- $18.6 million water revenue bonds, series 2009A (Delta Water Supply Project) 'BB+'; -- $154.6 million water revenue bonds, series 2009B (taxable Build America Bonds) (Delta Water Supply Project) 'BB+'. TALMAGE STRUCTURED: Moody's Lifts Rating on Cl. E Notes to Caa3 ---------------------------------------------------------------- Moody's Investors Service upgraded the ratings of three classes and affirmed the ratings of two classes of Notes issued by Talmage Structured Real Estate 2006-3, Ltd. The upgrades are due to the paydowns to the top class from greater than expected amortization of the underlying collateral as well as the improvements of par value tests since last review. Additionally, the underlying collateral performance has been relatively stable as evidenced by transition in Moody's weighted average rating factor (WARF) and weighted average recovery rate (WARR) since last review. The affirmations are due to key transaction parameters performing within levels commensurate with the existing ratings level. The rating action is the result of Moody's on-going surveillance of commercial real estate collateralized debt obligation and collateralized loan obligation (CRE CDO CLO) transactions. Moody's rating action is as follows: Cl. C, Upgraded to Aa1 (sf); previously on Sep 21, 2011 Upgraded to Baa3 (sf) Cl. D, Upgraded to Ba3 (sf); previously on Oct 5, 2010 Downgraded to Caa3 (sf) Cl. E, Upgraded to Caa3 (sf); previously on Oct 5, 2010 Downgraded to C (sf) Cl. F, Affirmed at C (sf); previously on Oct 5, 2010 Downgraded to C (sf) Cl. G, Affirmed at C (sf); previously on Oct 5, 2010 Downgraded to C (sf) RATINGS RATIONALE Talmage Structured Real Estate Funding 2006-3, Ltd. is currently a static cash CRE CDO transaction (the reinvestment period ended in September 2011) backed by a portfolio of A-Notes and whole loans (47.6% of the pool balance), CRE CDOs (20.1%), commercial mortgage backed securities (CMBS) (17.7% of the pool balance), rake bonds (10.9%), and B-Notes (3.7%). As of the August 20, 2012 trustee report, the aggregate Note balance of the transaction, including preferred shares, has decreased to $151.1 million from $420.5 million at issuance, with the paydown currently directed to the Class C Notes. Classes A-1, A-2, B and S have been paid down in full. All par value tests are passing and improving since last review with the Class C par value test increasing to 270.1 from 203.9 at last review. There are five assets with a par balance of $63.3 million (41.2% of the current pool balance) that are considered impaired securities as of the August 20, 2012 trustee report. Moody's expects significant losses to occur to some of the impaired securities once they are realized. Moody's has identified the following parameters as key indicators of the expected loss within CRE CDO transactions: WARF, weighted average life (WAL), WARR, and Moody's asset correlation (MAC). These parameters are typically modeled as actual parameters for static deals and as covenants for managed deals. WARF is a primary measure of the credit quality of a CRE CDO pool. Moody's has completed updated assessments for the non-Moody's rated collateral. The bottom-dollar WARF is a measure of the default probability within a collateral pool. Moody's modeled a bottom-dollar WARF of 6,923 compared to 6,151 at last review. The current distribution of Moody's rated collateral and assessments for non-Moody's rated collateral is as follows: Aaa-Aa3 (10.4% compared to 11.4% at last review), Baa1-Baa3 (0.6% compared to 4.0% at last review), Ba1-Ba3 (6.2% compared to 5.3% at last review), B1-B3 (9.4% compared to 0.0% at last review), and Caa1-C (73.4% compared to 79.3% at last review). WAL acts to adjust the probability of default of the collateral in the pool for time. Moody's modeled to a WAL of 2.4 years compared to 2.3 years at last review. WARR is the par-weighted average of the mean recovery values for the collateral assets in the pool. Moody's modeled a fixed WARR of 33.1% compared to 30.7% at last review. MAC is a single factor that describes the pair-wise asset correlation to the default distribution among the instruments within the collateral pool (i.e. the measure of diversity). Moody's modeled a MAC of 0.0% compared to 99.9% as last review. The low MAC is due to higher default probability collateral concentrated within a small number of collateral names. Moody's review incorporated CDOROM(R)v2.8, one of Moody's CDO rating models, which was released on January 24, 2011. The cash flow model, CDOEdge(R)v3.2.1.2, was used to analyze the cash flow waterfall and its effect on the capital structure of the deal. Changes in any one or combination of the key parameters may have rating implications on certain classes of rated notes. However, in many instances, a change in key parameter assumptions in certain stress scenarios may be offset by a change in one or more of the other key parameters. Rated notes are particularly sensitive to changes in recovery rate assumptions. Holding all other key parameters static, changing the recovery rate assumption down from 33.1% to 23.1% or up to 43.1% would impact the modeled ratings 0 to 6 notches downward and 0 to 6 notches upward, respectively. The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of assumption uncertainty are the extent of growth in the current macroeconomic environment and commercial real estate property markets. While commercial real estate property values are beginning to move in a positive direction along with a rise in investment activity and stabilization in core property type performance, a consistent upward trend will not be evident until the volume of investment activity steadily increases, distressed properties are cleared from the pipeline, and job creation rebounds. The hotel sector is performing strongly and the multifamily sector continues to show increases in demand. Moderate improvements in the office sector continue with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow. Performance in the retail sector has been mixed with lackluster sales driven by discounting and promotions. However, rising wages and reduced unemployment, along with increased consumer confidence, is helping to spur consumer spending. Across all property sectors, the availability of debt capital continues to improve with increased securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario reflects healthier growth in the US and US growth decoupling from the recessionary trend in the euro zone, while a mild recession is expected in 2012. Downside risks remain significant, although they have moderated compared to earlier this year. Major downside risks include an increase in the potential magnitude of the euro area recession, the risk of an oil supply shock weighing negatively on consumer purchasing power and home prices, ongoing and policy-induced banking sector deleveraging leading to a tightening of bank lending standards and credit contraction, financial market turmoil continuing to negatively impact consumer and business confidence, persistently high unemployment levels, and weak housing markets, any or all of which will continue to constrain growth. The methodologies used in this rating were "Moody's Approach to Rating SF CDOs" published in May 2012, and "Moody's Approach to Rating Commercial Real Estate CDOs" published in July 2011. TERWIN MORTGAGE: Moody's Cuts Rating on I-A-2b Secs. to 'Caa3' -------------------------------------------------------------- Moody's Investors Service has downgraded the rating of the Class I-A-2b tranche issued by Terwin Mortgage Trust 2006-7. The collateral backing the related loan pool are subprime residential mortgages. Complete rating actions are as follows: Issuer: Terwin Mortgage Trust 2006-7 Cl. I-A-2b, Downgraded to Caa3 (sf); previously on May 30, 2012 B3 (sf) Placed Under Review for Possible Downgrade Ratings Rationale The action is a result of the recent performance of Subprime pools originated after 2005 and reflect Moody's updated loss expectations on these pools. The downgrade in the rating action is a result of deteriorating performance and/or structural features resulting in higher expected losses for the Class I-A-2b tranche than previously anticipated. The methodologies used in this rating were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. Moody's adjusts the methodologies noted above for Moody's current view on loan modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. 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) (SFW), 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 extended foreclosure timelines by servicers is taken into consideration when assigning ratings. The above RMBS approach only applies to structures with at least 40 loans and a pool factor of greater than 5%. Moody's can withdraw its rating when the pool factor drops below 5% and the number of loans in the deal declines to 40 loans or lower. If, however, a transaction has a specific structural feature, such as a credit enhancement floor, that mitigates the risks of small pool size, Moody's can choose to continue to rate the transaction. The primary sources of assumption uncertainty are Moody's central macroeconomic forecast and performance volatility as a result of servicer-related activity such as modifications. The unemployment rate fell from 9.1% in June 2011 to 8.2% in June 2012. Moody's forecasts a further drop to 7.8% by the end of 2Q 2013. Moody's expects housing prices to remain stable through the remainder of 2012 before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer activity such as modification-related principal forgiveness and interest rate reductions. Any change resulting from servicing transfers or other policy or regulatory change can also impact the performance of these transactions. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF298036 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF198689 TRICADIA CDO: Moody's Raises Rating on $55MM Notes to 'Ba2' ----------------------------------------------------------- Moody's Investors Service has upgraded the rating of the following class of notes issued by Tricadia CDO 2006-5, Ltd.: U.S. $55,000,000 Class B Senior Floating Rate Notes Due 2046, Upgraded to Ba2 (sf); previously on December 5, 2011 Upgraded to B1 (sf). Ratings Rationale According to Moody's, the rating action taken on the notes is primarily a result of an improvement in the credit quality of the underlying portfolio and an increase in the transaction's overcollateralization ratio since the last rating action in December 2011. Based on Moody's calculation, the weighted average rating factor has improved to 950 from 1014, and the Class B overcollateralization ratio has increased to 123.73% from 127.49% since December 2011. Tricadia CDO 2006-5, Ltd is a collateralized debt obligation backed by a portfolio of CLOs. The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in May 2012. Moody's applies the Monte Carlo simulation framework within CDOROMv2.8 to model the loss distribution for SF CDOs. Within this framework, defaults are generated so that they occur with the frequency indicated by the adjusted default probability pool (the default probability associated with the current rating multiplied by the Resecuritization Stress) for each credit in the reference. Specifically, correlated defaults are simulated using a normal (or "Gaussian") copula model that applies the asset correlation framework. Recovery rates for defaulted credits are generated by applying within the simulation the distributional assumptions, including correlation between recovery values. Together, the simulated defaults and recoveries across each of the Monte Carlo scenarios define the loss distribution for the reference pool. Once the loss distribution for the collateral has been calculated, each collateral loss scenario derived through the CDOROM loss distribution is associated with the interest and principal received by the rated liability classes via the CDOEdge cash-flow model. The cash flow model takes into account the following: collateral cash flows, the transaction covenants, the priority of payments (waterfall) for interest and principal proceeds received from portfolio assets, reinvestment assumptions, the timing of defaults, interest-rate scenarios and foreign exchange risk (if present). The Expected Loss (EL) for each tranche is the weighted average of losses to each tranche across all the scenarios, where the weight is the likelihood of the scenario occurring. Moody's defines the loss as the shortfall in the present value of cash flows to the tranche relative to the present value of the promised cash flows. The present values are calculated using the promised tranche coupon rate as the discount rate. For floating rate tranches, the discount rate is based on the promised spread over Libor and the assumed Libor scenario. Moody's notes that in arriving at its ratings of SF CDOs, backed by CLOs, there exist a number of sources of uncertainty, operating both on a macro level and on a transaction-specific level. These uncertainties are evidenced by 1) uncertainties of credit conditions in the general economy and 2) the large concentration of upcoming speculative-grade debt maturities which may create challenges for issuers to refinance. The underlying CLO tranches' performance may also be impacted by 1) the managers' investment strategy and behavior and 2) divergence in legal interpretation of CLO documentation by different transactional parties due to embedded ambiguities. Moody's rating action the factors in a number of sensitivity analyses and stress scenarios, discussed below. Results are shown in terms of the number of notches' difference versus the current model output, where a positive difference corresponds to lower expected loss, assuming that all other factors are held equal: Moody's below investment-grade assets notched up by 2 rating notches (WARF of 564): Class B: +2 Class C: +4 Class D: 0 Class E: 0 Class F: 0 Moody's below investment-grade assets notched down by 2 rating notches (WARF of 1252): Class B: -4 Class C: -2 Class D: 0 Class E: 0 Class F: 0 Further information on Moody's analysis of this transaction is available on www.moodys.com UBS-BARCLAYS 2012-C3: Moody's Rates Class F Certificates '(P)B2' ---------------------------------------------------------------- Moody's Investors Service has assigned provisional ratings to thirteen classes of CMBS securities, issued by UBS-Barclays Commercial Mortgage Trust 2012-C3, Commercial Mortgage Pass- Through Certificates, Series 2012-C3. Cl. A-1, Assigned (P)Aaa (sf) Cl. A-2, Assigned (P)Aaa (sf) Cl. A-3, Assigned (P)Aaa (sf) Cl. A-4, Assigned (P)Aaa (sf) Cl. A-S-EC*, Assigned (P)Aaa (sf) Cl. X-A**, Assigned (P)Aaa (sf) Cl. X-B**, Assigned (P)Ba3 (sf) Cl. B-EC*, Assigned (P)Aa3 (sf) Cl. EC*, Assigned (P)A2 (sf) Cl. C-EC*, Assigned (P)A3 (sf) Cl. D, Assigned (P)Baa3 (sf) Cl. E, Assigned (P)Ba2 (sf) Cl. F, Assigned (P)B2 (sf) * Reflects Exchangeable Certificates ** Reflects Interest Only Classes Ratings Rationale The Certificates are collateralized by 85 fixed rate loans secured by 113 properties. The ratings are based on the collateral and the structure of the transaction. Moody's CMBS ratings methodology combines both commercial real estate and structured finance analysis. Based on commercial real estate analysis, Moody's determines the credit quality of each mortgage loan and calculates an expected loss on a loan specific basis. Under structured finance, the credit enhancement for each certificate typically depends on the expected frequency, severity, and timing of future losses. Moody's also considers a range of qualitative issues as well as the transaction's structural and legal aspects. The credit risk of loans is determined primarily by two factors: 1) Moody's assessment of the probability of default, which is largely driven by each loan's DSCR, and 2) Moody's assessment of the severity of loss upon a default, which is largely driven by each loan's LTV ratio. The Moody's Actual DSCR of 1.60X is higher than the 2007 conduit/fusion transaction average of 1.31X. The Moody's Stressed DSCR of 1.10X is higher than the 2007 conduit/fusion transaction average of 0.92X. Moody's Trust LTV ratio of 99.0% is higher than the average Moody's CMBS 2.0 but lower than the 2007 conduit/fusion transaction average of 110.6%. Moody's Total LTV ratio, (inclusive of subordinated debt) of 100.0% is also considered when analyzing various stress scenarios for the rated debt. Moody's also considers both loan level diversity and property level diversity when selecting a ratings approach. With respect to loan level diversity, the pool's loan level (includes cross collateralized and cross defaulted loans) Herfindahl Index is 29.2, which is in-line with other multi- borrower pools rated by Moody's since 2009. The score is in-line with previously rated conduit and fusion transactions but higher than previously rated large loan transactions. With respect to property level diversity, the pool's property level Herfindahl score is 31.4. Sixteen loans (21.7% of the pool balance) are secured by multiple properties. Loans secured by multiple properties benefit from lower cash flow volatility given that excess cash flow from one property can be used to augment another's cash flow to meet debt service requirements. These loans also benefit from the pooling of equity from each underlying property. Moody's grades properties on a scale of 1 to 5 (best to worst) and considers those grades when assessing the likelihood of debt payment. The factors considered include property age, quality of construction, location, market, and tenancy. The weighted average grade for the pool is 2.50, which is in-line with the indices calculated in most multi-borrower. In terms of waterfall structure, the transaction contains a unique group of exchangeable certificates. Classes A-S-EC ((P) Aaa), B-EC ((P) Aa2) and C-EC ((P) A3) may be exchanged for Class EC ((P) A2) certificates and Class EC may be exchanged for the Classes A-S-EC, B-EC and C-EC. The EC certificates will be entitled to receive the sum of interest distributable on the classes A-S-EC, B-EC and C-EC certificates that are exchanged for such EC certificates. The initial certificate balance of the class EC certificates is equal to the aggregate of the initial certificate balances of the Class A-S-EC, B-EC and C-EC and represent the maximum certificate balance of the EC certificates that may be issued in an exchange. Moody's considers the probability of certificate default as well as the estimated severity of loss when assigning a rating. As a thick vertical tranche, Class EC has the default characteristics of the lowest rated component certificate ((P) A3), but a very high estimated recovery rate if a default occurs given the certificate's thickness. Considering both probability of default and recovery, Moody's provisional assessment of expected loss for the EC certificate is commensurate with an A2 rating. The methodologies used in this rating were"Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000, and "Moody's Approach to Rating Structured Finance Interest- Only Securities" published in February 2012. Moody's analysis employs the excel-based CMBS Conduit Model v2.61 which derives credit enhancement levels based on an aggregation of adjusted loan level proceeds derived from Moody's loan level DSCR and LTV ratios. Major adjustments to determining proceeds include loan structure, property type, sponsorship and diversity. Moody's analysis also uses the CMBS IO calculator version 1.0 which references the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit estimates; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type corresponding to an IO type as defined in the published methodology. The V Score for this transaction is assessed as Low/Medium, the same as the V score assigned to the U.S. Conduit and CMBS sector. This reflects typical volatility with respect to the critical assumptions used in the rating process as well as an average disclosure of securitization collateral and ongoing performance. 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 Moody's value of the collateral used in determining the initial rating were decreased by 5.0%, 14.3%, or 22.8%, the model-indicated rating for the currently rated junior Aaa class would be Aa1, Aa2, A1, respectively. 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. VALHALLA CLO: S&P Raises Rating on Class B Notes to 'BB+' --------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on two classes of notes from Valhalla CLO Ltd., a hybrid collateralized loan obligation (CLO) transaction, and removed the rating on the class A-2 notes from CreditWatch with positive implications, where S&P placed it on June 18, 2012. "At the same time, we affirmed our ratings on two other classes from the transaction," S&P said. "This transaction is currently in its amortization phase, as its reinvestment period ended in August 2011. The upgrades reflect a $165.63 million reduction in the balance of the super senior notes since our August 2011 rating actions. Due to this and other factors, the overcollateralization (O/C) ratios have increased for the class A, B, and C notes," S&P said. The affirmations of the ratings on the class C-1 and C-2 notes reflect credit support commensurate with the current rating levels. "Our ratings on each class of notes reflect the application of the largest obligor default test, a supplemental stress test we introduced as part of our September 2009 corporate criteria update," S&P said. "We note that the transaction has exposure to long-dated assets (i.e., assets maturing after the stated maturity of the CLO). Our analysis accounted for the potential market value and/or settlement related risk arising from the potential liquidation of the remaining securities on the legal final maturity date of the transaction," S&P said. 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 it deems necessary. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATING AND CREDITWATCH ACTIONS Valhalla CLO Ltd. Rating Class To From A-2 A- (sf) BB+ (sf)/Watch Pos B BB+ (sf) CCC- (sf) RATINGS AFFIRMED Valhalla CLO Ltd. Class Rating C-1 CCC- (sf) C-2 CCC- (sf) WACHOVIA BANK 2003-C6: Moody's Affirms 'Caa3' Rating on O Certs. ---------------------------------------------------------------- Moody's Investors Service upgraded the ratings of four classes and affirmed 11 classes of Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2003-C6 as follows: Cl. A-4, Affirmed at Aaa (sf); previously on Sep 17, 2003 Definitive Rating Assigned Aaa (sf) Cl. B, Affirmed at Aaa (sf); previously on Aug 7, 2006 Upgraded to Aaa (sf) Cl. C, Affirmed at Aaa (sf); previously on Jul 9, 2007 Upgraded to Aaa (sf) Cl. D, Affirmed at Aaa (sf); previously on Aug 9, 2007 Upgraded to Aaa (sf) Cl. E, Affirmed at Aaa (sf); previously on Oct 27, 2011 Upgraded to Aaa (sf) Cl. F, Upgraded to Aaa (sf); previously on Oct 27, 2011 Upgraded to Aa2 (sf) Cl. G, Upgraded to Aa2 (sf); previously on Oct 27, 2011 Upgraded to A1 (sf) Cl. H, Upgraded to A2 (sf); previously on Oct 27, 2011 Upgraded to Baa1 (sf) Cl. J, Upgraded to Baa2 (sf); previously on Sep 17, 2003 Definitive Rating Assigned Ba1 (sf) Cl. K, Affirmed at Ba2 (sf); previously on Sep 17, 2003 Definitive Rating Assigned Ba2 (sf) Cl. L, Affirmed at Ba3 (sf); previously on Sep 17, 2003 Definitive Rating Assigned Ba3 (sf) Cl. M, Affirmed at B1 (sf); previously on Sep 17, 2003 Definitive Rating Assigned B1 (sf) Cl. N, Affirmed at Caa1 (sf); previously on Dec 2, 2010 Downgraded to Caa1 (sf) Cl. O, Affirmed at Caa3 (sf); previously on Dec 2, 2010 Downgraded to Caa3 (sf) Cl. IO, Affirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) Ratings Rationale The upgrades are due to an increase in subordination due to increased subordination resulting from loan payoffs, amortization and defeasance as well as overall improved pool performance. The pool has paid down by 13% since last review. The affirmations to the ten principal bonds are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), 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. The rating of the interest-only class, Class IO, is consistent with the expected credit performance of its referenced classes and thus is affirmed. Moody's rating action reflects a cumulative base expected loss of 2.8% of the current pooled balance compared to 3.5% at last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255 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 extent of growth in the current macroeconomic environment and commercial real estate property markets. While commercial real estate property values are beginning to move in a positive direction along with a rise in investment activity and stabilization in core property type performance, a consistent upward trend will not be evident until the volume of investment activity steadily increases, distressed properties are cleared from the pipeline, and job creation rebounds. The hotel sector is performing strongly and the multifamily sector continues to show increases in demand. Moderate improvements in the office sector continue with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow. Performance in the retail sector has been mixed with lackluster sales driven by discounting and promotions. However, rising wages and reduced unemployment, along with increased consumer confidence, is helping to spur consumer spending. Across all property sectors, the availability of debt capital continues to improve with increased securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario reflects healthier growth in the US and US growth decoupling from the recessionary trend in the euro zone, while a mild recession is expected in 2012. Downside risks remain significant, although they have moderated compared to earlier this year. Major downside risks include an increase in the potential magnitude of the euro area recession, the risk of an oil supply shock weighing negatively on consumer purchasing power and home prices, ongoing and policy- induced banking sector deleveraging leading to a tightening of bank lending standards and credit contraction, financial market turmoil continuing to negatively impact consumer and business confidence, persistently high unemployment levels, and weak housing markets, any or all of which will continue to constrain growth. The methodologies used in this rating were "Moody's Approach to Rating Fusion U.S. CMBS Transactions" published in April 2005, "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000, and "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.61 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) 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 (sf) level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), 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 (sf) and B2 (sf), 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 assessments is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit assessment 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 assessment level, is incorporated for loans with similar credit assessments in the same transaction. The conduit model includes an IO calculator, which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit assessments; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point. For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. 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 19, compared to 26 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 8.4 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 (CMBS) transactions. Moody's monitors transactions on a monthly basis through a review utilizing MOST(R)(Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated October 27, 2011. Deal Performance As of the August 15, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 52% to $456 million from $953 million at securitization. The Certificates are collateralized by 66 mortgage loans ranging in size from less than 1% to 13% of the pool, with the top ten loans representing 40% of the pool. Eleven loans, representing 24% of the pool, have been defeased and are collateralized with U.S. Government Securities. One loan, representing 13% of the pool, has an investment grade credit assessment. Six loans, representing 7% 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) monthly reporting package. As part of its ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Four loans have been liquidated from the pool, resulting in an aggregate realized loss of $5 million (19% average loss severity). Two loans, representing 1% of the pool, are currently in special servicing. The servicer has recognized a $1 million appraisal reduction for the Oxford Townhomes Loan ($3 million -- 0.6% of the pool), which is a real estate owned (REO) multifamily property located in Morrow, Georgia. Moody's has estimated an aggregate $2 million loss (35% average expected loss) for both specially serviced loans. Moody's has assumed a high default probability for two poorly performing loans representing 3% of the pool and has estimated a $3 million aggregate loss (21% expected loss based on a 50% probability default) from these troubled loans. Moody's was provided with full year 2011 and partial year 2012 operating results for 98% and 90% of the conduit, respectively. The conduit portion of the pool excludes specially serviced, troubled and defeased loans as well as the loan with a credit assessment. Moody's weighted average conduit LTV is 77% compared to 80% 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 8.9%. Moody's actual and stressed conduit DSCRs are 1.55X and 1.36X, respectively, compared to 1.48X and 1.30X at last review. Moody's actual DSCR is based on Moody's net cash flow (NCF) 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 a credit assessment is the Lloyd Center Loan ($60 million -- 13.1% of the pool), which is secured by the borrower's interest in a 1.5 million square foot (SF) regional mall located in Portland, Oregon. This loan represents a 50% pari-passu interest in a $119 million first mortgage loan. The mall is anchored by Macy's, Sears and Nordstrom. As of June 2012, the total mall was 96% leased, while the in-line space was 92% leased. Blackstone and Glimcher Realty are the sponsors. A full or partial interest in the collateral is being marketed for sale. The loan matures in June 2013. Moody's current credit assessment and stressed DSCR are Baa1 and 1.56X, respectively, compared to Baa1 and 1.46X at last review. The top three performing conduit loans represent 12% of the pool balance. The largest conduit loan is the Coral Sky Plaza Loan ($21 million -- 4.7% of the pool), which is secured by a 233,000 SF retail center located in Royal Palm Beach, Florida. The property was 87% leased as of June 2012 compared to 96% at last review. Old Navy, formerly the property's fourth largest tenant, vacated in February 2012. There is minimal remaining rollover risk as only 5% of the leases expire between 2012 and 2015. Moody's LTV and stressed DSCR are 93% and 1.01X, respectively, compared to 89% and 1.07X at last review. The second largest conduit loan is The Shoppes at Union Hill Loan ($17 million -- 3.8% of the pool), which is secured by an 88,000 SF retail center located in Denville, New Jersey. The property was fully leased as of May 2012, which is the same as at last review. Seventy percent of the leases expire by the end of 2014. Moody's stressed the property's cash flow to address the lease rollover risk concern. Moody's LTV and stressed DSCR are 69% and 1.45X, respectively, compared to 70% and 1.4X at last review. The third largest conduit loan is the Via Tuscany Apartments Loan ($16 million -- 3.6% of the pool), which is secured by a 280-unit multifamily property located in Melbourne, Florida. The loan was on the servicer's watchlist at last review due to declining occupancy and DSCR. The property has rebounded strongly. The collateral was 95% leased as of March 2012 compared to 79% as of June 2011. Moody's LTV and stressed DSCR are 95% and 1.0X, compared to 113% and 0.84X at last review. WACHOVIA BANK 2004-C10: Moody's Affirms 'C' Rating on O Certs. -------------------------------------------------------------- Moody's Investors Service affirmed the ratings of 16 pooled classes and one non-pooled, or rake, class of Wachovia Bank Commercial Mortgage Securities Trust Commercial Mortgage Pass- Through Certificates, Series 2004-C10 as follows: Cl. A-4, Affirmed at Aaa (sf); previously on Sep 28, 2004 Definitive Rating Assigned Aaa (sf) Cl. A-1A, Affirmed at Aaa (sf); previously on Sep 28, 2004 Definitive Rating Assigned Aaa (sf) Cl. B, Affirmed at Aaa (sf); previously on Nov 21, 2006 Upgraded to Aaa (sf) Cl. C, Affirmed at Aaa (sf); previously on Jan 10, 2008 Upgraded to Aaa (sf) Cl. D, Affirmed at Aa1 (sf); previously on Oct 27, 2011 Upgraded to Aa1 (sf) Cl. E, Affirmed at Aa3 (sf); previously on Oct 27, 2011 Upgraded to Aa3 (sf) Cl. F, Affirmed at A3 (sf); previously on Jan 10, 2008 Upgraded to A3 (sf) Cl. G, Affirmed at Baa2 (sf); previously on Sep 28, 2004 Definitive Rating Assigned Baa2 (sf) Cl. H, Affirmed at Baa3 (sf); previously on Sep 28, 2004 Definitive Rating Assigned Baa3 (sf) Cl. J, Affirmed at Ba2 (sf); previously on Dec 2, 2010 Downgraded to Ba2 (sf) Cl. K, Affirmed at B2 (sf); previously on Dec 2, 2010 Downgraded to B2 (sf) Cl. L, Affirmed at Caa1 (sf); previously on Dec 2, 2010 Downgraded to Caa1 (sf) Cl. M, Affirmed at Caa3 (sf); previously on Dec 2, 2010 Downgraded to Caa3 (sf) Cl. N, Affirmed at Ca (sf); previously on Dec 2, 2010 Downgraded to Ca (sf) Cl. O, Affirmed at C (sf); previously on Dec 2, 2010 Downgraded to C (sf) Cl. X-C, Affirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) Cl. SL, Affirmed at Aaa (sf); previously on Oct 27, 2011 Upgraded to Aaa (sf) Ratings Rationale The affirmations for the 15 principal pooled classes are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed DSCR and the Herfindahl Index (Herf), 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. The non-pooled, or rake class, is affirmed at Aaa (sf) because it is fully defeased and collateralized with U.S. Government Securities. The rating of the IO Class, Class XC, is consistent with the expected credit performance of its referenced classes and thus is affirmed. Moody's rating action reflects a cumulative base expected loss of 2.3% of the current pooled balance compared to 1.9% at last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255 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 extent of growth in the current macroeconomic environment and commercial real estate property markets. While commercial real estate property values are beginning to move in a positive direction along with a rise in investment activity and stabilization in core property type performance, a consistent upward trend will not be evident until the volume of investment activity steadily increases, distressed properties are cleared from the pipeline, and job creation rebounds. The hotel sector is performing strongly and the multifamily sector continues to show increases in demand. Moderate improvements in the office sector continue with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow. Performance in the retail sector has been mixed with lackluster sales driven by discounting and promotions. However, rising wages and reduced unemployment, along with increased consumer confidence, is helping to spur consumer spending. Across all property sectors, the availability of debt capital continues to improve with increased securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario reflects healthier growth in the US and US growth decoupling from the recessionary trend in the euro zone, while a mild recession is expected in 2012. Downside risks remain significant, although they have moderated compared to earlier this year. Major downside risks include an increase in the potential magnitude of the euro area recession, the risk of an oil supply shock weighing negatively on consumer purchasing power and home prices, ongoing and policy- induced banking sector deleveraging leading to a tightening of bank lending standards and credit contraction, financial market turmoil continuing to negatively impact consumer and business confidence, persistently high unemployment levels, and weak housing markets, any or all of which will continue to constrain growth. The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000, "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000, and "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.61 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) 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 (sf) level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), 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 (sf) and B2 (sf), 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 assessments is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit assessment 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 assessment level, is incorporated for loans with similar credit assessments in the same transaction. The conduit model includes an IO calculator, which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit assessments; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point. For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. 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 14, compared to 17 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 8.4 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 (CMBS) transactions. Moody's monitors transactions on a monthly basis through a review utilizing MOST(R)(Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated October 27, 2011. Deal Performance As of the August 17, 2012 distribution date, the transaction's aggregate pooled certificate balance has decreased by 38% to $805 million from $1.3 billion at securitization. The total deal balance is $826 million due to a $21 million non-pooled class that is secured by a defeased loan. The Certificates are collateralized by 56 mortgage loans ranging in size from less than 1% to 10% of the pool, with the top ten loans representing 31% of the pool. Eleven loans, representing 52% of the pool, have been defeased and are collateralized with U.S. Government Securities. Nine 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 (CREFC) monthly reporting package. As part of its 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 million (43% average loss severity). One loan, representing less than 1% of the pool, is currently in special servicing. The loan is less than one month delinquent and the servicer has not recognized an appraisal reduction. Moody's analysis incorporates a 25% loss for the specially serviced loan. Moody's has assumed a high default probability for two poorly performing loans representing 1% of the pool and has estimated a $2 million aggregate loss (20% expected loss based on a 50% probability default) from these troubled loans. Moody's was provided with full year 2011 and partial year 2012 operating results for 97% and 77% of the conduit, respectively. The conduit portion of the pool excludes specially serviced, troubled and defeased loans. Moody's weighted average conduit LTV is 90%, which is the same as at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 10% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.0%. Moody's actual and stressed conduit DSCRs are 1.37X and 1.14X, respectively, compared to 1.37X and 1.13X at last review. Moody's actual DSCR is based on Moody's net cash flow (NCF) 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 conduit loans represent 18% of the pool. The largest conduit loan is the North Riverside Park Mall Loan ($80 million -- 9.9% of the pool), which is secured by the borrower's interest in a 1.1 million square foot (SF) regional mall located 11 miles west of Chicago's CBD in North Riverside, Illinois. The mall is anchored by a J.C. Penney, Carson Pirie Scott & Co and Sears. The 440,000 SF collateral portion was 95% leased as of July 2012 compared to 94% as of September 2011. Property performance declined due to an increase in operating expenses. Moody's LTV and stressed DSCR are 122% and 0.8X, respectively, compared to 108% and 0.91X at last review. The second largest loan is the Villa del Sol Apartments Loan ($41 million -- 5.1% of the pool), which is secured by a 562-unit apartment complex located in Santa Ana, California. The property has maintained a 95%+ occupancy since securitization. It was 97% leased as of March 2012. The property's average rent is $1,232 per unit, which is approximately 11% less than CBRE Econometric Advisor's average multifamily rent in Santa Ana. Moody's LTV and stressed DSCR are 88% and 1.04X, respectively, compared to 86% and 1.07X at last review. The third largest loan is the Pine Trail Square Loan ($26 million -- 3.3% of the pool), which is secured by a 270,000 SF retail center located in West Palm Beach, Florida. Former anchor tenant Albertson's, which occupied 54,000 SF, vacated the property. The sponsor has re-leased 32,000 SF of the former's Albertson's space to HH Gregg, but the rest remains vacant. The property was 87% leased as of April 2012 compared to 88% as of June 2011. Moody's LTV and stressed DSCR are 80% and 1.21X, respectively, compared to 82% and 1.19X at last review. WACHOVIA BANK 2004-C14: Moody's Cuts Rating on O Certs. to 'Ca' --------------------------------------------------------------- Moody's Investors Service (Moody's) downgraded the ratings of seven classes and affirmed 11 classes of Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2004-C14 as follows: Cl. A-3, Affirmed at Aaa (sf); previously on Sep 15, 2004 Assigned Aaa (sf) Cl. A-4, Affirmed at Aaa (sf); previously on Sep 15, 2004 Assigned Aaa (sf) Cl. A-1A, Affirmed at Aaa (sf); previously on Sep 15, 2004 Assigned Aaa (sf) Cl. B, Affirmed at Aa1 (sf); previously on Oct 27, 2011 Upgraded to Aa1 (sf) Cl. C, Affirmed at Aa2 (sf); previously on Oct 27, 2011 Upgraded to Aa2 (sf) Cl. D, Affirmed at A2 (sf); previously on Sep 15, 2004 Definitive Rating Assigned A2 (sf) Cl. E, Affirmed at A3 (sf); previously on Sep 15, 2004 Definitive Rating Assigned A3 (sf) Cl. F, Affirmed at Baa1 (sf); previously on Oct 27, 2011 Confirmed at Baa1 (sf) Cl. G, Affirmed at Baa2 (sf); previously on Oct 27, 2011 Confirmed at Baa2 (sf) Cl. H, Downgraded to Ba3 (sf); previously on Oct 27, 2011 Downgraded to Ba2 (sf) Cl. J, Downgraded to B1p (sf); previously on Oct 27, 2011 Downgraded to Ba3 (sf) Cl. K, Downgraded to B2 (sf); previously on Oct 27, 2011 Downgraded to B1 (sf) Cl. L, Downgraded to Caa1 (sf); previously on Oct 27, 2011 Downgraded to B3 (sf) Cl. M, Downgraded to Caa2 (sf); previously on Oct 27, 2011 Downgraded to Caa1 (sf) Cl. N, Downgraded to Caa3 (sf); previously on Oct 27, 2011 Downgraded to Caa2 (sf) Cl. O, Downgraded to Ca (sf); previously on Oct 27, 2011 Downgraded to Caa3 (sf)p Cl. X-C, Affirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) Cl. MAD, Affirmed at Aaa (sf); previously on May 4, 2007 Upgraded to Aaa (sf) Ratings Rationale The downgrades are due to higher anticipated losses from specially serviced and troubled loans and higher loan to value dispersion of the performing pool. The affirmations of the pooled principal classes are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), 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. Class MAD is secured by a B-note on the 11 Madison Avenue Loan which has been defeased and thus is affirmed at Aaa. The rating of the IO Class, Class XC, is consistent with the expected credit performance of its referenced classes and thus is affirmed. Moody's rating action reflects a cumulative base expected loss of 5.7% of the current balance. At last review, Moody's cumulative base expected loss was 4.6%. Realized losses represent 0.2% of the original balance, the same as last review. Moody's provides a current list of base losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255. 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. The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of assumption uncertainty are the extent of growth in the current macroeconomic environment and commercial real estate property markets. Commercial real estate property values are continuing to move in a positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with eight straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Slow recovery in the office sector continues with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by discounting and promotions. However, rising wages and reduced unemployment, along with increased consumer confidence, is helping to spur consumer spending resulting in increased sales. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario maintains its forecast of relatively robust growth in the US and an expectation of a mild recession in the euro area for 2012. Downside risks remain significant, and elevated downside risks and their materialization could pose a serious threat to the outlook. Major downside risks include: a deeper than expected recession in the euro area; the potential for a hard landing in major emerging markets; an oil supply shock; and material fiscal tightening in the US given recent political gridlock. Healthy but below-trend growth in GDP is expected through the rest of this year and next with risks trending to the downside. The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000, and "Moody's Approach to Rating Structured Finance Interest- Only Securities" published in February 2012. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.61 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) 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 (sf) level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), 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 (sf) and B2 (sf), 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 assessments is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit assessment 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 assessment level, is incorporated for loans with similar credit assessments in the same transaction. Moody's review also incorporated the CMBS IO calculator ver1.1, which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit assessments; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point. For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator ver1.1 would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. 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 22 compared to 24 at Moody's prior 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 (CMBS) transactions. Moody's monitors transactions on a monthly basis through a review utilizing MOST(R) (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated October 27, 2011. Deal Performance As of the August 17, 2012 distribution date, the transaction's aggregate pooled certificate balance has decreased by 43% to $622 million from $1.1 billion at securitization. The Certificates are collateralized by 57 mortgage loans ranging in size from less than 1% to 12% of the pool, with the top ten non-defeased loans representing 45% of the pool. Six loans, representing 16% of the pool, have defeased and are secured by U.S. Government securities. Seven loans, representing 15% 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) monthly reporting package. As part of its 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, resulting in an aggregate realized loss of $1.7 million (11% loss severity on average). Two loans, representing 5% of the pool, are currently in special servicing. The largest specially serviced loan is the Bel Villaggio, Phases I & II Loan ($15.9 million -- 2.6% of the pool), which is secured by a 77,251 square foot (SF) retail center located in Temecula, California. The loan was transferred to special servicing in November 2009 due to imminent monetary default and is currently REO. The property was 58% leased as of July 2012. The special servicer indicated the property's leasing team is currently marketing the vacant space in order to lease up the property. The second specially serviced loan is the Summer View at Sherman Oaks Apartments Loan ($14.9 million -- 2.4% of the pool). This loan is secured by a 169-unit apartment complex located in Sherman Oaks, California. The loan was transferred into special servicing in February 2011 due to monetary default. The original borrower filed for bankruptcy in August 2011 and a plan of reorganization, which included a sale of the property and assumption of the loan, was approved by the court. The sale and loan assumption occurred in March 2012 and the loan is current on its payments. The special servicer indicated that this loan is pending return to the master servicer after three timely payments are made. Moody's estimates an aggregate $12.8 million loss for specially serviced loans (42% expected loss on average). Moody's has assumed a high default probability for three poorly performing loans representing 3% of the pool and has estimated an aggregate $2.9 million loss (18% expected loss based on a 50% probability default) from these troubled loans. Moody's was provided with full year 2011 operating results for 98% of the pool's non-specially serviced and non-defeased loans. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 94% compared to 96% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 8% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.1%. Excluding special serviced and troubled loans, Moody's actual and stressed DSCRs are 1.33X and 1.13X, respectively, compared to 1.27X and 1.06X at last review. Moody's actual DSCR is based on Moody's net cash flow (NCF) 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 23% of the pool balance. The largest loan is the 444 North Michigan Avenue Loan ($71.5 million -- 11.5% of the pool), which is secured by a 511,201 SF office property located in Chicago, Illinois. The property was 69% leased as of June 2012 compared to 72% at last review. The loan is currently on the master servicer's watchlist due to a low DSCR. The master servicer indicated that the property manager has been very active in marketing the property and has signed new tenants representing approximately 5% of the NRA that are scheduled to begin their leases within the next eight months. Although the recent activity should increase the near-term performance of the property, Moody's is concerned about the property's ability to stabilize prior to the loan maturity date of July 2014. Moody's LTV and stressed DSCR are 134% and 0.72X, respectively, compared to 133% and 0.73X at last full review. The second largest loan is the FBI Field Office - Baltimore, MD Loan ($37.9 million -- 6.1% of the pool), which is secured by a 155,755 SF Class A office property located approximately seven miles northwest of Baltimore in Woodlawn, Maryland. The property is 100% leased to the FBI through July 2014 with two 5-year renewal options. The loan was previously transferred into special servicing in February 2010 due to the parent of the borrower filing for Chapter 11 but the loan has been returned to the master servicer. Due to the single tenant nature of the property, Moody's is concerned about the potential rollover risk only ten months after the loan's maturity date of August 2013. Moody's value for this loan reflects a lit/dark analysis. Moody's LTV and stressed DSCR are 121% and 0.83X, respectively, compared to 98% and 1.03X at last review. The third largest loan is the Barneys New York - Beverly Hills, CA Loan ($32.6 million -- 5.2% of the pool), which is secured by a 114,978 SF single tenant retail property located in Beverly Hills, California. The tenant is Barneys New York, Inc., with a lease expiration in January 2019. The loan maturity is August 2014. Property performance has been stable. Moody's value for this loan reflects a lit/dark analysis. Moody's LTV and stressed DSCR are 85% and 1.08X, respectively, compared to 84% and 1.09X at last review. WCP WIRELESS: Fitch Affirms 'BB-' Rating on $50MM Class C Notes --------------------------------------------------------------- Fitch Ratings affirms 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 as follows: -- $211 million class A at 'Asf'; Outlook Stable; -- $55 million class B at 'BBB-sf'; Outlook Stable; -- $50 million class C at 'BB-sf'; Outlook Stable. The affirmations are due to the stable performance of the collateral since issuance. In addition, the transaction has paid down 3.4% (as of August 2012) since issuance. The notes are secured primarily by mortgages on the interests of the asset entities in wireless sites representing not less than 95% of the net cash flow (NCF) from purchased leasehold interests and a perfected security interest in loan assets. A portion of the notes are secured by payment obligations guaranteed by AT&T Inc. (AT&T Receivables; rated 'A' with a Stable Outlook by Fitch). As part of its review, Fitch analyzed the financial information provided by the master servicer, Midland Loan Services. As of August 2012, the reported aggregate scheduled revenue net cash flow increased to $39.8 million (including AT&T Receivables) from $36.9 million at issuance. WELLS FARGO 2005-1: Moody's Cuts Cl. M-6 RMBS Rating to 'Ca' ------------------------------------------------------------ Moody's Investors Service has downgraded the ratings on eight tranches and confirmed the ratings on two tranches from four subprime RMBS transactions issued by Wells Fargo. The collateral backing these transactions are subprime residential mortgages. Complete rating actions are as follows: Issuer: Wells Fargo Home Equity Asset-Backed Securities 2005-1 Trust Cl. M-1, Downgraded to Aa2 (sf); previously on Jun 3, 2010 Confirmed at Aa1 (sf) Cl. M-2, Downgraded to Baa2 (sf); previously on May 30, 2012 Aa3 (sf) Placed Under Review for Possible Downgrade Cl. M-3, Downgraded to Ba3 (sf); previously on May 30, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade Cl. M-4, Downgraded to Caa1 (sf); previously on May 30, 2012 B2 (sf) Placed Under Review for Possible Downgrade Cl. M-5, Downgraded to Caa3 (sf); previously on May 30, 2012 Caa1 (sf) Placed Under Review for Possible Downgrade Cl. M-6, Downgraded to Ca (sf); previously on May 30, 2012 Caa3 (sf) Placed Under Review for Possible Downgrade Issuer: Wells Fargo Home Equity Asset-Backed Securities 2005-3 Trust Cl. M-3, Downgraded to Ba1 (sf); previously on Jun 3, 2010 Confirmed at Baa3 (sf) Cl. M-4, Downgraded to B2 (sf); previously on May 30, 2012 Ba3 (sf) Placed Under Review for Possible Downgrade Issuer: Wells Fargo Home Equity Asset-Backed Securities 2006-1 Trust Cl. A-3, Confirmed at A1 (sf); previously on May 30, 2012 A1 (sf) Placed Under Review for Possible Upgrade Issuer: Wells Fargo Home Equity Asset-Backed Securities 2006-2 Trust Cl. M-1, Confirmed at Caa2 (sf); previously on May 30, 2012 Caa2 (sf) Placed Under Review for Possible Downgrade Ratings Rationale The actions are a result of the recent performance of Subprime pools originated after 2005 and reflect Moody's updated loss expectations on these pools. The downgrades in the rating action are a result of deteriorating performance and/or structural features resulting in higher expected losses for certain bonds than previously anticipated. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. Moody's adjusts the methodologies noted above for Moody's current views on loan modifications. As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. 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) (SFW), 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 extended foreclosure timelines by servicers is taken into consideration when assigning ratings. The above methodology only applies to pools with at least 40 loans and a pool factor of greater than 5%. Moody's may withdraw its rating when the pool factor drops below 5% and the number of loans in the pool declines to 40 loans or lower unless specific structural features allow for a monitoring of the transaction (such as a credit enhancement floor). The primary sources of assumption uncertainty are Moody's central macroeconomic forecast and performance volatility as a result of servicer-related activity such as modifications. The unemployment rate fell from 9.1% in June 2011 to 8.2% in June 2012. Moody's forecasts a further drop to 7.8% by the end of 2Q 2013. Moody's expects housing prices to remain stable through the remainder of 2012 before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer activity such as modification-related principal forgiveness and interest rate reductions. Any change resulting from servicing transfers or other policy or regulatory change can also impact the performance of these transactions . A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF298015 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF198689 WELLS FARGO 2010-C1: Moody's Affirms B2 Rating on Class F Certs. ---------------------------------------------------------------- Moody's Investors Service affirmed the ratings of nine classes of Wells Fargo Commercial Mortgage Trust, Commercial Mortgage Pass- Through Certificates, Series 2010-C1 as follows: Cl. A-1, Affirmed at Aaa (sf); previously on Nov 19, 2010 Definitive Rating Assigned Aaa (sf) Cl. A-2, Affirmed at Aaa (sf); previously on Nov 19, 2010 Definitive Rating Assigned Aaa (sf) Cl. B, Affirmed at Aa2 (sf); previously on Nov 19, 2010 Definitive Rating Assigned Aa2 (sf) Cl. C, Affirmed at A2 (sf); previously on Nov 19, 2010 Definitive Rating Assigned A2 (sf) Cl. D, Affirmed at Baa3 (sf); previously on Nov 19, 2010 Definitive Rating Assigned Baa3 (sf) Cl. E, Affirmed at Ba2 (sf); previously on Nov 19, 2010 Definitive Rating Assigned Ba2 (sf) Cl. F, Affirmed at B2 (sf); previously on Nov 19, 2010 Definitive Rating Assigned B2 (sf) Cl. X-A, Affirmed at Aaa (sf); previously on Nov 19, 2010 Definitive Rating Assigned Aaa (sf) Cl. X-B, Affirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) Ratings Rationale The affirmations of the principal classes are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), 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. The ratings of the IO Classes, Class X-A and X-B, are consistent with the expected credit performance of their referenced classes and thus are affirmed. Moody's rating action reflects a cumulative base expected loss of 1.6% of the current balance compared to 1.2% at last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255 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 extent of growth in the current macroeconomic environment and commercial real estate property markets. Commercial real estate property values are continuing to move in a positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with eight straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Slow recovery in the office sector continues with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by discounting and promotions. However, rising wages and reduced unemployment, along with increased consumer confidence, is helping to spur consumer spending resulting in increased sales. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario maintains its forecast of relatively robust growth in the US and an expectation of a mild recession in the euro area for 2012. Downside risks remain significant, and elevated downside risks and their materialization could pose a serious threat to the outlook. Major downside risks include: a deeper than expected recession in the euro area; the potential for a hard landing in major emerging markets; an oil supply shock; and material fiscal tightening in the US given recent political gridlock. Healthy but below-trend growth in GDP is expected through the rest of this year and next with risks trending to the downside. The methodologies used in this rating were "Moody's Approach to Rating Fusion U.S. CMBS Transactions" published in April 2005, "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000, and "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.61 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) 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 (sf) level are driven by a pay down analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), 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 (sf) and B2 (sf), 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 assessments is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the underlying credit assessment 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 assessments in the same transaction. Moody's review also incorporated the CMBS IO calculator ver1.1 which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit estimates; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type corresponding to an IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point . For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator ver1.1 would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. 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, the same as 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 8.4 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 (CMBS) transactions. Moody's monitors transactions on a monthly basis through a review utilizing MOST(R) (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated October 20, 2011. Deal Performance As of the August 17, 2012 distribution date, the transaction's aggregate certificate balance has decreased 3% to $718 million from $736 million at securitization. The Certificates are collateralized by 37 mortgage loans ranging in size from less than 1% to 25% of the pool, with the top ten loans representing 64% of the pool. No loans have defeased and there are four loans with an investment grade credit assessment. There are two loans, representing 6% of the pool, 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) monthly reporting package. As part of its 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 since securitization and there are no loans in special servicing. Moody's has not assumed a high default probability for any loans and has estimated no losses from troubled loans. Moody's was provided with full year 2011 operating results for 100% of the performing pool and partial year 2012 operating results for 74% of the performing pool. Excluding specially serviced loans, Moody's weighted average conduit LTV is 83% compared to 84% at last full review. Moody's net cash flow reflects a weighted average haircut of 11.2% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.5%. Moody's actual and stressed conduit DSCRs are 1.55X and 1.27X, respectively, compared to 1.55X and 1.25X, respectively, at last full review. Moody's actual DSCR is based on Moody's net cash flow (NCF) 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 assessment is the Dividend Capital Portfolio Loan ($180.0 million -- 25.1% of the pool), which is secured by a fee interest in 14 single tenant properties located across nine states. The portfolio consists of seven office properties, five industrial distribution centers, one data center and one research and development facility. In aggregate, the portfolio contains approximately 3,643,379 square feet (SF). As of December 2011 the portfolio was 100% leased, the same as at last review. Moody's cash flow was stressed to reflect the risk inherent with single tenant triple net leased properties. The loan also benefits from amortization. Moody's current credit assessment and stressed DSCR are Baa3 and 1.55X, respectively, compared to Baa3 and 1.46X at last review. The second largest loan with a credit assessment is the Salmon Run Mall Loan ($53.9 million -- 7.5% of the pool), which is secured by a regional mall containing approximately 671,766 SF located in Watertown, New York. Salmon Run Mall is the only regional mall within the trade area and is eight miles away from Fort Drum Army Base, which is the largest employer in Northern New York. Anchor tenants include Sears, Burlington Coat Factory, Gander Mountain, Dick's Sporting Goods and J.C. Penney. As of December 2011 the property was 89% leased versus 94% leased at last review. Financial performance has declined slightly in concert with lower occupancy. Moody's current credit assessment and stressed DSCR are A3 and 1.58X, respectively, compared to A3 and 1.61X at last review. The third largest loan with a credit assessment is the 19 West 34th Street Loan ($25.0 million -- 3.5% of the pool), which is secured by a 224,093 SF mixed use property located directly across from the Empire State Building in New York, New York. Constructed in 1907 (renovated in 1995), the property contains both retail and office components. The main retail tenant, Banana Republic, is currently operating under a sublease from Martin Building Retail, an entity of the owner. As of December 2011, the property was 99% leased, the same as at last review. The loan is interest-only throughout the term. Moody's current credit assessment and stressed DSCR are Aa2 and 1.88X, respectively, compared to Aa2 and 1.97X at last review. The fourth largest loan with a credit assessment is the Radisson Reagan National Airport Loan ($19.6 million -- 2.7% of the pool), which is secured by a 243-room full service hotel located a quarter of a mile away from the Reagan National Airport in Arlington, Virginia. The property was 78% leased as of December 2011 compared to 81% as of December 2010. This loan also benefits from amortization. Moody's current credit assessment and stressed DSCR are Baa3 and 1.94X, respectively, compared to Baa3 and 1.88X at securitization. The top three performing conduit loans represent 39% of the pool balance. The largest loan is the Polaris Towne Center Loan ($44.9 million -- 6.3% of the pool), which is secured by a 443,264 SF anchored retail center located in Columbus, Ohio. The property was 98% leased as of December 2011 compared to 97% at last review. Anchor tenants include Kroger and Best Buy. The property also benefits from non-owned shadow anchors Target and Lowes. Moody's LTV and stressed DSCR are 81% and 1.21X, respectively, compared to 82% and 1.18X at last review. The second largest loan is the First Tennessee Plaza and Cedar Ridge Loan ($35.3 million -- 4.9% of the pool), two crossed- collateralized and cross-defaulted loans secured by two separate office properties, totaling 536,869 SF, located in Knoxville, Tennessee. The largest property is First Tennessee Plaza, a 447,013 SF high-rise office building located in downtown Knoxville. The remaining collateral is represented by Cedar Ridge, a 89,856 SF office building located in suburban Knoxville. The loan is encumbered with a $3.6 million junior participation interest held outside of the trust. The portfolio was 76% leased as of December 2011 versus 86% leased as of December 2010. Moody's LTV and stressed DSCR are 103% and 1.0X, respectively, compared to 99% and 1.04X at last review. The third largest loan is the Pepper Square I and II and Central Forest Shopping Center Loan ($31.3 million -- 4.4% of the pool), two crossed-collateralized and cross-defaulted loans secured by separate retail properties, totaling 372,753 SF, located in Dallas, Texas. The portfolio's largest tenants include Hobby Lobby, Stein Mart and Bally's Total Fitness. The portfolio was 86% leased as of March 2012, the same as at last review. Moody's LTV and stressed DSCR are 89% and 1.18X, respectively, compared to 90% and 1.17X at last review. WESTGATE RESORTS 2012-2: S&P Gives 'BB' Rating on Class C Notes --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its ratings to Westgate Resorts 2012-2 LLC's $221 million timeshare- collateralized notes. The note issuance is an asset-backed securities transaction backed by deeded vacation ownership interval (timeshare) loans. "The ratings reflect our opinion of the credit enhancement available in the form of subordination, overcollateralization, a reserve account, and available excess spread; and our view of Westgate Resorts Ltd.'s servicing ability and experience in the timeshare market," S&P said. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com/967.pdf RATINGS ASSIGNED Westgate Resorts 2012-2 LLC Class Rating Amount (mil. $) A A (sf) 141 B BBB (sf) 49 C BB (sf) 31 WFCM 2012-LC5: Fitch Issues Presale Report on Several Certificates ------------------------------------------------------------------ Fitch Ratings has issued a presale report on WFCM 2012-LC5 Commercial Mortgage Pass-Through Certificates. Fitch expects to rate the transaction and assign Outlooks as follows: -- $81,143,000 class A-1 'AAAsf'; Outlook Stable; -- $156,188,000 class A-2 'AAAsf'; Outlook Stable; -- $466,683,000 class A-3 'AAAsf'; Outlook Stable; -- $100,000,000 Class A-SB 'AAAsf'; Outlook Stable; -- $90,000,000#a class A-FL 'AAAsf'; Outlook Stable; -- $0 class A-FXa 'AAAsf'; Outlook Stable; -- $1,018,538,000a* class X-A 'AAAsf'; Outlook Stable; -- $76,630,000a* class X-B 'AA-sf'; Outlook Stable; -- $124,524,000 class A-S 'AAAsf'; Outlook Stable; -- $76,630,000 class B 'AA-sf'; Outlook Stable; -- $41,508,000 class C 'A-sf'; Outlook Stable; -- $49,490,000a class D 'BBB-sf'; Outlook Stable; -- $20,754,000a class E 'BBsf'; Outlook Stable; -- $23,946,000a class F 'Bsf'; Outlook Stable. # Floating Rate. * Notional amount and interest only. a Privately placed pursuant to Rule 144A. The expected ratings are based on information provided by the issuer as of Sept. 7, 2012. Fitch does not expect to rate the $46,298,194 class G. The certificates represent the beneficial ownership in the trust, primary assets of which are 70 loans secured by 124 commercial properties having an aggregate principal balance of approximately $1.277 billion as of the cutoff date. The loans were contributed to the trust by Wells Fargo Bank National Association, Ladder Capital Finance LLC and The Royal Bank of Scotland. Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 77.1% of the properties by balance, cash flow analysis of 81.6%, and asset summary reviews on 82.6% of the pool. The transaction has a Fitch stressed debt service coverage ratio (DSCR) of 1.29 times (x), a Fitch stressed loan-to-value (LTV) of 95.4%, and a Fitch debt yield of 10.3%. Fitch's aggregate net cash flow represents a variance of 6.7% to issuer cash flows. The Master Servicer and Special Servicer will be Wells Fargo Bank, N.A. and Rialto Capital Advisors, LLC, rated 'CMS2' and 'CSS2-', respectively, by Fitch. WHITEHORSE I: Moody's Lifts Rating on Cl. B-1L Notes From 'Ba1' --------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of the following notes issued by WhiteHorse I Ltd.: Issuer: WhiteHorse I Ltd. U.S. $10,000,000 Class A-3L Floating Rate Notes Due September 2016, Upgraded to Aa1(sf); previously on Jul 26, 2011 Upgraded to A2 (sf); U.S. $5,000,000 Class B-1L Floating Rate Notes Due September 2016, Upgraded to Baa2(sf); previously on Jul 26, 2011 Upgraded to Ba1(sf). RATINGS RATIONALE According to Moody's, the rating actions taken on the notes are primarily a result of deleveraging of the senior notes and an increase in the transaction's overcollateralization ratios since the rating action in July 2011. Moody's notes that the Class A Notes have been paid down by approximately 46% or $35 million since the last rating action. Based on the latest trustee report dated August 6, 2012, the Class A and Class B1-L overcollateralization ratios are reported at 130.92% and 116.71%, respectively, versus July 2011 levels of 117.39% and 110.15%, respectively. Notwithstanding benefits of the delevering, Moody's notes that the credit quality of the underlying portfolio has deteriorated since the last rating action. Based on the August 2012 trustee report, the weighted average rating factor is currently 2643 compared to 2482 in July 2011. Additionally, Moody's notes that the underlying portfolio includes a number of investments in securities that mature after the maturity date of the notes. Based on the August 2012 trustee report, securities that mature after the maturity date of the notes currently make up approximately 14.8% of the underlying portfolio. 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" published in June 2011, 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 balance of $52.5 million, defaulted par of $5.2 million, a weighted average default probability of 13.58% (implying a WARF of 2443), a weighted average recovery rate upon default of 49.24%, and a diversity score of 25. The 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. WhiteHorse I,Ltd, issued in July 2004, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. The principal methodology used in this rating was "Moody's Approach to Rating Collateralized Loan Obligations" published in June 2011. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Approach to Rating Collateralized Loan Obligations" rating methodology published in June 2011. In addition to the base case analysis described above, Moody's also performed sensitivity analyses to test the impact on all rated notes of various default probabilities. 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 loss), assuming that all other factors are held equal: Moody's Adjusted WARF -- 20% (1954) Class A3L: +1 Class B1-L: +2 Moody's Adjusted WARF + 20% (2932) Class A3L: -2 Class B1-L: -1 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 upcoming speculative-grade debt maturities which may create challenges for issuers to refinance. CLO notes' performance may also be impacted by 1) the manager's investment strategy and behavior and 2) divergence in legal interpretation of CLO documentation by different transactional parties due to embedded ambiguities. Sources of additional performance uncertainties are described below: 1) Deleveraging: The main source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will continue and at what pace. Deleveraging 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 deal's overcollateralization levels. Further, the timing of recoveries and the manager's decision to work out versus sell 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. * S&P Puts Ratings on 17 Tranches From 14 CDOs on Watch Positive ---------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on 17 tranches from 14 corporate-backed synthetic collateralized debt obligation (CDO) transactions on CreditWatch positive. "At the same time, we placed seven ratings on four structured finance- backed synthetic CDO transactions and one rating from one corporate-backed synthetic CDO transaction on CreditWatch negative. In addition, we affirmed one rating from one corporate- backed synthetic CDO transaction and removed it from CreditWatch negative. The rating actions followed our monthly review of synthetic CDO transactions," S&P said. "The CreditWatch positive placements reflect the seasoning of the transactions, the rating stability of the obligors in the underlying reference portfolios over the past few months, and the synthetic rated overcollateralization (SROC) ratios that had risen above 100% at the next highest rating level. The CreditWatch negative placements reflect SROC ratios that fell below 100% due to recent CreditWatch placements of CMBS securities in the underlying reference portfolios following an update to CMBS criteria," S&P said. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATING ACTIONS Aphex Capital MOTIVE Series 2004-C Rating Class To From A CCC+ (sf)/Watch Pos CCC+ (sf) Athenee CDO PLC JPY3.4 bil tranche B Hunter Valley CDO II floating-rate notes due 30 June 2014 series 2007-6 Rating Class To From Tranche B BB- (sf)/Watch Pos BB- (sf) Cloverie PLC Series 2005-56 Rating Class To From A BB+ (sf)/Watch Neg BB+ (sf) Cloverie PLC EUR100 mil Floating Rate Credit Linked Notes Series 2007-44 Rating Class To From Notes B (sf)/Watch Pos B (sf) Cloverie PLC EUR50 mil Floating Rate Credit Linked Notes Series 2007-43 Rating Class To From Notes B (sf)/Watch Pos B (sf) Credit Default Swap US$10 mil Swap Risk Rating-Protection Buyer, CDS Reference #CA1119131 Rating Class To From Tranche BBsrb (sf)/Watch Pos BBsrb (sf) Greylock Synthetic CDO 2006 Series 1 Rating Class To From A3-$LMS BB+ (sf)/Watch Pos BB+ (sf) Morgan Stanley Managed ACES SPC Series 2005-1 Rating Class To From II A BBB (sf)/Watch Pos BBB (sf) II B BBB (sf)/Watch Pos BBB (sf) Morgan Stanley Managed ACES SPC Series 2006-4 Rating Class To From II BBB (sf)/Watch Pos BBB (sf) IIIB BB+ (sf)/Watch Pos BB+ (sf) Mt Kailash Series III Rating Class To From Cr Lkd Ln B (sf)/Watch Neg B (sf) North Street Referenced Linked Notes 2005-9 Limited Rating Class To From E AA- (sf)/Watch Pos AA- (sf) F BB- (sf)/Watch Pos BB- (sf) Omega Capital Investments PLC EUR274 mil, US$160 mil Palladium CDO I Secured Floating Rate Notes Series 19 Rating Class To From S-1E BB+ (sf)/Watch Pos BB+ (sf) Pegasus 2007-1, Ltd. Rating Class To From A1 B+ (sf)/Watch Neg B+ (sf) A2 B+ (sf)/Watch Neg B+ (sf) Prelude Europe CDO Ltd. 2006-1 Rating Class To From Notes B- (sf)/Watch Pos B- (sf) REVE SPC EUR15 mil, JPY3 bil, US$81 mil REVE SPC Segregated Portfolio of Dryden XVII Notes Rating Class To From Series 40 B (sf) B (sf)/Watch Neg Rutland Rated Investments Series LYNDEN 2006-1 (21) Rating Class To From A1-L BB (sf)/Watch Pos BB (sf) Rutland Rated Investments EUR5 mil, US$197 mil Dryden XII - IG Synthetic CDO 2006-1 Rating Class To From A2-$LS A- (sf)/Watch Pos A- (sf) Rutland Rated Investments US$105 mil Dryden XII - IG Synthetic CDO 2006-2 Rating Class To From A1-$LS BBB- (sf)/Watch Pos BBB- (sf) Seawall 2007-2 (AAA Synthetic ReREMIC) Ltd Rating Class To From A BB+ (sf)/Watch Neg BB+ (sf) B BB+ (sf)/Watch Neg BB+ (sf) Seawall 2007-3 (AAA Synthetic ReREMIC) Ltd Rating Class To From A BB+ (sf)/Watch Neg BB+ (sf) B BB+ (sf)/Watch Neg BB+ (sf) * S&P Withdraws 'D' Ratings on 94 Classes From CDO, Re-REMIC Deals ------------------------------------------------------------------ Standard & Poor's Ratings Services withdrew its 'D (sf)' ratings on 94 classes from eight commercial real estate collateralized debt obligation (CRE CDO) and resecuritized real estate mortgage investment conduit (re-REMIC) transactions and one U.S. commercial mortgage-backed securities (CMBS) transaction. "The withdrawals follow the previous downgrade of all outstanding ratings from each transaction to 'D (sf)'. We had previously lowered most of the ratings to 'D (sf)' due to recurring or accumulated interest shortfalls. We had previously lowered a smaller number of ratings to 'D (sf)' following principal losses to the classes," S&P said. The recurring and accumulated interest shortfalls primarily occurred due to one or more of these factors: -- Appraisal subordinate entitlement reductions (ASERs) in effect for the specially serviced assets; -- Trust expenses that may include, but are not limited to, property operating expenses, property taxes, insurance payments, and legal expenses; and -- Special servicing fees. "We provide details of each of the nine transactions on which we previously lowered our ratings to 'D (sf)'," S&P said. ARCap 2006-RR7 Resecuritization Inc. "We lowered our ratings to 'D (sf)' on classes A through O from ARCap 2006-RR7 Resecuritization Inc., a re-REMIC transaction, between August 2010 and July 2012 due to deferred interest on these classes, which we expect to recur. We did not expect the classes to be ultimately repaid," S&P said. Capital Trust RE CDO 2005-1 Ltd. "We lowered our ratings to 'D (sf)' on classes A through H from Capital Trust RE CDO 2005-1 Ltd., a CRE CDO transaction, between January 2012 and June 2012 due to recurring deferred interest on these classes. Classes A and B are nondeferrable classes and experienced interest shortfalls," S&P said. Centerline 2007-1 Resecuritization Trust "We lowered our ratings to 'D (sf)' on the nondeferrable classes A-1 and A-2 from Centerline 2007-1 Resecuritization Trust, a CRE CDO transaction, on Sept. 17, 2010, following interest shortfalls. The downgrades to 'D (sf)' on classes B through P reflect the principal losses that these classes incurred from October 2010 through June 2012," S&P said. Chase Commercial Mortgage Securities Corp. Series 1997-1 "We lowered our ratings to 'D (sf)' on classes G and H from Chase Commercial Mortgage Securities Corp.'s series 1997-1, a CMBS transaction, in October 2009 and September 2010 due to cumulative interest shortfalls and the potential for future recurring interest shortfalls relating to the assets with the special servicer," S&P said. GS Mortgage Securities Trust 2007-GKK1 "We lowered our ratings to 'D (sf)' classes A through L from GS Mortgage Securities Trust 2007-GKK1, a re-REMIC transaction, between September 2009 and July 2012 due to recurring deferred interest," S&P said. JER CRE CDO 2006-2 Ltd. "We lowered our ratings to 'D (sf)' on the nondeferrable classes A-FL and B-FL from JER CRE CDO 2006-2 Ltd., a CRE CDO transaction, on Oct. 6, 2010, following interest shortfalls. We lowered our ratings to 'D (sf)' on classes C-FL and C-FX through G-FL to reflect our analysis of the transaction's liability structure and the credit characteristics of the underlying collateral using our criteria for rating global CDOs of pooled structured finance assets. The downgrades also reflected our analysis of the transaction following the termination of the interest rate swap contract for the transaction, resulting in a payment to the hedge counterparty. We expected that the interest payments on these classes would be deferred for an extended period of time due to the termination payment," S&P said. LNR CDO IV Ltd. "We lowered our ratings to 'D (sf)' on the nondeferrable classes A and B from LNR CDO IV Ltd., a CRE CDO transaction, due to interest shortfalls these classes incurred in April 2010 and May 2010, respectively. We lowered our ratings on classes C-FL and C-FX through K on August 9, 2012, to reflect our analysis of the transaction following the termination of the interest rate swap, and our expectation that the classes were unlikely to be repaid in full," S&P said. LNR CDO V "We lowered our ratings to 'D (sf)' on the nondeferrable classes A and B from LNR CDO V, a CRE CDO transaction, due to interest shortfalls these classes incurred on Dec. 8, 2009. We lowered classes C-FL and C-FX through L on August 9, 2012, to reflect our analysis of the transaction following the termination of the interest rate swap, and our expectation that the classes were unlikely to be repaid in full," S&P said. WAVE SPC "We lowered our ratings to 'D (sf)' on the nondeferrable classes A-1, A-2, and B from WAVE SPC, a CRE CDO transaction to reflect our analysis of the transaction following interest shortfalls to the classes in June 2012. We lowered our ratings on classes C and D to 'D (sf)' because we determined that the classes were unlikely to be repaid in full," S&P said. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATINGS WITHDRAWN ARCap 2006-RR7 Resecuritization Inc. Commercial mortgage-backed securities pass-through certificates series 2006-RR7 Rating Rating Class To From A NR D (sf) A-D NR D (sf) B NR D (sf) C NR D (sf) D NR D (sf) E NR D (sf) F NR D (sf) G NR D (sf) H NR D (sf) J NR D (sf) K NR D (sf) L NR D (sf) M NR D (sf) N NR D (sf) O NR D (sf) Capital Trust RE CDO 2005-1 Ltd. collateralized debt obligations series 2005-1 Rating Rating Class To From A NR D (sf) B NR D (sf) C NR D (sf) D NR D (sf) E NR D (sf) F NR D (sf) G NR D (sf) H NR D (sf) Centerline 2007-1 Resecuritization Trust collateralized debt obligations series 2007-1 Rating Rating Class To From A-1 NR D (sf) A-2 NR D (sf) B NR D (sf) C NR D (sf) D NR D (sf) E NR D (sf) F NR D (sf) G NR D (sf) H NR D (sf) J NR D (sf) K NR D (sf) L NR D (sf) M NR D (sf) N NR D (sf) O NR D (sf) P NR D (sf) Chase Commercial Mortgage Securities Corp. Commercial mortgage pass-through certificates series 1997-1 Rating Rating Class To From G NR D (sf) H NR D (sf) GS Mortgage Securities Trust 2007-GKK1 Commercial mortgage-backed securities pass-through certificates Rating Rating Class To From A-1 NR D (sf) A-2 NR D (sf) B NR D (sf) C NR D (sf) D NR D (sf) E NR D (sf) F NR D (sf) G NR D (sf) H NR D (sf) J NR D (sf) K NR D (sf) L NR D (sf) JER CRE CDO 2006-2 Ltd. collateralized debt obligations series 2006-2 Rating Rating Class To From A-FL NR D (sf) B-FL NR D (sf) C-FL NR D (sf) C-FX NR D (sf) D-FL NR D (sf) D-FX NR D (sf) E-FL NR D (sf) E-FX NR D (sf) F-FL NR D (sf) G-FL NR D (sf) LNR CDO IV Ltd. collateralized debt obligations series 2006-1 Rating Rating Class To From A NR D (sf) B-FL NR D (sf) B-FX NR D (sf) C-FL NR D (sf) C-FX NR D (sf) D-FL NR D (sf) D-FX NR D (sf) E NR D (sf) F-FL NR D (sf) F-FX NR D (sf) G NR D (sf) H NR D (sf) J NR D (sf) K NR D (sf) LNR CDO V collateralized debt obligations series 2007-1 Rating Rating Class To From A NR D (sf) B NR D (sf) C-FL NR D (sf) C-FX NR D (sf) D NR D (sf) E NR D (sf) F NR D (sf) G NR D (sf) H NR D (sf) J NR D (sf) K NR D (sf) L NR D (sf) WAVE SPC collateralized debt obligations series 2007-1 Rating Rating Class To From A-1 NR D (sf) A-2 NR D (sf) B NR D (sf) C NR D (sf) D NR D (sf) NR-Not rated. ********* 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. Jhonas Dampog, Marites Claro, Joy Agravante, Rousel Elaine Tumanda, Howard C. Tolentino, Joseph Medel C. Martirez, Denise Marie Varquez, Ronald C. Sy, Joel Anthony G. Lopez, Cecil R. Villacampa, Sheryl Joy P. Olano, Ivy B. Magdadaro, Carlo Fernandez, Christopher G. Patalinghug, and Peter A. Chapman, Editors. Copyright 2012. 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 ***