/raid1/www/Hosts/bankrupt/TCR_Public/170205.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, February 5, 2017, Vol. 21, No. 35
Headlines
AMAC CDO I: Moody's Affirms 'C' Rating on Class F Debt
ATLAS SENIOR III: S&P Affirms 'BB' Rating on Class E Notes
BABCOCK & BROWN: S&P Raises Rating on Class G-1 Notes to 'BB+'
BANK OF AMERICA 2017-BNK3: Fitch to Rate Class F Certs 'B'
BAYVIEW OPPORTUNITY 2017-CRT1: Fitch to Rate Class B-3 Debt B+sf
BEAR STEARNS 2005-TOP18: Moody's Affirms C Rating on Cl. J Certs
BEAR STEARNS 2007-PWR15: Moody's Affirms C Rating on Cl. A-J Debt
BLADE ENGINE: Fitch Lowers Rating on Series B Certs to 'CCCsf'
BLUEMOUNTAIN CLO 2013-3: S&P Affirms 'BB' Rating on Class E Notes
BLUEMOUNTAIN CLO 2014-1: S&P Affirms 'B' Rating on Class F Notes
CAPITAL AUTO 2015-4: Moody's Affirms Ba1 Rating on Class E Notes
CITIGROUP COMMERCIAL 2016-GC36: Fitch Affirms B- Rating on F Debt
COA SUMMIT: Moody's Affirms Ba2 Rating on Class D Notes
COMM 2005-LP5: Moody's Lowers Rating on 2 Tranches to Csf
CONNECTICUT AVE 2017-C01: Fitch Rates Cl. 1M-2C Notes 'Bsf'
CSFB TRUST 2006-C5: Moody's Cuts Rating on Class B Debt to 'C'
EXETER AUTOMOBILE 2017-1: S&P Gives Prelim BB Rating on Cl. D Debt
FREMF 2017-K61: Fitch Assigns BB+ Rating to Class C Certs
GREENWICH CAPITAL 2004-GG1: Fitch Affirms 'D' Rating on Cl. L Debt
GS MORTGAGE 2006-GG6: Fitch Withdraws D Rating on Cl. F Debt
GS MORTGAGE 2012-GCJ7: Moody's Affirms B2 Rating on Class F Certs
JFIN CLO 2017: Moody's Assigns (P)Ba3 Rating to Cl. E Sec. Notes
JP MORGAN 2003-LN1: Moody's Affirms Ca Rating on Class K Certs
JP MORGAN 2003-ML1: Fitch Affirms D Rating on Class N Debt
JP MORGAN 2011-C3: Fitch Affirms 'B-sf' Rating on Class J Certs
JP MORGAN 2013-C10: Fitch Affirms 'Bsf' Rating on Class F Debt
KEY COMMERCIAL 2007-SL1: Fitch Hikes Class C Debt Rating to CCCsf
KMART FUNDING: Moody's Raises Rating on Cl. G Secured Bonds to Ca
LB-UBS COMMERCIAL 2007-C7: Fitch Affirms D Rating on Cl. G Notes
MORGAN STANLEY 2007-TOP25: Moody's Cuts Class D Debt Rating to 'C'
NRZ ADVANCE 2015-ON1: S&P Gives Prelim. BB Rating on Cl. E-T1 Debt
ONEMAIN DIRECT 2017-1: Moody's Assigns (P)B2 Rating to Class E Debt
PUTNAM STRUCTURED 2002-1: Moody's Affirms Caa3 Rating on A-2 Debt
RESIX FINANCE 2003-A: Fitch Hikes Rating on Cl. B9 Debt From BBsf
RFC CDO 2006-1: Fitch Lowers Rating on Class C Debt to 'Csf'
RFC CDO 2006-1: Moody's Lowers Rating on Class D Notes to 'C'
ROCKWALL CDO II: Moody's Affirms B1 Rating on Cl. B-2L Debt
SAXON ASSET: Moody's Takes Action on $41MM of Subprime RMBS
SOUND POINT XV: Moody's Assigns (P)Ba3 Rating to Class E Notes
STACR 2017-DNA1: Fitch to Rate Class M-2 Notes 'BBsf'
SUGAR CREEK: Moody's Hikes Rating on Class E Notes From Ba1
TOWD POINT 2017-1: Fitch to Rate $74.7MM Class B2 Notes 'B'
UBS COMMERCIAL 2012-C1: Moody's Affirms B2 Rating on Class F Certs
UNITED AIRLINES 1999-1: Moody's Affirms Ba1 Rating on Cl. B Certs
VITALITY RE VIII: S&P Assigns 'BB+' Rating on Class B Notes
WELLS FARGO 2016-NXS5: Fitch Affirms 'B-sf' Rating on Cl. G Debt
WESTWOOD CDO I: Moody's Affirms B1 Rating on Class D Debt
[*] Moody's Hikes $33MM of Subprime RMBS Issued 2000-2004
[*] Moody's Raises $145MM of Subprime RMBS Issued 2006
[*] Moody's Takes Action on $120MM of RMBS Issued 2002-2005
[*] Moody's Takes Action on $130.9MM of RMBS Issued 2003-2004
[*] Moody's Takes Action on $18.4MM of RMBS Issued 2004-2005
[*] Moody's Ups $116MM of Alt-A & Option ARM RMBS Issued 2003-2005
[*] S&P Completes Review on 118 Classes From 22 RMBS Deals
[*] S&P Completes Review on 22 Classes From 12 RMBS Deals
*********
AMAC CDO I: Moody's Affirms 'C' Rating on Class F Debt
------------------------------------------------------
Moody's Investors Service has affirmed the ratings of the following
notes issued by AMAC CDO Funding I:
Cl. E, Affirmed Caa3 (sf); previously on Feb 11, 2016 Affirmed Caa3
(sf)
Cl. F, Affirmed C (sf); previously on Feb 11, 2016 Affirmed C (sf)
RATINGS RATIONALE
Moody's has affirmed the ratings on the transaction because the key
transaction metrics are commensurate with the existing ratings.
While the credit quality has migrated downward, as evidenced by
WARF and WARR, the level of amortization and expected recovery of
the asset pool results in the ratings affirmations. 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.
AMAC CDO Funding I is a static cash transaction backed by a
portfolio of: i) whole loans and senior participations (84.9% of
the pool balance); and ii) mezzanine interests (15.1%). As of the
December 20, 2017 trustee report, the aggregate note balance of the
transaction, including preferred shares, has decreased to $53.0
million from $400.0 million at issuance, with the paydown directed
to the senior most outstanding class of notes, as a result of
regular amortization and the re-classification of interest as
principal as a result of the failure of certain interest coverage
tests.
The pool contains one mezzanine interest totaling $3.2 million
(15.1% of the collateral pool balance) that is listed as defaulted
security as of the December 20, 2017 trustee report. Moody's does
expect significant losses to occur from this defaulted asset once
they are realized.
Moody's has identified the following as key indicators of the
expected loss in CRE CDO transactions: the weighted average rating
factor (WARF), the weighted average life (WAL), the weighted
average recovery rate (WARR), and Moody's asset correlation (MAC).
Moody's typically models these 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 its assessments for the collateral it does not
rate. The rating agency modeled a bottom-dollar WARF of 8054,
compared to 5788 at last review. The current distribution of
Moody's rated collateral and assessments for non-Moody's rated
collateral is as follows: Aaa-Aa3 and 0.0% compared to 2.9% at last
review, Ba1-Ba3 and 0.0% compared to 2.4% at last review, B1-B3 and
0.0% compared to 21.2% at last review, Caa1-Ca/C and 100.0%
compared to 85.4% at last review.
Moody's modeled a WAL of 1.9 years, compared to 2.0 years at last
review. The WAL is based on assumptions about extensions on the
underlying collateral loan exposures.
Moody's modeled a fixed WARR of 46.7%, compared to 51.2% at last
review.
Moody's modeled a MAC of 0.0%, compared to 23.8% at last review.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's
Approach to Rating SF CDOs" published in October 2016.
Factors that would lead to an upgrade or downgrade of the ratings:
The performance of the notes is subject to uncertainty, because it
is sensitive to the performance of the underlying portfolio, which
in turn depends on economic and credit conditions that are subject
to change. The servicing decisions of the master and special
servicer and surveillance by the operating advisor with respect to
the collateral interests and oversight of the transaction will also
affect the performance of the rated notes.
Moody's Parameter Sensitivities: Changes to any one or more of the
key parameters could have rating implications for some of the rated
notes, although a change in one key parameter assumption could be
offset by a change in one or more of the other key parameter
assumptions. The rated notes are particularly sensitive to changes
in the ratings of the underlying collateral and assessments.
Increasing the recovery rate of 100% of the collateral pool by +10%
would result in an average modeled rating movement on the rated
notes of zero notches upward (e.g., one notch up implies a ratings
movement of Baa3 to Baa2). Decreasing the recovery rate of 100% of
the collateral pool by -10% would result in an average modeled
rating movement on the rated notes of zero notches downward (e.g.,
one notch down implies a ratings movement of Baa3 to Ba1).
The primary sources of uncertainty in Moody's assumptions are the
extent of growth in the current macroeconomic environment given the
weak recovery and certain commercial real estate property markets.
Commercial real estate property values continue to improve
modestly, 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, sustained growth will not be possible until investment
increases steadily for a significant period, non-performing
properties are cleared from the pipeline and fears of a euro area
recession abate.
ATLAS SENIOR III: S&P Affirms 'BB' Rating on Class E Notes
----------------------------------------------------------
S&P Global Ratings raised its ratings on the class B and C notes
and affirmed its ratings on the class A, D, and E notes from Atlas
Senior Loan Fund III Ltd., a U.S. collateralized loan obligation
(CLO) transaction that closed in July 2013 and is managed by
Crescent Capital Group L.P.
The rating actions follow S&P's review of the transaction's
performance, using data from the Dec. 21, 2016, trustee report. The
transaction is scheduled to remain in its reinvestment period until
August 2017. The upgrades primarily reflect credit quality
improvement in the underlying collateral since our effective date
rating affirmations in January 2014.
Collateral with an S&P Global Ratings credit rating of 'BB-' or
higher has increased significantly from the October 2013 effective
date report used for S&P's previous review. The purchasing of this
higher-rated collateral has resulted in a decrease in reported
weighted average spread to 3.77% from 4.69% but also an increase in
the weighted average S&P Global Ratings recovery rate.
The transaction has also benefited from collateral seasoning, with
the reported weighted average life decreasing to 4.26 years from
5.43 years in October 2013. This seasoning, combined with the
improved credit quality, has decreased the overall credit risk
profile, which, in turn, provided more cushion to the tranche
ratings. In addition, the number of issuers in the portfolio has
increased during this period, and the resultant diversification has
benefitted the transaction.
However, the transaction has experienced a slight increase in both
defaults and assets rated 'CCC+' and below since the October 2013
effective date report. Although these represent a low proportion
of the total portfolio, with defaulted collateral and assets rated
'CCC+' or below representing 0.92% and 2.34% of the aggregate
principal balance, up slightly from 0.00% and 2.01%, respectively,
in October 2013, the increase in defaults has affected the
overcollateralization (O/C) ratios:
-- The class A/B O/C ratio was 133.98%, down from the 135.54%
reported in October 2013.
-- The class C O/C ratio was 119.71%, down from 121.10%.
-- The class D O/C ratio was 112.11%, down from 113.41%.
-- The class E O/C ratio was 106.66%, down from 107.90%.
Despite the decline in O/C ratios, the current coverage test ratios
are all passing and well above their minimum threshold values.
Overall, the increase in defaulted assets and assets rated 'CCC+'
and below has been largely offset by the decline in the weighted
average life and positive portfolio credit migration of the
collateral portfolio.
Although S&P's cash flow analysis indicated higher ratings for the
class B, C, and D notes, its rating actions consider the increase
in the defaults that has contributed to some par loss in the
underlying collateral. S&P limited the upgrades to offset future
potential credit migration in the underlying collateral. In
addition, the ratings reflect additional sensitivity runs that
allowed for volatility in the underlying portfolio, given that the
transaction is still in its reinvestment period.
The affirmations of the ratings on the class A, D, and E notes
reflect S&P's belief that the credit support available is
commensurate with the current rating levels.
S&P's review of this transaction included a cash flow analysis,
based on the portfolio and transaction as reflected in the
aforementioned trustee report, to estimate future performance. In
line with S&P's criteria, its cash flow scenarios applied
forward-looking assumptions on the expected timing and pattern of
defaults, and recoveries upon default, under various interest rate
and macroeconomic scenarios. In addition, S&P's analysis
considered the transaction's ability to pay timely interest and/or
ultimate principal to each of the rated tranches. The results of
the cash flow analysis demonstrated, in S&P's view, that all of the
rated outstanding classes have adequate credit enhancement
available at the rating levels associated with these rating
actions.
S&P 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 will take rating actions as S&P
deems necessary.
RATINGS RAISED
Atlas Senior Loan Fund III Ltd.
Rating
Class To From
B AA+ (sf) AA (sf)
C A+ (sf) A (sf)
RATINGS AFFIRMED
Atlas Senior Loan Fund III Ltd.
Class Rating
A AAA (sf)
D BBB (sf)
E BB (sf)
BABCOCK & BROWN: S&P Raises Rating on Class G-1 Notes to 'BB+'
--------------------------------------------------------------
S&P Global Ratings raised its rating on Babcock & Brown Air Funding
I Ltd. series 2007-1's class G-1 notes to 'BB+ (sf) from 'BB
(sf)'.
The raised rating primarily reflects the significant paydowns of
$470.2 million on the class G-1 notes since our last rating action
in January 2014. The notes are currently outstanding by
approximately 13.6% of their original balance. The loan-to-value
ratio of the class G-1 notes (74.01% based on depreciated half-life
value as of January 2017) has improved as a result of the paydowns.
Although the class G-1 notes can pass a higher rating stress than
'BB+', S&P considered the combination of the event risk due to the
small size of the remaining aircraft portfolio and the value
retention risk of the remaining mid-life aircraft; therefore, S&P
limited the rating at a speculative-grade level.
The remaining portfolio consisted of nine aircraft (three A320
family, four B737NG, and two B757-200), all of which were on lease.
The appraised half-life value (the lower of the mean and median of
half-life base values) for the nine aircraft as of September 2016
was $159.781 million.
S&P 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 S&P will take further rating actions
as it deems necessary.
BANK OF AMERICA 2017-BNK3: Fitch to Rate Class F Certs 'B'
----------------------------------------------------------
Fitch Ratings has issued a presale report on Bank of America
Merrill Lynch Commercial Mortgage Trust 2017-BNK3 commercial
mortgage pass-through certificates, series 2017-BNK3.
Fitch expects to rate the transaction and assign Rating Outlooks as
follows:
-- $27,490,000 class A-1 'AAAsf'; Outlook Stable;
-- $52,680,000 class A-2 'AAAsf'; Outlook Stable;
-- $33,360,000 class A-SB 'AAAsf'; Outlook Stable;
-- $110,000,000 class A-3 'AAAsf'; Outlook Stable;
-- $426,236,000 class A-4 'AAAsf'; Outlook Stable;
-- $649,766,000b class X-A 'AAAsf'; Outlook Stable;
-- $139,236,000b class X-B 'AA-sf'; Outlook Stable;
-- $92,824,000 class A-S'AAAsf'; Outlook Stable;
-- $46,412,000 class B 'AA-sf'; Outlook Stable;
-- $35,969,000 class C 'A-sf'; Outlook Stable;
-- $38,290,000a class X-D 'BBB-sf'; Outlook Stable;
-- $38,290,000ab class D 'BBB-sf'; Outlook Stable;
-- $16,244,000a class E 'BB+sf'; Outlook Stable;
-- $13,924,000a class F 'Bsf'; Outlook Stable.
The following classes are not expected to be rated:
-- $34,809,000a class G;
-- $48,854,632ac RR Interest.
(a) Privately placed and pursuant to Rule 144A.
(b) Notional amount and interest only.
(c) Vertical credit risk retention interest representing 5% of the
pool balance (as of the closing date).
The expected ratings are based on information provided by the
issuer as of Jan. 25, 2017.
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 63 loans secured by 94
commercial properties having an aggregate principal balance of
$977,092,638 as of the cut-off date. The loans were contributed to
the trust by Wells Fargo Bank, National Association, Morgan Stanley
Mortgage Capital Holdings LLC, and Bank of America, National
Association.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 73% of the properties by
balance, cash flow analysis of 81.4%, and asset summary reviews on
100% of the pool.
KEY RATING DRIVERS
Pool Diversity: The pool shows diversity with respect to loan size
and property type. The top 10 loans represent 48.9% of the pool,
and the loan concentration index (LCI) is 331; both metrics are
below the respective 2016 averages of 54.8% and 422. No property
type represents more than 29.6% of the pool (retail). Hotel
properties only represent 12.4% of the pool, which is below the
2016 average of 16% for Fitch-rated multiborrower transactions.
Fitch Leverage in Line with 2016 Average: The pool's leverage is in
line with that of other Fitch-rated multiborrower transactions. The
pool's Fitch DSCR and LTV are 1.21x and 103.9%, respectively, which
are comparable to the 2016 averages of 1.21x and 105.2%. Excluding
investment-grade credit opinion loans, the pool has a Fitch DSCR
and LTV of 1.20x and 107%, respectively, better than the 2016
normalized averages of 1.16x and 109.9%.
Investment-Grade Credit Opinion Loans: Two loans, representing 7.2%
of the pool, have investment-grade credit opinions. 85 Tenth Avenue
(5.1% of the pool) has an investment-grade credit opinion of
'BBBsf*' on a stand-alone basis. Potomac Mills (2.1% of the pool)
has an investment-grade credit opinion of 'BBBsf*' on a stand-alone
basis. Combined, the two credit opinion loans have a weighted
average (WA) Fitch DSCR and LTV of 1.38x and 64.3%, respectively.
RATING SENSITIVITIES
For this transaction, Fitch's net cash flow (NCF) was 12.8% below
the most recent year's net operating income (NOI) for properties
for which a full-year NOI was provided, excluding properties that
were stabilizing during this period). Unanticipated further
declines in property-level NCF could result in higher defaults and
loss severities on defaulted loans and in potential rating actions
on the certificates.
Fitch evaluated the sensitivity of the ratings assigned to the BACM
2017-BNK3 certificates and found that the transaction displays
average sensitivities to further declines in NCF. In a scenario in
which NCF declined a further 20% from Fitch's NCF, a downgrade of
the junior 'AAAsf' certificates to 'BBB+sf' could result. In a more
severe scenario, in which NCF declined a further 30% from Fitch's
NCF, a downgrade of the junior 'AAAsf' certificates to 'BBB-sf'
could result.
BAYVIEW OPPORTUNITY 2017-CRT1: Fitch to Rate Class B-3 Debt B+sf
----------------------------------------------------------------
Fitch Ratings expects to rate Bayview Opportunity Master Fund IVb
Trust 2017-CRT1 (BOMFT 2017-CRT1):
-- $126,281,000 class M notes 'BBB-sf'; Outlook Stable;
-- $21,704,000 class B-1 initial exchangeable notes 'BB+sf';
Outlook Stable;
-- $17,758,000 class B-2 initial exchangeable notes 'BBsf';
Outlook Stable;
-- $15,785,000 class B-3 initial exchangeable notes 'B+sf';
Outlook Stable;
-- $126,281,000 class M-X notional notes 'BBB-sf'; Outlook
Stable.
The following classes will not be rated by Fitch:
-- $15,786,398 class B-4 initial exchangeable notes;
-- $71,033,398 class B subsequent exchangeable notes.
BOMFT 2017-CRT1 is collateralized by 13 underlying securities from
GSE Credit Risk Transfer (CRT) transactions. The underlying
securities include M2 classes from various Fannie Mae Connecticut
Avenue Securities (CAS) transactions and M3 classes from various
Freddie Mac Structured Agency Credit Risk (STACR) transactions.
The underlying securities are general unsecured obligations of
Fannie Mae ('AAA'/Outlook Stable) and Freddie Mac ('AAA'/Outlook
Stable) and are subject to the credit and principal payment risk of
a reference pool of certain residential mortgage loans held in
various Fannie Mae or Freddie Mac-guaranteed MBS. All of the
underlying securities were issued between 2014 and 2016, and five
of the underlying transactions rely on a fixed tiered loss severity
schedule that is determined by the amount of cumulative credit
events in the reference pool when passing credit losses to
bondholders.
Fitch currently holds public ratings on six of the 13 underlying
securities ranging from 'Bsf' to 'BB+sf' and maintains ratings on
at least one class in nine of the 11 underlying transactions. For
the three unrated securities that are not in Fitch-rated
transactions, Fitch relies on publicly available information in its
credit analysis.
The 'BBB-sf' rating for the M notes, the 'BB+sf' rating on the B-1
notes, the 'BBsf' rating on the B-2 notes, and the 'B+sf' rating on
the B-3 notes reflects credit enhancement (CE) sufficient to
protect against projected losses on the remaining underlying
reference pool balances of approximately 2.15%, 1.80%, 1.50% and
1.00%, respectively, when the projected reference pool losses are
weighted by the contributing balance of the underlying securities.
To help ensure rating stability on the new notes, the initial CE
provides protection one rating notch above Fitch's rating-stressed
projected losses. For example, the M notes ('BBB-sf') are initially
protected against Fitch's 'BBBsf' rating stress scenario and the
B-1 notes ('BB+sf') are initially protected against Fitch's
'BBB-sf' rating stress scenario.
The CE and projected recovery for the rated notes in this
transaction were assessed by comparing the CE and class size for
each underlying security to Fitch's loss projections for the
related reference mortgage pools. For example, a hypothetical
underlying security with CE of 2.00% and a class size of 1.00% is
assumed to recover 50% of its class principal balance in a rating
stress scenario with a 2.50% underlying reference pool loss. The
total estimated principal recovery amount available to pay the
rated notes is the aggregated projected recovery of each underlying
security, weighted by its contributing balance. Fitch believes this
is a conservative approach to estimating principal recovery for the
new rated classes, since it does not allow for any rating benefit
from the shorter remaining life of the M class. To the extent the
new rated classes pay off in full before Fitch's projected losses
on the underlying reference pools are fully realized, the classes
will be able to sustain more severe stress scenarios than their
initial rating reflects.
Fitch's credit rating reflects the probability of ultimate recovery
of principal and the timely payment of bond interest up to the Net
WAC cap. Fitch's credit analysis of BOMFT 2017-CRT1 focused
primarily on principal recovery due to the transaction's definition
of the Net WAC cap. The Net WAC cap is defined as the interest
collected (not due) on the underlying securities, net of expenses
over the class principal balance of the P&I notes. In such a
structure, interest shortfalls that can affect credit ratings on
the new classes are generally not possible, since interest due is
effectively defined as interest available.
However, the structure allows for the repayment of Net WAC cap
shortfalls to the M, B-1 and B-2 classes prior to paying interest
due to the B-3 class. Consequently, interest shortfalls that can
affect credit ratings are possible for the B-3 class. Fitch
analysed scenarios that could result in interest shortfalls for the
B-3 class, focusing on the potential for large extraordinary
expenses after the coupon step-up date that could result in
interest collections being diverted to pay Net WAC cap shortfalls
to more senior classes than the B-3 class. Fitch believes the risk
of interest shortfalls to the B-3 class is consistent with a 'B+sf'
credit rating due to mitigating factors such as the annual limit on
eligible extraordinary expenses and the margin between the coupon
on the underlying securities and the new rated classes.
KEY RATING DRIVERS
Performance to Date (Positive): All of the underlying reference
pools have performed well, incurring fewer than 5 bps of loss to
date. The performance has been driven by high credit quality and
strong home price appreciation. The remaining loans have benefitted
from an average of 15% home price appreciation since origination.
Fixed Tiered Loss Severity Transactions (Positive): Five of the 13
underlying securities are from CRT transactions structured with a
fixed loss severity schedule that is based upon the percentage of
cumulative credit events. This structure limits potential losses to
bondholders. Further, as the transactions age with strong
performance, the potential for high loss severities becomes
increasingly less probable, even in high-stress rating scenarios.
Hard Maturity Date (Positive): All of the underlying transactions
are structured to a final legal maturity at which time the related
issuer will repay the outstanding balance of the transaction in
full. The issuers are currently rated 'AAA' by Fitch and therefore
Fitch considers the probability of repayment of any outstanding
balances at the maturity date to be a 'AAA' credit risk. The final
maturity date for each transaction is either 10 years or 12.5 years
after issuance depending on whether it is a fixed loss severity
transaction or an actual loss transaction. As the transactions
continue to season and approach the maturity date, the window in
which losses can be realized by the transaction decreases,
resulting in lower loss expectations on the remaining balances.
Fitch applies a reduction to its lifetime default expectations to
account for this, with the most seasoned transactions receiving the
largest benefit.
Sequential Payment Priority (Positive): Due to the sequential
payment priority among the non-senior classes in the underlying
transactions, the underlying securities have benefitted from an
increase in CE as a percentage of the underlying reference pool.
Not Currently Receiving Principal (Negative): Only one of the
underlying securities are currently receiving principal. However,
Fitch estimates, on average, the underlying securities are likely
to begin receiving principal within two years with a number of
underlying securities projected to start receiving principal within
the next 12 months.
Class Thickness (Negative): The classes of the underlying
securities make up a relatively small percentage of the underlying
reference pool balance, with an average size between 2% and 3%. The
small class sizes relative to the CRTs' capital structure may
increase the potential volatility of recoveries in the event of a
default. When considering the class thickness and recovery
volatility of the underlying securities, Fitch considered the size
of the class relative to the differences between projected
reference pool losses in increasingly stressful rating scenarios.
On average for the underlying securities, the difference between
the scenario that causes a dollar of principal writedown and a
scenario that results in a complete loss to the underlying security
is approximately two full rating categories. Measured a different
way in terms of national home price decline, Fitch estimates the
difference between the scenarios that cause a dollar of loss and a
complete loss on the underlying securities is, on average, a 10%
further national home price decline, which Fitch believes is a
meaningful difference in macroeconomic scenarios. Additionally,
unlike recent vintage private label U.S. RMBS where a relatively
small number of loans can make up 2%-3% of a mortgage pool, the
same percentage represents thousands of loans in CRT transactions,
helping to mitigate idiosyncratic risk.
Receivership Risk Considered (Neutral): Under the Federal Housing
Finance Regulatory Reform Act, the Federal Housing Finance Agency
(FHFA) must place Fannie Mae and Freddie Mac into receivership if
it determines that the government-sponsored enterprise's (GSE)
assets are less than its obligations for longer than 60 days
following the deadline of its SEC filing. As receiver, FHFA could
repudiate any contract entered into by Fannie Mae or Freddie Mac if
it is determined that such action would promote an orderly
administration of the GSE's affairs. Fitch believes that the U.S.
government will continue to support both Fannie Mae and Freddie
Mac, as reflected in its current rating of the GSE. However, if at
some point Fitch views the support as being reduced and
receivership likely, the rating of the GSEs could be downgraded,
and ratings on the notes for the underlying securities - and
ultimately this transaction -- could be affected.
CRITERIA APPLICATION
Although the transaction is not a Re-REMIC, since the underlying
securities are not REMIC classes, Fitch's 'U.S. RMBS Surveillance
and Re-REMIC Criteria' was considered due to the similarities in
transaction structure with Re-REMICs.
Fitch made two variations to the criteria for this transaction. The
first variation applies to which bonds are eligible for ratings in
new issue Re-REMICs. While Fitch generally limits underlying bond
eligibility to senior bonds that are currently receiving principal
payments, Fitch believes there are sufficient mitigating factors to
provide ratings on these classes. Such factors include the
sequential pay structure and a hard maturity date (in 120 months on
average), which is expected to mitigate tail risk common in U.S.
RMBS. Additionally, performance to date on the reference pools has
been strong, with many rated classes indicating positive rating
pressure. Finally, the issuers of the underlying assets (Fannie Mae
and Freddie Mac) hold unique leverage in the residential mortgage
market, which is expected to help mitigate loan quality weakness
and operational risk.
The second variation from the above referenced criteria is in
relation to the application of Fitch's Portfolio Credit Model
(PCM), typically used to rate multiple bond Structured Credit
transactions. The U.S. RMBS Re-REMIC criteria state that Fitch will
utilize a hybrid approach between Fitch's RMBS and Structured
Credit groups for transactions backed by more than five
non-distressed RMBS. While Fitch ensured the projected U.S. RMBS
default probability of the underlying securities was consistent, or
higher than under the PCM approach, Fitch relied on the GSE CRT
bond-level analysis (rather than the generic U.S. RMBS portfolio
probabilities used in the Structured Credit PCM model) to estimate
the recoveries of the underlying securities in the event of a
default. Fitch used the GSE CRT bond-specific recoveries, rather
than the generic U.S. RMBS portfolio assumptions from the PCM
Structured Credit approach, due to structural features that are
uncommon in U.S. RMBS mezzanine classes, such as sequential payment
priority and hard maturity dates.
The use of the bond-specific GSE CRT recoveries resulted in a
rating approximately 2-3 notches than the rating implied with the
generic U.S. RMBS recoveries generated by the Structured Credit PCM
approach.
RATING SENSITIVITIES
Fitch's analysis includes rating stress scenarios from 'CCCsf' to
'AAAsf'. The 'CCCsf' scenario is intended to be the most-likely
base-case scenario. Rating scenarios above 'CCCsf' are increasingly
more stressful and less likely to occur. Although many variables
are adjusted in the stress scenarios, the primary driver of the
loss scenarios is the home price forecast assumption. In the 'Bsf'
scenario, Fitch assumes home prices decline 10% below their
long-term sustainable level. The home price decline assumption is
increased by 5% at each higher rating category up to a 35% decline
in the 'AAAsf' scenario.
Classes currently rated below 'Bsf' are at-risk to default at some
point in the future. As default becomes more imminent, bonds
currently rated 'CCCsf' and 'CCsf' will migrate towards 'Csf' and
eventually 'Dsf'.
The ratings of bonds currently rated 'Bsf' or higher will be
sensitive to future mortgage borrower behavior, which historically
has been strongly correlated with home price movements. Despite
recent positive trends, Fitch currently expects home prices to
decline in some regions before reaching a sustainable level. While
Fitch's ratings reflect this home price view, the ratings of
outstanding classes may be subject to revision to the extent actual
home price and mortgage performance trends differ from those
currently projected by Fitch.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation
to this rating action.
BEAR STEARNS 2005-TOP18: Moody's Affirms C Rating on Cl. J Certs
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on two classes
and affirmed the ratings on five classes in Bear Stearns Commercial
Mortgage Securities Trust, Commercial Mortgage Pass-Through
Certificates, Series 2005-TOP18 as follows:
Cl. D, Affirmed Aaa (sf); previously on Jul 7, 2016 Affirmed Aaa
(sf)
Cl. E, Affirmed Aaa (sf); previously on Jul 7, 2016 Upgraded to Aaa
(sf)
Cl. F, Upgraded to A2 (sf); previously on Jul 7, 2016 Upgraded to
Baa1 (sf)
Cl. G, Upgraded to B1 (sf); previously on Jul 7, 2016 Affirmed B3
(sf)
Cl. H, Affirmed Caa3 (sf); previously on Jul 7, 2016 Affirmed Caa3
(sf)
Cl. J, Affirmed C (sf); previously on Jul 7, 2016 Affirmed C (sf)
Cl. X, Affirmed Caa2 (sf); previously on Jul 7, 2016 Downgraded to
Caa2 (sf)
RATINGS RATIONALE
The ratings on Classes F and G were upgraded based primarily on an
increase in credit support resulting from loan paydowns and
amortization. The deal has paid down 16.7% since Moody's last
review.
The ratings on Classes D and E were affirmed because the
transaction's key metrics, including Moody's loan-to-value (LTV)
ratio, Moody's stressed debt service coverage ratio (DSCR) and the
transaction's Herfindahl Index (Herf), are within acceptable
ranges. The ratings on Classes H and J were affirmed because the
ratings are consistent with Moody's expected loss.
The rating on the IO class, Class X, was affirmed based on the
credit performance (or the weighted average rating factor or WARF)
of its referenced classes.
Moody's rating action reflects a base expected loss of 1.2% of the
current balance, compared to 2.2% at Moody's last review. Moody's
base expected loss plus realized losses is now 2.3% of the original
pooled balance, compared to 2.2% at the 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.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The methodologies used in these ratings were "Approach to Rating US
and Canadian Conduit/Fusion CMBS" published in December 2014, and
"Moody's Approach to Rating Large Loan and Single Asset/Single
Borrower CMBS" published in October 2015.
DESCRIPTION OF MODELS USED
Moody's review used the excel-based CMBS Conduit Model, which it
uses for both conduit and fusion transactions. Credit enhancement
levels for conduit loans are driven by property type, Moody's
actual and stressed DSCR, and Moody's property quality grade (which
reflects the capitalization rate Moody's uses to estimate Moody's
value). Moody's fuses the conduit results with the results of its
analysis of investment grade structured credit assessed loans and
any conduit loan that represents 10% or greater of the current pool
balance.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of seven, compared to nine at Moody's last review.
When the Herf falls below 20, Moody's uses the excel-based Large
Loan Model and then reconciles and weights the results from the
conduit and large loan 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, and property
type. Moody's also further adjusts these aggregated proceeds for
any pooling benefits associated with loan level diversity and other
concentrations and correlations.
DEAL PERFORMANCE
As of the January 13, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by 96% to $41.8 million
from $1.122 billion at securitization. The certificates are
collateralized by 14 mortgage loans ranging in size from less than
5% to 23% of the pool, with the top ten loans (excluding
defeasance) constituting 92% of the pool One loan, constituting 4%
of the pool, has defeased and is secured by US government
securities.
Three loans, constituting 26% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Sixteen loans have been liquidated from the pool, contributing to
an aggregate realized loss of $24.8 million (for an average loss
severity of 17%). No loans are currently in special servicing.
Moody's received full year 2015 operating results for 100% of the
pool, and full or partial year 2016 operating results for 85% of
the pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 62%, compared to 55% at Moody's
last review. Moody's conduit component excludes loans with
structured credit assessments, defeased and CTL loans, and
specially serviced and troubled loans. Moody's net cash flow (NCF)
reflects a weighted average haircut of 29% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 9.3%.
Moody's actual and stressed conduit DSCRs are 1.46X and 2.15X,
respectively, compared to 1.68X and 2.24X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The top three conduit loans represent 54% of the pool balance. The
largest loan is the Finisar Portfolio Loan ($9.62 million -- 23.0%
of the pool), which is secured by two properties, an office
building in Sunnyvale, California and an industrial building in
Allen, Texas. The properties are 100% leased to the Finisar
Corporation through February 2020. Due to the single tenant risk,
Moody's valuation reflects a "lit/dark" analysis. The loan has
amortized 43% since securitization and matures in March 2020.
Moody's LTV and stressed DSCR are 34% and 3.00X, respectively,
compared to 35% and 2.96X at the last review.
The second largest loan is the Summa Care Centre Loan ($8.55
million -- 20.5% of the pool), which is secured by a 92,000 square
foot (SF) office building in downtown Akron, Ohio. The property was
98% leased to Summa Health System through November 2017, with three
five-year extension options. Due to the single tenant risk, Moody's
valuation reflects a "lit/dark" analysis. The loan has an upcoming
anticipated repayment date (ARD) in March 2017. Moody's LTV and
stressed DSCR are 87% and 1.15X, respectively, compared to 70% and
1.43X at the last review.
The third largest loan is the Sheridan Shoppes Loan ($4.29 million
-- 10.3% of the pool), which is secured by a 25,000 SF unanchored
retail property in Davie, Florida. The strip center is shadow
anchored by Publix Super Market. The property has been 100% leased
since 2014. National tenants include a JP Morgan Chase Branch,
GameStop and a Cold Stone Creamery. The loan has amortized 19%
since securitization and matures in April 2020. Moody's LTV and
stressed DSCR are 85% and 1.18X, respectively, compared to 97% and
1.03X at the last review.
BEAR STEARNS 2007-PWR15: Moody's Affirms C Rating on Cl. A-J Debt
-----------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on nine classes
and downgraded the rating on one class in Bear Stearns Commercial
Mortgage Securities Trust, Commercial Mortgage Pass-Through
Certificates, Series 2007-PWR15:
Cl. A-4, Affirmed Aaa (sf); previously on Jun 23, 2016 Affirmed Aaa
(sf)
Cl. A-4FL, Affirmed Aaa (sf); previously on Jun 23, 2016 Affirmed
Aaa (sf)
Cl. A-1A, Affirmed Aaa (sf); previously on Jun 23, 2016 Affirmed
Aaa (sf)
Cl. A-M, Affirmed Baa3 (sf); previously on Jun 23, 2016 Affirmed
Baa3 (sf)
Cl. A-MFX, Affirmed Baa3 (sf); previously on Jun 23, 2016 Affirmed
Baa3 (sf)
Cl. A-MFL, Affirmed Baa3 (sf); previously on Jun 23, 2016 Affirmed
Baa3 (sf)
Cl. A-J, Affirmed C (sf); previously on Jun 23, 2016 Downgraded to
C (sf)
Cl. A-JFX, Affirmed C (sf); previously on Jun 23, 2016 Downgraded
to C (sf)
Cl. A-JFL, Affirmed C (sf); previously on Jun 23, 2016 Downgraded
to C (sf)
Cl. X-1, Downgraded to Caa2 (sf); previously on Jun 23, 2016
Downgraded to B3 (sf)
RATINGS RATIONALE
The ratings on six investment grade P&I classes were affirmed
because the transaction's key metrics, including Moody's
loan-to-value (LTV) ratio, Moody's stressed debt service coverage
ratio (DSCR) and the transaction's Herfindahl Index (Herf), are
within acceptable ranges. The ratings on the remianing three P&I
classes were affirmed because the ratings are consistent with
Moody's expected loss.
The rating on the IO Class (Class X-1) was downgraded due to a
decline in the credit performance (or the weighted average rating
factor or WARF) of its referenced classes.
Moody's rating action reflects a base expected loss of 25.7% of the
current balance, compared to 9.1% at Moody's last review. Moody's
base expected loss plus realized losses is now 17.8% of the
original pooled balance, compared to 17.6% at the last review.
Moody's provides a current list of base expected losses for conduit
and fusion CMBS transactions on moodys.com
athttp://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The methodologies used in these rating were "Approach to Rating US
and Canadian Conduit/Fusion CMBS" published in December 2014, and
"Moody's Approach to Rating Large Loan and Single Asset/Single
Borrower CMBS" published in October 2015.
DESCRIPTION OF MODELS USED
Moody's review used the excel-based CMBS Conduit Model, which it
uses for both conduit and fusion transactions. Credit enhancement
levels for conduit loans are driven by property type, Moody's
actual and stressed DSCR, and Moody's property quality grade (which
reflects the capitalization rate Moody's uses to estimate Moody's
value). Moody's fuses the conduit results with the results of its
analysis of investment grade structured credit assessed loans and
any conduit loan that represents 10% or greater of the current pool
balance.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 14, compared to 45 at last review.
When the Herf falls below 20, Moody's uses the excel-based Large
Loan Model and then reconciles and weights the results from the
conduit and large loan 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 and property
type. Moody's also further adjusts these aggregated proceeds for
any pooling benefits associated with loan level diversity and other
concentrations and correlations.
DEAL PERFORMANCE
As of the January 11, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by 80% to $570.43
million from $2.81 billion at securitization. The certificates are
collateralized by 45 mortgage loans ranging in size from less than
1% to 15% of the pool, with the top ten loans constituting 68% of
the pool. One loan, constituting less than 1% of the pool, has
defeased and is secured by US government securities.
Twenty-nine loans, constituting 54% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Thirty loans have been liquidated from the pool, resulting in an
aggregate realized loss of $354.4 million (for an average loss
severity of 57.2%). Ten loans, constituting 42% of the pool, are
currently in special servicing. The four largest specially serviced
loans are secured by single tenant office buildings totaling
872,551 SF and located in West Windsor, New Jersey. The loans are
the three 777 Scudders Mill Loans and the 100 Nassau Park Loan (for
a total loan balance of $213 million, or 37.3% of the pool). The
properties are all occupied by the same tenant (E R Squibb & Sons
LLC). The tenant has vacated three of the four properties and the
loan was transferred to special servicing in March 2016 seeking a
loan modification. The special servicer indicated that the
properties are being actively marketed for lease.
The remaining six specially serviced loans are secured by a mix of
property types. Moody's estimates an aggregate $119 million loss
for the specially serviced loans (50.3% expected loss on average).
Moody's has assumed a high default probability for eight poorly
performing loans, constituting 16% of the pool, and has estimated
an aggregate loss of $14 million (a 15% expected loss based on a
50% probability default) from these troubled loans.
Moody's received full year 2015 operating results for 100% of the
pool, and full or partial year 2016 operating results for 85% of
the pool. Moody's weighted average conduit LTV is 101%, the same as
at Moody's last review. Moody's conduit component excludes loans
with structured credit assessments, defeased and CTL loans, and
specially serviced and troubled loans. Moody's net cash flow (NCF)
reflects a weighted average haircut of 17% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 8.8%.
Moody's actual and stressed conduit DSCRs are 1.35X and 1.02X,
respectively, compared to 1.30X and 1.05X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The top three conduit loans represent 21% of the pool balance. The
largest loan is the Cherry Hill Town Center Loan ($88 million --
15.4% of the pool), which is secured by an approximately 511,000 SF
retail property located along the NJ Route 70 highway in Cherry
Hill, NJ, a suburb of Philadelphia. The property is also known as
Market Place at Garden State Park and is anchored by Home Depot and
Wegmans. The property was 100% leased as of June 2016. Moody's LTV
and stressed DSCR are 102% and 0.87X, respectively, the same as at
last review.
The second largest exposure is the cross-collateralized Riverview
Plaza, Route 30 Plaza and Rochester Plaza Loans ($16.6 million --
2.9% of the pool), which is secured by two anchored community
shopping centers and one single retail center located in southwest
Pennsylvania. The properties were 98% leased in aggregate as of
September 2016. Moody's LTV and stressed DSCR are 102% and 0.93X,
respectively, compared to 97% and 0.97X at the last review.
The third largest exposure is the Sierra Center Loan ($15.7 million
-- 2.8% of the pool), which is secured by a 98,158 SF
grocery-anchored retail center located in Baldwin Park, CA. Leases
comprising of 77% of the NRA have lease expirations that occur
within the next six months. Office Max (24% of NRA) has already
indicated they will be vacating their space upon lease expiration
in June 2017. Moody's LTV and stressed DSCR are 123% and 0.76X,
respectively, compared to 111% and 0.85X at the last review.
BLADE ENGINE: Fitch Lowers Rating on Series B Certs to 'CCCsf'
--------------------------------------------------------------
Fitch Ratings has downgraded Blade Engine Securitization LTD as
follows:
-- Series A-1 to 'BBsf' from 'BBBsf'; Outlook Negative;
-- Series A-2 to 'BBsf' from 'BBBsf'; Outlook Negative;
-- Series B to 'CCCsf' Recovery Estimate 100%, from 'Bsf.'
The series E certificates are not rated (NR) by Fitch.
KEY RATING DRIVERS
The downgrade of the class A notes reflects the potential for
decreased cash flow available to service the notes, and the results
of Fitch's cash flow analysis. The Negative Outlook reflects the
slowly increasing LTV and the future lease cash flow potential of
the engine portfolio. The performance of the transaction continues
to depend more on the collections from a few engines that support
wide-body aircraft, while demand for certain older technology
engines remains weak.
The downgrade of class B reflects the inability of cash flow to
service the notes, leading to continuous draws on the Junior Cash
Account. As the Junior Cash Account continues to be depleted, the
eventual default of class B is a real possibility.
Fitch's assumptions and stresses were derived and applied
consistent with criteria. Lessee rating assumptions and initial
engine values utilized are consistent with the approach detailed in
the criteria. Fitch assumed that engines would be classified as
phase 1 until the end of their supported aircraft production run.
The engines are then considered phase 2 for seven years for those
that support current technology A320 and B737 aircraft, and five
years for all others. After that, phase 3 was assumed to last for
10 years.
No depreciation was assumed to occur until phase 3, when engines
experienced 10% per annum. Recessionary value declines were assumed
to be 5%, 10%, and 20% for phases 1, 2, and 3 in 'BBBsf' and 'BBsf'
scenarios, and 5%, 10%, and 15% in 'Bsf' scenarios. Recessions were
assumed to last for five years, while the value declines occurred
over three years in 'BBBsf' scenarios, and four years in 'BBsf' and
'Bsf' scenarios. The first recession was assumed to occur after six
months.
For remarketing downtime, Fitch assumed three months under 'BBBsf'
and 'BBsf' scenarios, and two months under 'Bsf' scenarios, in
non-recessionary periods. During assumed recessions, Fitch assumed
four months under 'BBBsf' and 'BBsf' scenarios, and three months
under 'Bsf' scenarios. Repossession time was assumed to be two
months under 'BBBsf' scenarios, and one month under 'BBsf' and
'Bsf' scenarios.
Under 'BBBsf' scenarios, engines were assumed to experience
remarketing and repossession costs of $20,000 and $150,000,
respectively. These were decreased by $5,000 for remarketing
assumptions, and $50,000 for repossessions, when moving down to
lower rating category stresses.
For new lease term assumptions, Fitch assumed long-term lease terms
of 48 and 60 months for 'BBBsf' scenarios for recessionary and
non-recessionary periods, respectively. These assumptions were
increased by six months each when moving down to lower rating
category stresses. Short-term leases in the 'BBBsf' scenarios were
assumed to have terms of two and four months in recessionary and
non-recessionary periods, respectively. For 'BBsf' and 'Bsf'
scenarios, these were increased to three and six months,
respectively.
Fitch assumed a future long-term/short-term lease mix of 65%/35%,
and a 50% extension rate for short-term leases. The maximum lease
rate factor was assumed to be 1.1% for long-term leases and 1.4%
for short-term leases.
For residual proceeds, Fitch assumed the engines would be sold at
the end of phase 3 for 25% of their future stressed values. The
lone exception is one grounded engine that powers the A340
aircraft, for which no residual credit was applied. Maintenance
expenses were assumed to equal maintenance collections, despite
that current maintenance reserves and anticipated collections in
the coming year exceed anticipated expenses.
Fitch's ratings do not consider the application of step-up interest
to the notes following the expected maturity date on the seventh
anniversary of the refinancing.
RATING SENSITIVITIES
Due to the correlation between the global economic conditions and
the airline industry, the ratings may be impacted by the strength
of the macro-environment over the remaining term of the
transaction. Global economic scenarios that are inconsistent with
Fitch's expectations could lead to further negative rating actions.
For example, the occurrence of an extended global recession of
significantly greater severity than the last two experienced, and
the resulting strain on aircraft lease cash flow, could lead to a
downgrade of the notes.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
BLUEMOUNTAIN CLO 2013-3: S&P Affirms 'BB' Rating on Class E Notes
-----------------------------------------------------------------
S&P Global Ratings raised its ratings to 'AA+ (sf)' from 'AA (sf)'
on the class B-1 and B-2 notes from BlueMountain CLO 2013-3 Ltd., a
cash flow collateralized loan obligation (CLO) managed by
BlueMountain Capital Management LLC. In addition, S&P affirmed its
ratings on the class A, C, D, E, and F notes to reflect adequate
credit support at their current respective rating levels.
The rating actions follow S&P's review of the transaction's
performance using data from the Nov. 30, 2016, trustee report. The
transaction is scheduled to remain in its reinvestment period until
October 2017.
The upgrades on the class B-1 and B-2 notes primarily reflect
stable credit quality in the underlying collateral and a slight
increase in the portfolio par balance since S&P's effective date
rating affirmations, which used data from the November 2013 trustee
report. Although there has been a slight increase in 'CCC' rated
assets and defaults during the same time, the balance of assets
rated 'BB-' and above has increased.
Additionally, the par gain in the underlying portfolio since the
effective date has led to slight increases in the
overcollateralization (O/C) ratios from the November 2013 trustee
report:
-- The class A/B O/C ratio was 138.49%, compared with 137.66%.
-- The class C O/C ratio was 122.89%, compared with 122.16%.
-- The class D O/C ratio was 115.80%, compared with 115.11%.
-- The class E O/C ratio was 110.16%, compared with 109.50%.
-- The class F O/C ratio was 106.48%, compared with 105.84%.
S&P affirmed its ratings on the class A, C, D, E, and F notes.
Although S&P's cash flow results indicated a higher rating for the
class C, D, and E notes, its rating actions considered additional
sensitivity runs that allowed for volatility in the underlying
portfolio given that the transaction is still in its reinvestment
period. Although the cash flow analysis indicated a lower rating
for the class F notes, S&P affirmed its rating on this class to
reflect the stable performance and increase in the class F O/C
ratio.
S&P's review of the transaction relied in part upon a criteria
interpretation with respect to its May 2014 criteria, "CDOs:
Mapping A Third Party's Internal Credit Scoring System To Standard
& Poor's Global Rating Scale," which allows S&P to use a limited
number of public ratings from other Nationally Recognized
Statistical Rating Organizations (NRSROs) to assess the credit
quality of assets not rated by S&P Global Ratings. The criteria
provide specific guidance for the treatment of corporate assets not
rated by S&P Global Ratings, while the interpretation outlines the
treatment of securitized assets.
S&P 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 will take rating actions as S&P
deems necessary.
RATINGS RAISED
BlueMountain CLO 2013-3 Ltd.
Rating
Class To From
B-1 AA+ (sf) AA (sf)
B-2 AA+ (sf) AA (sf)
RATINGS AFFIRMED
BlueMountain CLO 2013-3 Ltd.
Class Rating
A AAA (sf)
C A (sf)
D BBB (sf)
E BB (sf)
F B (sf)
BLUEMOUNTAIN CLO 2014-1: S&P Affirms 'B' Rating on Class F Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R, B-1-R,
B-2-R, and C-R replacement notes from BlueMountain CLO 2014-1 Ltd.,
a collateralized loan obligation (CLO) originally issued in 2014
that is managed by BlueMountain Capital Management LLC. S&P
withdrew its ratings on the original class A, B-1, B-2, and C notes
following payment in full on the Jan. 30, 2017, refinancing date.
At the same time, S&P affirmed its ratings on the class D, E, and F
notes, which were not part of this refinancing.
On the Jan. 30 refinancing date, the proceeds from the class A-R,
B-1-R, B-2-R, and C-R replacement note issuances were used to
redeem the original class A, B-1, B-2, and C notes as outlined in
the transaction document provisions. Therefore, S&P withdrew its
ratings on the original notes in line with their full redemption,
and S&P is assigning ratings to the replacement notes.
"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 the
expected timing and pattern of defaults, and recoveries upon
default, under various interest rate and macroeconomic scenarios.
In addition, our analysis considered the transaction's ability to
pay timely interest or ultimate principal, or both, to each of the
rated tranches," S&P said.
The assigned ratings reflect S&P's opinion that the credit support
available is commensurate with the associated rating levels.
S&P 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 S&P will take rating actions as it
deems necessary.
RATINGS ASSIGNED
BlueMountain CLO 2014-1 Ltd.
Replacement class Rating Amount (mil $)
A-R AAA (sf) 321.25
B-1-R AA+ (sf) 30.00
B-2-R AA+ (sf) 20.00
C-R A+ (sf) 41.25
RATINGS WITHDRAWN
BlueMountain CLO 2014-1 Ltd.
Rating
Original class To From
A NR AAA (sf)
B-1 NR AA (sf)
B-2 NR AA (sf)
C NR A (sf)
RATINGS AFFIRMED
BlueMountain CLO 2014-1 Ltd.
Class Rating
D BBB (sf)
E BB (sf)
F B (sf)
NR--Not rated.
CAPITAL AUTO 2015-4: Moody's Affirms Ba1 Rating on Class E Notes
----------------------------------------------------------------
Moody's Investors Service has upgraded six securities and affirmed
thirty-nine securities from 2013, 2014 and 2015 vintage
transactions sponsored by Ally Financial Inc. (Ba3, Stable).
Complete rating actions are:
Issuer: Capital Auto Receivables Asset Trust 2013-4
Class A-4 Notes, Affirmed Aaa (sf); previously on Aug 22, 2016
Affirmed Aaa (sf)
Class B Notes, Affirmed Aaa (sf); previously on Aug 22, 2016
Affirmed Aaa (sf)
Class C Notes, Affirmed Aaa (sf); previously on Aug 22, 2016
Affirmed Aaa (sf)
Class D Notes, Affirmed Aaa (sf); previously on Aug 22, 2016
Affirmed Aaa (sf)
Class E Notes, Affirmed Aaa (sf); previously on Aug 22, 2016
Upgraded to Aaa (sf)
Issuer: Capital Auto Receivables Asset Trust 2014-1
Class A-4 Notes, Affirmed Aaa (sf); previously on Oct 28, 2016
Affirmed Aaa (sf)
Class B Notes, Affirmed Aaa (sf); previously on Oct 28, 2016
Affirmed Aaa (sf)
Class C Notes, Affirmed Aaa (sf); previously on Oct 28, 2016
Affirmed Aaa (sf)
Class D Notes, Affirmed Aaa (sf); previously on Oct 28, 2016
Affirmed Aaa (sf)
Class E Notes, Affirmed Aaa (sf); previously on Oct 28, 2016
Upgraded to Aaa (sf)
Issuer: Capital Auto Receivables Asset Trust 2014-2
Class A-3 Notes, Affirmed Aaa (sf); previously on Oct 28, 2016
Affirmed Aaa (sf)
Class A-4 Notes, Affirmed Aaa (sf); previously on Oct 28, 2016
Affirmed Aaa (sf)
Class B Notes, Affirmed Aaa (sf); previously on Oct 28, 2016
Affirmed Aaa (sf)
Class C Notes, Affirmed Aaa (sf); previously on Oct 28, 2016
Affirmed Aaa (sf)
Class D Notes, Affirmed Aaa (sf); previously on Oct 28, 2016
Affirmed Aaa (sf)
Class E Notes, Affirmed Aaa (sf); previously on Oct 28, 2016
Upgraded to Aaa (sf)
Issuer: Capital Auto Receivables Asset Trust 2014-3
Class A-3 Notes, Affirmed Aaa (sf); previously on Oct 28, 2016
Affirmed Aaa (sf)
Class A-4 Notes, Affirmed Aaa (sf); previously on Oct 28, 2016
Affirmed Aaa (sf)
Class B Notes, Affirmed Aaa (sf); previously on Oct 28, 2016
Affirmed Aaa (sf)
Class C Notes, Affirmed Aaa (sf); previously on Oct 28, 2016
Affirmed Aaa (sf)
Class D Notes, Affirmed Aaa (sf); previously on Oct 28, 2016
Upgraded to Aaa (sf)
Class E Notes, Upgraded to Aaa (sf); previously on Oct 31, 2016
Assigned Aa1 (sf)
Issuer: Capital Auto Receivables Asset Trust 2015-1
Class A-2 Notes, Affirmed Aaa (sf); previously on Oct 28, 2016
Affirmed Aaa (sf)
Class A-3 Notes, Affirmed Aaa (sf); previously on Oct 28, 2016
Affirmed Aaa (sf)
Class A-4 Notes, Affirmed Aaa (sf); previously on Oct 28, 2016
Affirmed Aaa (sf)
Class B Notes, Affirmed Aaa (sf); previously on Oct 28, 2016
Affirmed Aaa (sf)
Class C Notes, Affirmed Aaa (sf); previously on Oct 28, 2016
Upgraded to Aaa (sf)
Class D Notes, Upgraded to Aaa (sf); previously on Oct 28, 2016
Upgraded to Aa1 (sf)
Class E Notes, Upgraded to A3 (sf); previously on Oct 31, 2016
Assigned Baa1 (sf)
Issuer: Capital Auto Receivables Asset Trust 2015-3
Class A-1A Notes, Affirmed Aaa (sf); previously on Oct 28, 2016
Affirmed Aaa (sf)
Class A-2 Notes, Affirmed Aaa (sf); previously on Oct 28, 2016
Affirmed Aaa (sf)
Class A-3 Notes, Affirmed Aaa (sf); previously on Oct 28, 2016
Affirmed Aaa (sf)
Class A-4 Notes, Affirmed Aaa (sf); previously on Oct 28, 2016
Affirmed Aaa (sf)
Class B Notes, Affirmed Aaa (sf); previously on Oct 28, 2016
Upgraded to Aaa (sf)
Class C Notes, Upgraded to Aa1 (sf); previously on Oct 28, 2016
Upgraded to Aa2 (sf)
Class D Notes, Affirmed A1 (sf); previously on Oct 28, 2016
Upgraded to A1 (sf)
Class E Notes, Affirmed Ba1 (sf); previously on Oct 28, 2016
Affirmed Ba1 (sf)
Issuer: Capital Auto Receivables Asset Trust 2015-4
Class A-1 Notes, Affirmed Aaa (sf); previously on Oct 21, 2015
Definitive Rating Assigned Aaa (sf)
Class A-2 Notes, Affirmed Aaa (sf); previously on Oct 21, 2015
Definitive Rating Assigned Aaa (sf)
Class A-3 Notes, Affirmed Aaa (sf); previously on Oct 21, 2015
Definitive Rating Assigned Aaa (sf)
Class A-4 Notes, Affirmed Aaa (sf); previously on Oct 21, 2015
Definitive Rating Assigned Aaa (sf)
Class B Notes, Upgraded to Aaa (sf); previously on Oct 21, 2015
Definitive Rating Assigned Aa1 (sf)
Class C Notes, Upgraded to Aa2 (sf); previously on Oct 21, 2015
Definitive Rating Assigned Aa3 (sf)
Class D Notes, Affirmed A3 (sf); previously on Oct 21, 2015
Definitive Rating Assigned A3 (sf)
Class E Notes, Affirmed Ba1 (sf); previously on Oct 21, 2015
Definitive Rating Assigned Ba1 (sf)
RATINGS RATIONALE
The upgrades are a result of the buildup of credit enhancement due
to sequential pay structures and non-declining
overcollateralization and reserve accounts. The lifetime cumulative
net loss (CNL) expectations were increased to 3.00% from 2.75% for
the 2014-1, 2015-3 and 2015-4 transactions, lowered to 2.25% from
2.5% for the 2013-4 transaction and remained unchanged for the
2014-2, 2014-3 and 2015-1 transactions at 2.25%, 2.00% and 2.75%
respectively.
CARAT transactions issued prior to 2015 have the same one-year
revolving feature that allows collateral to be added to the
securitized pool during the first twelve months. After this initial
period, the transactions amortize. All transactions included in
this rating action have completed their revolving period.
Below are key performance metrics (as of the January 2017
distribution date) and credit assumptions for the affected
transactions. Credit assumptions include Moody's expected lifetime
CNL, expressed as a percentage of the original pool balance plus
any additional added receivables, as well as Moody's lifetime
remaining CNL expectation and Moody's Aaa levels, both expressed as
a percentage of the current pool balance. The Aaa level is the
level of credit enhancement that would be consistent with a Aaa
(sf) rating for the given asset pool. Performance metrics include
the pool factor, which is the ratio of the current collateral
balance to the original collateral balance at closing; total credit
enhancement, which typically consists of subordination,
overcollateralization, reserve fund; and Excess Spread per annum.
Issuer: Capital Auto Receivables Asset Trust 2013-4
Lifetime CNL expectation -- 2.25%; prior expectation (October 2016)
- 2.50%
Lifetime Remaining CNL expectation -- 2.16%
Aaa (sf) level - 13.00%
Pool factor -- 18.05%
Total Hard credit enhancement - Class A 84.45%, Class B 66.22%,
Class C 48.94%, Class D 33.59%, Class E 20.15%
Excess Spread per annum -- Approximately 4.1%
Issuer: Capital Auto Receivables Asset Trust 2014-1
Lifetime CNL expectation -- 3.00%; prior expectation (October 2016)
- 2.75%
Lifetime Remaining CNL expectation -- 2.97%
Aaa (sf) level - 13.00%
Pool factor -- 20.75%
Total Hard credit enhancement - Class A 73.07%, Class B 57.3%,
Class C 42.35%, Class D 29.06%, Class E 17.44%
Excess Spread per annum -- Approximately 4.2%
Issuer: Capital Auto Receivables Asset Trust 2014-2
Lifetime CNL expectation -- 2.25%; prior expectation (October 2016)
- 2.25%
Lifetime Remaining CNL expectation -- 2.28%
Aaa (sf) level - 13.00%
Pool factor -- 20.32%
Total Hard credit enhancement - Class A 70.72%, Class B 55.45%,
Class C 40.98%, Class D 28.13%, Class E 16.88%
Excess Spread per annum -- Approximately 4.5%
Issuer: Capital Auto Receivables Asset Trust 2014-3
Lifetime CNL expectation -- 2.00%; prior expectation (October 2016)
- 2.00%
Lifetime Remaining CNL expectation -- 2.18%
Aaa (sf) level - 13.00%
Pool factor -- 29.85%
Total Hard credit enhancement - Class A 50.42%, Class B 39.53%,
Class C 29.22%, Class D 20.05%, Class E 12.03%
Excess Spread per annum -- Approximately 4.5%
Issuer: Capital Auto Receivables Asset Trust 2015-1
Lifetime CNL expectation -- 2.75%; prior expectation (October 2016)
- 2.75%
Lifetime Remaining CNL expectation -- 2.71%
Aaa (sf) level - 14.00%
Pool factor -- 42.07%
Total Hard credit enhancement - Class A 34.86%, Class B 26.98%,
Class C 19.51%, Class D 12.87%, Class E 4.57%,
Excess Spread per annum -- Approximately 4.7%
Issuer: Capital Auto Receivables Asset Trust 2015-3
Lifetime CNL expectation -- 3.00%; prior expectation (October 2016)
- 2.75%
Lifetime Remaining CNL expectation -- 2.89%
Aaa (sf) level - 16.00%
Pool factor -- 56.88%
Total Hard credit enhancement - Class A 24.25%, Class B 18.61%,
Class C 13.26%, Class D 8.51%, Class E 2.57%,
Excess Spread per annum -- Approximately 5.3%
Issuer: Capital Auto Receivables Asset Trust 2015-4
Lifetime CNL expectation -- 3.00%; original expectation (October
2015) - 2.75%
Lifetime Remaining CNL expectation -- 3.13%
Aaa (sf) level - 16.00%
Pool factor -- 61.89%
Total Hard credit enhancement - Class A 21.71%, Class B 16.56%,
Class C 11.69%, Class D 7.36%, Class E 1.94%,
Excess Spread per annum -- Approximately 5.9%
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Auto Loan- and Lease-Backed ABS' published in
October 2016.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are greater than necessary to
protect investors against current expectations of loss could lead
to an upgrade of the rating. Moody's current expectations of loss
may be better than its original expectations because of lower
frequency of default by the underlying obligors or appreciation in
the value of the vehicles that secure the obligor's promise of
payment. The US job market and the market for used vehicle are
primary drivers of performance. Other reasons for better
performance than Moody's expected include changes in servicing
practices to maximize collections on the loans or refinancing
opportunities that result in a prepayment of the loan.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could lead to a
downgrade of the ratings. Moody's current expectations of loss may
be worse than its original expectations because of higher frequency
of default by the underlying obligors of the loans or a
deterioration in the value of the vehicles that secure the
obligor's promise of payment. The US job market and the market for
used vehicle are primary drivers of performance. Other reasons for
worse performance than Moody's expected include poor servicing,
error on the part of transaction parties, lack of transactional
governance and fraud.
CITIGROUP COMMERCIAL 2016-GC36: Fitch Affirms B- Rating on F Debt
-----------------------------------------------------------------
Fitch Ratings has affirmed 15 classes of Citigroup Commercial
Mortgage Trust (CGCMT) 2016-GC36 commercial mortgage pass-through
certificates.
KEY RATING DRIVERS
The affirmations are the result of overall stable pool performance,
which reflects no material changes to pool metrics since issuance;
therefore, the original rating analysis was considered in affirming
the transaction.
As of the January 2017 distribution date, the pool's aggregate
principal balance has been reduced by 0.4% to $1.15 billion from
$1.16 billion at issuance. There have been no specially serviced
loans since issuance. No loans are defeased.
Stable Performance with No Material Changes: All loans in the pool
are current as of the January 2017 distribution with property level
performance in line with issuance expectations and no material
changes to pool metrics.
Fitch has designated one loan (0.8% of pool) as a Fitch Loan of
Concern. The loan, which is secured by a 78,196 square foot office
property located in The Woodlands, TX, has been on the master
servicer's watchlist since June 2016 due to the trigger of a cash
management period after the largest tenant (21% of net rentable
area [NRA]) failed to give the required renewal notice and
subsequently vacated at expiration in October 2016.
Highly Concentrated Pool: The top 10 loans comprise 59.4% of the
pool, which is above the 2015 and 2014 averages of 49.3% and 50.5%,
respectively. It was also noted at issuance that the loan
concentration index (LCI) was higher than average for this
transaction.
High Fitch Leverage: The pool demonstrates high leverage statistics
with a Fitch debt service coverage ratio and loan-to-value ratio of
1.08x and 113.5%, respectively, at issuance.
Limited Amortization: The pool is scheduled to amortize by 10.3% of
the initial pool balance prior to maturity. Eight loans (29.5% of
pool) are interest-only for the full term. As of January 2017,
39.6% of the current pool consists of loans that still have a
partial interest-only component during their remaining loan term,
compared to 42.5% of the original pool at issuance.
Although not a Loan of Concern, Fitch will continue to monitor the
leasing status on the sixth largest loan, Park Place (4.3% of
pool), which is secured by a six-building office property located
in Chandler, AZ. Noted at issuance, the largest tenant, Infusion
Software (30.7% of NRA through September 2021), was scheduled to
expand into an additional 19.2% of the NRA once buildout was
complete. According to the master servicer, the tenant's expansion
lease commenced on Jan. 1, 2017 and runs through December 2024.
However, the tenant has decided to spend a portion of their tenant
improvement allowance to sublease this additional space instead.
The property is located in the Mesa/Chandler office submarket,
which reported a high overall vacancy rate of 27.7%, as of third
quarter 2016 per Reis.
RATING SENSITIVITIES
The Rating Outlooks on all classes remain Stable. Fitch does not
foresee positive or negative ratings migration until a material
economic or asset-level event changes the transaction's overall
portfolio-level metrics.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation
to this rating action.
Fitch has affirmed the following classes:
-- $38.7 million class A-1 at 'AAAsf'; Outlook Stable;
-- $22.1 million class A-2 at 'AAAsf'; Outlook Stable;
-- $33.5 million class A-3 at 'AAAsf'; Outlook Stable;
-- $225 million class A-4 at 'AAAsf'; Outlook Stable;
-- $415.2 million class A-5 at 'AAAsf'; Outlook Stable;
-- $70.4 million class A-AB at 'AAAsf'; Outlook Stable;
-- $856.9 million class X-A* at 'AAAsf'; Outlook Stable;
-- $52 million class A-S** at 'AAAsf'; Outlook Stable;
-- $75.1 million class B** at 'AA-sf'; Outlook Stable;
-- $182.1 million class EC** at 'A-sf'; Outlook Stable;
-- $54.9 million class C** at 'A-sf'; Outlook Stable;
-- $65 million class D at 'BBB-sf'; Outlook Stable;
-- $65 million class X-D* at 'BBB-sf'; Outlook Stable;
-- $28.9 million class E at 'BB-sf'; Outlook Stable;
-- $11.6 million class F at 'B-sf'; Outlook Stable.
*Notional Amount and interest-only.
**Class A-S, B, and C certificates may be exchanged for class EC
certificates, and class EC certificates may be exchanged for the
class A-S, B, and C certificates. Fitch does not rate the class G
or H certificates.
COA SUMMIT: Moody's Affirms Ba2 Rating on Class D Notes
-------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by COA Summit CLO Ltd.
Class B Senior Secured Deferrable Floating Rate Notes, Upgraded to
Aa1 (sf); previously on May 6, 2016 Upgraded to Aa3 (sf)
Class C Senior Secured Deferrable Floating Rate Notes, Upgraded to
Baa1 (sf); previously on May 6, 2016 Affirmed Baa2 B1 (sf)
Moody's also affirmed the ratings on the following notes:
Class A-1 Senior Secured Floating Rate Notes (current balance of
$86,792,075.58), Affirmed Aaa (sf); previously on May 6, 2016
Affirmed Aaa (sf)
Class A-2 Senior Secured Floating Rate Notes, Affirmed Aaa (sf);
previously on May 6, 2016 Affirmed Aaa (sf)
Class D Secured Deferrable Floating Rate Notes, Affirmed Ba2 (sf);
previously on May 6, 2016 Affirmed Ba2 (sf)
COA Summit CLO Ltd., issued in March 2014, is a collateralized loan
obligation (CLO) backed primarily by a portfolio of senior secured
loans. The transaction's reinvestment period ended in April 2015.
RATINGS RATIONALE
These rating actions are primarily a result of deleveraging of the
senior notes and an increase in the transaction's
over-collateralization (OC) ratios since May 2016. The Class A-1
notes have been paid down by approximately 46% or $74.6 million
since that time. Based on Moody's calculation, the OC ratios for
the Class A, Class B, Class C and Class D notes are currently
159.62%, 137.50%, 120.77% and 108.74%, respectively, versus May
2016 levels of 139.52%, 126.37%, 115.48% and 107.10%,
respectively.
Nevertheless, the credit quality of the portfolio has deteriorated
since May 2016. Based on Moody's calculation, the weighted average
rating factor (WARF) is currently 3239 compared to 2961 at that
time.
Methodology Used for the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
October 2016.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
This transaction is subject to a number of factors and
circumstances that could lead to either an upgrade or downgrade of
the ratings:
1) Macroeconomic uncertainty: CLO performance is subject to a)
uncertainty about credit conditions in the general economy and b)
the large concentration of upcoming speculative-grade debt
maturities, which could make refinancing difficult for issuers.
2) Collateral Manager: Performance can also be affected positively
or negatively by a) the manager's investment strategy and behavior
and b) differences in the legal interpretation of CLO documentation
by different transactional parties owing to embedded ambiguities.
3) Collateral credit risk: A shift towards collateral of better
credit quality, or better credit performance of assets
collateralizing the transaction than Moody's current expectations,
can lead to positive CLO performance. Conversely, a negative shift
in credit quality or performance of the collateral can have adverse
consequences for CLO performance.
4) Deleveraging: An important source of uncertainty in this
transaction is whether deleveraging from unscheduled principal
proceeds will continue and at what pace. Deleveraging of the CLO
could accelerate owing to high prepayment levels in the loan market
and/or collateral sales by the manager, which could have a
significant impact on the notes' ratings. Note repayments that are
faster than Moody's current expectations will usually have a
positive impact on CLO notes, beginning with those with the highest
payment priority.
5) Recovery of defaulted assets: Fluctuations in the market value
of defaulted assets reported by the trustee and those that Moody's
assumes as having defaulted could result in volatility in the
deal's OC levels. Further, the timing of recoveries and whether a
manager decides to work out or sell defaulted assets create
additional uncertainty. 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.
Realization of higher than assumed recoveries would positively
impact the CLO.
6) Long-dated assets: The presence of assets that mature after the
CLO's legal maturity date exposes the deal to liquidation risk on
those assets. This risk is borne first by investors with the lowest
priority in the capital structure. Moody's assumes that the
terminal value of an asset upon liquidation at maturity will 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) or the asset's current market value.
7) Exposure to assets with low credit quality and weak liquidity:
The presence of assets rated Caa3 with a negative outlook, Caa2 or
Caa3 on review for downgrade or the worst Moody's speculative grade
liquidity (SGL) rating, SGL-4, exposes the notes to additional
risks if these assets default. The historical default rate is
higher than average for these assets. Due to the deal's exposure to
such assets, which constitute around $7.4 million of par, Moody's
ran a sensitivity case defaulting those assets.
In addition to the base case analysis, Moody's also conducted
sensitivity analyses to test the impact of a number of default
probabilities on the rated notes relative to the base case modeling
results, which may be different from the current public ratings of
the notes. Below is a summary of the impact of different default
probabilities (expressed in terms of WARF) on all of the rated
notes (by the difference in the number of notches versus the
current model output, for which a positive difference corresponds
to lower expected loss):
Moody's Adjusted WARF -- 20% (2591)
Class A-1: 0
Class A-2: 0
Class B: +1
Class C: +3
Class D: +1
Moody's Adjusted WARF + 20% (3887)
Class A-1: 0
Class A-2: 0
Class B: -2
Class C: -2
Class D: -1
Loss and Cash Flow Analysis:
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. In its base case,
Moody's analyzed the collateral pool as having a performing par and
principal proceeds balance of $214.0 million, defaulted par of
$10.8 million, a weighted average default probability of 21.85%
(implying a WARF of 3239) a weighted average recovery rate upon
default of 49.33%, a diversity score of 48 and a weighted average
spread of 3.79% (before accounting for LIBOR floors).
Moody's incorporates the default and recovery properties of the
collateral pool in cash flow model analysis where they are subject
to stresses as a function of the target rating on each CLO
liability reviewed. Moody's derives the default probability from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate for future defaults is based primarily on the seniority of the
assets in the collateral pool. In each case, historical and market
performance and the collateral manager's latitude for trading the
collateral are also factors.
COMM 2005-LP5: Moody's Lowers Rating on 2 Tranches to Csf
---------------------------------------------------------
Moody's Investors Service has affirmed the ratings on three classes
and downgraded six classes of COMM 2005-LP5 Commercial Mortgage
Pass-Through Certificates:
Cl. E, Affirmed Aaa (sf); previously on Jun 16, 2016 Upgraded to
Aaa (sf)
Cl. F, Downgraded to Ba1 (sf); previously on Jun 16, 2016 Affirmed
A3 (sf)
Cl. G, Downgraded to Ba3 (sf); previously on Jun 16, 2016 Affirmed
Baa2 (sf)
Cl. H, Downgraded to Caa3 (sf); previously on Jun 16, 2016
Downgraded to B2 (sf)
Cl. J, Downgraded to C (sf); previously on Jun 16, 2016 Downgraded
to Caa1 (sf)
Cl. K, Downgraded to C (sf); previously on Jun 16, 2016 Downgraded
to Caa3 (sf)
Cl. L, Affirmed C (sf); previously on Jun 16, 2016 Downgraded to C
(sf)
Cl. M, Affirmed C (sf); previously on Jun 16, 2016 Downgraded to C
(sf)
Cl. X-C, Downgraded to Caa2 (sf); previously on Jun 16, 2016
Downgraded to Caa1 (sf)
RATINGS RATIONALE
The ratings on three P&I classes, Classes E, L and M, were affirmed
because the transaction's key metrics, including Moody's loan
-to-value (LTV) ratio, Moody's stressed debt service coverage ratio
(DSCR) and the transactions Herfindahl Index (HERF), are within
acceptable ranges.
The ratings on five P&I classes, Classes F through K, were
downgraded due to ongoing concerns about current and future
interest shortfalls and losses from specially serviced loans.
The rating on one IO class, Class XC, was downgraded based on a
decline in the credit performance (or the weighted average rating
factor or WARF) of the referenced classes. The deal has paid down
an additional 14% since last review.
Moody's rating action reflects a base expected loss of 57.3% of the
current balance compared to 26.9% at last review. Moody's base
expected plus realized losses totals 4.8% compared to 3.2% at last
review. Moody's provides a current list of base expected losses for
conduit and fusion CMBS transactions on moodys.com at
http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in these ratings was "Moody's
Approach to Rating Large Loan and Single Asset/Single Borrower
CMBS" published in October 2015.
DESCRIPTION OF MODELS USED
Moody's analysis used the excel-based Large Loan Model. 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 and property type. Moody's also
further adjusts these aggregated proceeds for any pooling benefits
associated with loan level diversity and other concentrations and
correlations.
DEAL PERFORMANCE
As of the January 10, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by 94% to $97.6 million
from $1.7 billion at securitization. The certificates are
collateralized by 16 mortgage loans ranging in size from less than
1% to 71% of the pool, with the top ten loans constituting 98% of
the pool.
Two loans, constituting 2% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Nineteen loans have been liquidated from the pool, resulting in an
aggregate realized loss of $26.5 million (for an average loss
severity of 12%). The largest specially serviced loan is the
Lakeside Mall Loan ($69.5 million -- 71% of the pool), which
represents a pari-passu interest in a $138.9 million senior
mortgage loan. The loan transferred to special servicing in May
2016 per the borrower's (GGP) request, as the loan failed to pay
off at its June 1, 2016 maturity date. The loan is secured by
643,000 square feet (SF) within a 1.5 million SF regional mall
located in Sterling Heights, Michigan. The mall's anchors include
Sears, JC Penney, Macy's, Lord & Taylor and Macy's Mens & Home.
Macy's Mens and Home is the only anchor tenant that is part of the
collateral. As of November 30, 2016, the total mall was
approximately 93% occupied, while in-line occupancy was
approximately 77%. Inline tenant sales per square foot on a
trailing 12 month basis as of September 2016 were reported to be
$263 compared to $284 for calendar year 2015. Comparable inline
tenant sales over the same time period were $311 on a trailing 12
month basis as of September 2016 compared to $318 as of year-end
2015. Many inline tenants also have lease maturity dates within the
next 18 months.
The second largest loan in special servicing is Meridian Place
Apartments Loan (for $10.0 million -- 10.2% of the pool), which is
secured by a 232-unit Class C+ multifamily property located 2 miles
north of the Tallahassee, Florida central business district. The
loan transferred to special servicing in September 2010 due to
payment default and became REO in January 2012. As of December
2016, the property was 94% leased, the same as at last review. The
special servicer's strategy is to make select capex repairs,
increase rents and then dispose of the asset in second half of
2017.
Moody's received full year 2015 operating results for 64% of the
pool, and full or partial year 2016 operating results for 64% of
the pool. Moody's weighted average conduit LTV is 28%, compared to
31% at Moody's last review. Moody's conduit component excludes
loans with structured credit assessments, defeased and CTL loans,
and specially serviced and troubled loans. Moody's value reflects a
weighted average capitalization rate of 9.7%.
Moody's actual and stressed conduit DSCRs are 3.39X and 4.17X,
respectively, compared to 2.95X and 3.81X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The top three conduit loans represent 11.2% of the pool balance.
The largest loan is the 30 East 65th Street Loan ($6.0 million --
6.1% of the pool), which is secured by a 64-unit co-operative
building, located on 65th and Madison Avenue in Manhattan. The
building is located one block from the Central Park zoo. Moody's
LTV and stressed DSCR are 19% and 4.32X, respectively, the same as
at last review.
The second largest loan is the Pacific American Fish Company Loan
($3.4 million -- 3.5% of the pool), which is secured by a 106,000
SF industrial building located in Vernon, California. The
building's sole tenant, Pacific American Fish Co. lease expires on
March 31, 2020. Performance has remained steady. Due to the single
tenant exposure, Moody's stressed the value of the property
utilizing a lit / dark analysis. Moody's LTV and stressed DSCR are
16% and 5.87X, respectively, compared to 19% and 5.11X at the last
review.
The third largest loan is the Hunters Chase Apartments Loan ($1.5
million -- 1.5% of the pool). The loan is secured by a 112-unit
multifamily property located in Thomasville, Georgia. As of
December 2016, the property was 99% leased. Moody's LTV and
stressed DSCR are 38% and 2.35X, respectively, compared to 48% and
1.89X at the last review.
CONNECTICUT AVE 2017-C01: Fitch Rates Cl. 1M-2C Notes 'Bsf'
-----------------------------------------------------------
Fitch Ratings has assigned ratings to Fannie Mae's risk transfer
transaction, Connecticut Avenue Securities, series 2017-C01 (CAS
2017-C01), as follows:
-- $457,271,000 class 1M-1 notes 'BBB-sf'; Outlook Stable;
-- $228,635,000 class 1M-2A notes 'BB+sf'; Outlook Stable;
-- $228,635,000 class 1M-2B notes 'BB-sf'; Outlook Stable;
-- $228,635,000 class 1M-2C notes 'Bsf'; Outlook Stable;
-- $685,905,000 class 1M-2 exchangeable notes 'Bsf'; Outlook
Stable;
-- $228,635,000 class 1A-I1 exchangeable notional notes 'BB+sf';
Outlook Stable;
-- $228,635,000 class 1E-A1 exchangeable notes 'BB+sf'; Outlook
Stable;
-- $228,635,000 class 1A-I2 exchangeable notional notes 'BB+sf';
Outlook Stable;
-- $228,635,000 class 1E-A2 exchangeable notes 'BB+sf'; Outlook
Stable;
-- $228,635,000 class 1A-I3 exchangeable notional notes 'BB+sf';
Outlook Stable;
-- $228,635,000 class 1E-A3 exchangeable notes 'BB+sf'; Outlook
Stable;
-- $228,635,000 class 1A-I4 exchangeable notional notes 'BB+sf';
Outlook Stable;
-- $228,635,000 class 1E-A4 exchangeable notes 'BB+sf'; Outlook
Stable;
-- $228,635,000 class 1B-I1 exchangeable notional notes 'BB-sf';
Outlook Stable;
-- $228,635,000 class 1E-B1 exchangeable notes 'BB-sf'; Outlook
Stable;
-- $228,635,000 class 1B-I2 exchangeable notional notes 'BB-sf';
Outlook Stable;
-- $228,635,000 class 1E-B2 exchangeable notes 'BB-sf'; Outlook
Stable;
-- $228,635,000 class 1B-I3 exchangeable notional notes 'BB-sf';
Outlook Stable;
-- $228,635,000 class 1E-B3 exchangeable notes 'BB-sf'; Outlook
Stable;
-- $228,635,000 class 1B-I4 exchangeable notional notes 'BB-sf';
Outlook Stable;
-- $228,635,000 class 1E-B4 exchangeable notes 'BB-sf'; Outlook
Stable;
-- $228,635,000 class 1C-I1 exchangeable notional notes 'Bsf';
Outlook Stable;
-- $228,635,000 class 1E-C1 exchangeable notes 'Bsf'; Outlook
Stable;
-- $228,635,000 class 1C-I2 exchangeable notional notes 'Bsf';
Outlook Stable;
-- $228,635,000 class 1E-C2 exchangeable notes 'Bsf'; Outlook
Stable;
-- $228,635,000 class 1C-I3 exchangeable notional notes 'Bsf';
Outlook Stable;
-- $228,635,000 class 1E-C3 exchangeable notes 'Bsf'; Outlook
Stable;
-- $228,635,000 class 1C-I4 exchangeable notional notes 'Bsf';
Outlook Stable;
-- $228,635,000 class 1E-C4 exchangeable notes 'Bsf'; Outlook
Stable;
-- $457,270,000 class 1E-D1 exchangeable notes 'BB-sf'; Outlook
Stable;
-- $457,270,000 class 1E-D2 exchangeable notes 'BB-sf'; Outlook
Stable;
-- $457,270,000 class 1E-D3 exchangeable notes 'BB-sf'; Outlook
Stable;
-- $457,270,000 class 1E-D4 exchangeable notes 'BB-sf'; Outlook
Stable;
-- $457,270,000 class 1E-D5 exchangeable notes 'BB-sf'; Outlook
Stable;
-- $457,270,000 class 1E-F1 exchangeable notes 'Bsf'; Outlook
Stable;
-- $457,270,000 class 1E-F2 exchangeable notes 'Bsf'; Outlook
Stable;
-- $457,270,000 class 1E-F3 exchangeable notes 'Bsf'; Outlook
Stable;
-- $457,270,000 class 1E-F4 exchangeable notes 'Bsf'; Outlook
Stable;
-- $457,270,000 class 1E-F5 exchangeable notes 'Bsf'; Outlook
Stable;
-- $457,270,000 class 1-X1 exchangeable notional notes 'BB-sf';
Outlook Stable;
-- $457,270,000 class 1-X2 exchangeable notional notes 'BB-sf';
Outlook Stable;
-- $457,270,000 class 1-X3 exchangeable notional notes 'BB-sf';
Outlook Stable;
-- $457,270,000 class 1-X4 exchangeable notional notes 'BB-sf';
Outlook Stable;
-- $457,270,000 class 1-Y1 exchangeable notional notes 'Bsf';
Outlook Stable;
-- $457,270,000 class 1-Y2 exchangeable notional notes 'Bsf';
Outlook Stable;
-- $457,270,000 class 1-Y3 exchangeable notional notes 'Bsf';
Outlook Stable;
-- $457,270,000 class 1-Y4 exchangeable notional notes 'Bsf';
Outlook Stable.
The following classes will not be rated by Fitch:
-- $42,117,071,181 class 1A-H reference tranche;
-- $24,066,956 class 1M-1H reference tranche;
-- $12,033,978 class 1M-AH reference tranche;
-- $12,033,978 class 1M-BH reference tranche;
-- $12,033,978 class 1M-CH reference tranche;
-- $207,850,000 class 1B-1 notes;
-- $ 10,939,980 class 1B-1H reference tranche;
-- $218,789,980 class 1B-2H reference tranche.
The 'BBB-sf' rating for the 1M-1 note reflects the 2.65%
subordination provided by the 0.55% class 1M-2A, the 0.55% class
1M-2B, the 0.55% class 1M-2C, the 0.50% class 1B-1 and their
corresponding reference tranches as well as the 0.50% 1B-2H
reference tranche. The notes are general senior unsecured
obligations of Fannie Mae ('AAA'/Outlook Stable) subject to the
credit and principal payment risk of a pool of certain residential
mortgage loans held in various Fannie Mae-guaranteed MBS.
The reference pool of mortgages will consist of mortgage loans with
loan to values (LTVs) greater than 60% and less than or equal to
80%.
Connecticut Avenue Securities, series 2017-C01 (CAS 2017-C01) is
Fannie Mae's 16th risk transfer transaction issued as part of the
Federal Housing Finance Agency's Conservatorship Strategic Plan for
2013-2017 for each of the government sponsored enterprises (GSEs)
to demonstrate the viability of multiple types of risk transfer
transactions involving single family mortgages.
The objective of the transaction is to transfer credit risk from
Fannie Mae to private investors with respect to a $43.8 billion
pool of mortgage loans currently held in previously issued MBS
guaranteed by Fannie Mae where principal repayment of the notes are
subject to the performance of a reference pool of mortgage loans.
As loans liquidate, are modified or other credit events occur, the
outstanding principal balance of the debt notes will be reduced by
the loan's actual loss severity percentage related to those credit
events.
While the transaction structure simulates the behavior and credit
risk of traditional RMBS mezzanine and subordinate securities,
Fannie Mae will be responsible for making monthly payments of
interest and principal to investors. Because of the counterparty
dependence on Fannie Mae, Fitch's expected rating on the 1M-1,
1M-2A, 1M-2B and 1M-2C notes will be based on the lower of: the
quality of the mortgage loan reference pool and credit enhancement
(CE) available through subordination; and Fannie Mae's Issuer
Default Rating. The 1M-1, 1M-2A 1M-2B, 1M-2C, and 1B-1 notes will
be issued as LIBOR-based floaters. In the event that the one-month
LIBOR rate falls below the applicable Negative LIBOR Trigger value
described in the offering memorandum, the interest payment on the
interest-only notes will be capped at the excess of (i) the
interest amount payable on the related class of exchangeable notes
for that payment date over (ii) the interest amount payable on the
class of floating rate Related Combinable and Recombinable (RCR)
notes included in the same combination for that payment date. If
there are no floating rate classes in the related exchange, then
the interest payment on the interest-only notes will be capped at
the aggregate of the interest amounts payable on the classes of RCR
notes included in the same combination that were exchanged for the
specified class of interest only RCR Notes for that payment date.
KEY RATING DRIVERS
High Quality Mortgage Pool (Positive): The reference mortgage loan
pool consists of high quality mortgage loans that were acquired by
Fannie Mae from March 2016 through June 2016. In this transaction,
Fannie Mae has only included one group of loans with LTV ratios
from 60%-80%. Overall, the reference pool's collateral
characteristics are similar to recent CAS transactions and reflect
the strong credit profile of post-crisis mortgage originations.
Actual Loss Severities (Neutral): This will be Fannie Mae's ninth
actual loss risk transfer transaction in which losses borne by the
noteholders will not be based on a fixed loss severity (LS)
schedule. The notes in this transaction will experience losses
realized at the time of liquidation or modification, which will
include both lost principal and delinquent or reduced interest.
12.5-Year Hard Maturity (Positive): The 1M-1, 1M-2A, 1M-2B, 1M-2C
and 1B-1 notes benefit from a 12.5-year legal final maturity. As a
result, any collateral losses on the reference pool that occur
beyond year 12.5 are borne by Fannie Mae and do not affect the
transaction. Fitch accounted for the 12.5-year window in its
default analysis and applied a reduction to its lifetime default
expectations.
Limited Size/Scope of Third-Party Diligence (Neutral): This is the
fifth Fannie Mae transaction in which Fitch received third-party
due diligence on a loan production basis as opposed to a
transaction-specific review. Fitch believes that regular, periodic
third-party reviews (TPRs) conducted on a loan production basis are
sufficient for validating Fannie Mae's quality-control (QC)
processes. The sample selection was limited to a population of
7,391 loans that were previously reviewed as part of Fannie Mae's
post-purchase QC review and met the reference pool's eligibility
criteria. Of those loans, 1,998 were selected for a full review
(credit, property valuation, and compliance) by third-party due
diligence providers. Of the 1,998 loans, 592 were part of this
transaction's reference pool. Fitch views the results of the due
diligence review as consistent with its opinion of Fannie Mae as an
above-average aggregator; as a result, no adjustments were made to
Fitch's loss expectations based on due diligence.
Advantageous Payment Priority (Positive): The 1M-1 class strongly
benefits from the sequential pay structure and stable CE provided
by the more junior 1M-2A, 1M-2B, 1M-2C and 1B-1 classes, which are
locked out from receiving any principal until classes with a more
senior payment priority are paid in full. However, available CE for
the junior classes as a percentage of the outstanding reference
pool increases in tandem with the paydown of the 1M-1 class. Given
the size of the 1M-1 class relative to the combined total of all
the junior classes, together with the sequential pay structure, the
class 1M-1 will de-lever and CE as a percentage will build faster
than in a pro rata payment structure.
Solid Alignment of Interests (Positive): While the transaction is
designed to transfer credit risk to private investors, Fitch
believes that it benefits from a solid alignment of interests.
Fannie Mae will be retaining credit risk in the transaction by
holding the 1A-H senior reference tranches, which have an initial
loss protection of 3.75%, as well as 100% of the first loss 1B-2H
reference tranche, sized at 50 basis points (bps). Fannie Mae is
also retaining an approximately 5% vertical slice/interest in the
1M-1, 1M-2A, 1M-2B and 1M-2C tranches and roughly 45% of the 1B-1
tranche.
Receivership Risk Considered (Neutral): Under the Federal Housing
Finance Regulatory Reform Act, the Federal Housing Finance Agency
(FHFA) must place Fannie Mae into receivership if it determines
that Fannie Mae's assets are less than its obligations for more
than 60 days following the deadline of its SEC filing, as well as
for other reasons. As receiver, FHFA could repudiate any contract
entered into by Fannie Mae if it is determined that the termination
of such contract would promote an orderly administration of Fannie
Mae's affairs. Fitch believes that the U.S. government will
continue to support Fannie Mae; this is reflected in Fithc's
current rating of Fannie Mae. However, if, at some point, Fitch
views the support as being reduced and receivership likely, the
ratings of Fannie Mae could be downgraded and the 1M-1, 1M-2A,
1M-2B and 1M-2C notes' ratings affected.
RATING SENSITIVITIES
Fitch's analysis incorporates sensitivity analyses to demonstrate
how the ratings would react to steeper market value declines (MVDs)
than assumed at both the metropolitan statistical area (MSA) and
national levels. The implied rating sensitivities are only an
indication of some of the potential outcomes and do not consider
other risk factors that the transaction may become exposed to or be
considered in the surveillance of the transaction.
This defined stress sensitivity analysis demonstrates how the
ratings would react to steeper MVDs at the national level. The
analysis assumes MDVs of 10%, 20%, and 30%, in addition to the
model-projected 24.2% at the 'BBBsf' level and 19.4% at the 'BBsf'
level. The analysis indicates that there is some potential rating
migration with higher MVDs, compared with the model projection.
Fitch also conducted defined rating sensitivities which determine
the stresses to MVDs that would reduce a rating by one full
category, to non-investment grade, and to 'CCCsf'. For example,
additional MVDs of 11%, 11% and 34% would potentially reduce the
'BBBsf' rated class down one rating category, to non-investment
grade, and to 'CCCsf', respectively.
DUE DILIGENCE USAGE
Fitch was provided with due diligence information from Adfitech,
Inc. The due diligence focused on credit and compliance reviews,
desktop valuation reviews and data integrity. Adfitech examined
selected loan files with respect to the presence or absence of
relevant documents. Fitch received certifications indicating that
the loan-level due diligence was conducted in accordance with
Fitch's published standards. The certifications also stated that
the company performed its work in accordance with the independence
standards, per Fitch's criteria, and that the due diligence
analysts performing the review met Fitch's criteria of minimum
years of experience. Fitch considered this information in its
analysis and the findings did not have an impact on the analysis.
CSFB TRUST 2006-C5: Moody's Cuts Rating on Class B Debt to 'C'
--------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on three classes
and downgraded the ratings on two classes in CSFB Commercial
Mortgage Trust 2006-C5:
Cl. A-J, Affirmed Caa1 (sf); previously on Jun 2, 2016 Affirmed
Caa1 (sf)
Cl. B, Downgraded to C (sf); previously on Jun 2, 2016 Affirmed
Caa3 (sf)
Cl. C, Affirmed C (sf); previously on Jun 2, 2016 Affirmed C (sf)
Cl. D, Affirmed C (sf); previously on Jun 2, 2016 Affirmed C (sf)
Cl. A-X, Downgraded to Caa3 (sf); previously on Jun 2, 2016
Downgraded to B2 (sf)
RATINGS RATIONALE
The rating on Classes A-J, C and D were affirmed because the
ratings are consistent with expected recovery and losses of
principal and interest from liquidated and troubled loans.
The rating on the Class B was downgraded due to the anticipated
losses from specially serviced and troubled loans. Loans
representing approximately 97% of the pool are in special
servicing, of which 13 (representing 36.4% of the pool balance) are
real estate owned ("REO").
The rating on the IO Class, Class A-X, was downgraded due to the
decline in the credit performance of its reference classes
resulting from principal paydowns of higher quality reference
classes.
Moody's rating action reflects a base expected loss of 56.3% of the
current balance, compared to 11.1% at Moody's last review. Moody's
base expected loss plus realized losses is now 13.4% of the
original pooled balance, compared to 14.5% at the 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.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in these ratings was "Moody's
Approach to Rating Large Loan and Single Asset/Single Borrower
CMBS" published in October 2015.
Moody's analysis incorporated a loss and recovery approach in
rating the P&I classes in this deal since 96.8% of the pool is in
special servicing and Moody's has identified one additional
troubled loan representing 3.2% of the pool. In this approach,
Moody's determines a probability of default for each specially
serviced and troubled loan that it expects will generate a loss and
estimates a loss given default based on a review of broker's
opinions of value (if available), other information from the
special servicer, available market data and Moody's internal data.
The loss given default for each loan also takes into consideration
repayment of servicer advances to date, estimated future advances
and closing costs. Translating the probability of default and loss
given default into an expected loss estimate, Moody's then applies
the aggregate loss from specially serviced and troubled loans to
the most junior classes and the recovery as a pay down of principal
to the most senior classes.
DESCRIPTION OF MODELS USED
Moody's analysis used the excel-based Large Loan Model. 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 and property type. Moody's also
further adjusts these aggregated proceeds for any pooling benefits
associated with loan level diversity and other concentrations and
correlations.
DEAL PERFORMANCE
As of the January 18, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by 91.2% to $301
million from $3.4 billion at securitization. The certificates are
collateralized by 25 mortgage loans ranging in size from less than
1% to 23.2% of the pool, with the top ten loans constituting 88.6%
of the pool. There are no outstanding loans that have defeased.
Seventy-three loans have been liquidated from the pool at a loss,
resulting in an aggregate realized loss of $290.6 million (for an
average loss severity of 48%). Twenty-four loans, constituting
96.8% of the pool, are currently in special servicing. The largest
exposure in specially servicing is the West Covina Portfolio Loan
($75.6 million -- 25.1% of the pool), which is secured by two
cross-collateralized and cross-defaulted loans. The West Covina
Village Community Shopping Center Loan is secured by a 229,000
square foot (SF) anchored retail center and the Wells Fargo Bank
Tower Loan is secured by a 215,000 square foot (SF) suburban office
building. Both properties are located in West Covina, California.
The loans initially transferred to special servicing in June 2009
due to delinquent payments and a loan modification closed in May
2013. The loans were returned to the master servicer in 2013 but
were subsequently transferred back to the special servicer in June
2014. As of May 2016, The Wells Fargo Bank Tower has become REO and
the West Covina Village Community Shopping Center remains in
special servicing.
The second largest specially serviced loan is a Midtown Manhattan
Hotel Loan ($70 million -- 12.5% of the pool), formerly known as
the Best Western President Loan. The loan is secured by a 16-story,
334-room, full service hotel located in the Theater District on
West 48th Street between Seventh and Eighth Avenue in Manhattan,
New York. The flag was changed from a Best Western to a TRYP by
Wyndham in 2014 and is now known as The Gallivant Times Square. The
loan was first transferred to Special Servicing in March 2013, and
then again in June 2014 due to delinquent payments and was modified
effective October 2014. The loan transferred back into special
servicing in December 2015 for imminent default. As per the special
servicer, foreclosure is being dual tracked with discussions of
potential restructuring options with the borrower.
The third largest specially serviced loan is the Sandhill Phase I
Loan ($51 million -- 16.9% of the pool), which is secured by a
288,021 square foot (SF) lifestyle retail center located in
Columbia, South Carolina. The asset includes a ground lease to a
98,542 square foot (SF) JC Penney Department store. The loan
transferred to special servicing in October 2011 due to delinquent
payments and became REO in September 2012. As per the October 2016
rent roll the property was 88% leased, compared to 89% leased as of
March 2016 (including the JCP ground lease). As per the special
servicer the asset is not currently on the market for sale and
their strategy is to continue to stabilize the property.
The remaining 20 specially serviced loans are secured by a mix of
property types. Moody's estimates an aggregate $166.1 million loss
for the specially serviced loans (57% expected loss on average).
As of the January 18, 2017 remittance statement cumulative interest
shortfalls were $38.1 million and impact up to Class B. Moody's
anticipates interest shortfalls will continue because of the
exposure to specially serviced loans and/or modified loans.
Interest shortfalls are caused by special servicing fees, including
workout and liquidation fees, appraisal entitlement reductions
(ASERs), loan modifications and extraordinary trust expenses.
The only performing non-specially serviced loan in the pool
represents 3.2% of the pool balance. The loan is the Duke
University Health Systems, Inc. - OPS Loan ($9.7 million -- 3.2% of
the pool), which is secured by a 40,540 square foot (SF) medical
office building located in a medical corridor in Durham, North
Carolina. The property is 100% leased by Duke University Health
System Inc. with a lease expiration of November 30, 2017. The
tenant has vacated the property and will continue to pay rent for
the duration of its lease term. The loan is on the master
servicer's watchlist due to the lease expiration date and Moody's
has identified this as a troubled loan.
EXETER AUTOMOBILE 2017-1: S&P Gives Prelim BB Rating on Cl. D Debt
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Exeter
Automobile Receivables Trust's $400.00 million automobile
receivables-backed notes series 2017-1.
The note issuance is an asset-backed securities transaction backed
by subprime auto loan receivables.
The preliminary ratings are based on information as of Jan. 26,
2017. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The availability of approximately 51.83%, 43.30%, 34.78%,
and 28.62% credit support for the class A, B, C, and D
notes, respectively, based on stressed cash flow scenarios
(including excess spread), which provide coverage of
approximately 2.50x, 2.05x, 1.55x, and 1.27x S&P's 19.75%-
20.75% expected cumulative net loss (CNL). These break-even
scenarios withstand cumulative gross losses of approximately
82.9%, 69.3%, 55.7%, and 45.8%, respectively.
-- The timely interest and principal payments that S&P believes
will be made to the preliminary rated notes under stressed
cash flow modeling scenarios that S&P believes is
appropriate for the assigned preliminary ratings.
-- S&P's expectation that under a moderate ('BBB') stress
scenario, all else being equal, its ratings on the class A
and B notes will remain within one rating category of its
preliminary 'AA (sf)' and 'A (sf)' ratings, respectively,
during the first year and that our ratings on the class C
and D notes will remain within two rating categories of
S&P's preliminary 'BBB (sf)' and 'BB (sf)' ratings during
the first year. These potential rating movements are
consistent with S&P's 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.
-- The collateral characteristics of the subprime automobile
loans securitized in this transaction, including the
representations in the transaction documents that all
contracts in the pool have made a least one payment.
-- The transaction's payment, credit enhancement, and legal
structures. This transaction includes a CNL trigger, which
if breached increases the overcollateralization target.
PRELIMINARY RATINGS ASSIGNED
Exeter Automobile Receivables Trust 2017-1
Class Rating Type Interest Amount
rate(i) (mil. $)
A AA (sf) Senior Fixed 244.02
B A (sf) Subordinate Fixed 60.32
C BBB (sf) Subordinate Fixed 49.31
D BB (sf) Subordinate Fixed 46.35
(i)The interest rates and actual sizes of these tranches will be
determined on the pricing date.
FREMF 2017-K61: Fitch Assigns BB+ Rating to Class C Certs
---------------------------------------------------------
Fitch Ratings has assigned the following ratings and Rating
Outlooks to FREMF 2017-K61 Multifamily Mortgage Pass-Through
Certificates and Freddie Mac Structured Pass-Through Certificates
Series K-061:
FREMF 2017-K61 Multifamily Mortgage Pass-Through Certificates
--$129,287,000b class A-1 'AAAsf'; Outlook Stable;
--$882,737,000b class A-2 'AAAsf'; Outlook Stable;
--$72,512,000bc class A-M 'Asf'; Outlook Stable;
--$1,012,024,000ab class X1 'AAAsf'; Outlook Stable;
--$72,512,000abc class XAM 'Asf'; Outlook Stable;
--$1,012,024,000a class X2-A 'AAAsf'; Outlook Stable;
--$50,444,000 class B 'BBBsf'; Outlook Stable;
--$31,527,000 class C 'BB+sf'; Outlook Stable.
Freddie Mac Structured Pass-Through Certificates, Series K-061
--$129,287,000b class A-1 'AAAsf'; Outlook Stable;
--$882,737,000b class A-2 'AAAsf'; Outlook Stable;
--$72,512,000bc class A-M 'Asf'; Outlook Stable;
--$1,012,024,000ab class X1 'AAAsf'; Outlook Stable;
--$72,512,000abc class XAM 'Asf'; Outlook Stable.
(a) Notional amount and interest-only
(b) Guaranteed by Freddie Mac. Ratings are based solely on the
underlying collateral and without respect to the Freddie Mac
guarantee.
(c) Classes A-M and XAM could be rated 'AAAsf' if the Freddie Mac
guarantee would be accounted for.
The ratings are based on the information provided by the issuer as
of Jan. 26, 2017. Fitch did not rate the following classes of FREMF
2017-K61: the $176,553,402 interest-only class X3, the $249,065,402
interest-only class X2-B or the $94,582,402 class D.
Additionally, Fitch did not rate the following class of Freddie Mac
Structured Pass-Through Certificates, Series K-061: the
$176,553,402 interest-only class X3.
The certificates represent the beneficial ownership interest in the
trust. The trust's primary assets are 69 loans secured by 69
commercial properties having an aggregate principal balance of
approximately $1.26 billion as of the cut-off date. The Freddie Mac
Structured Pass-Through Certificates, Series K-061 (Freddie Mac SPC
K-061) represents a pass-through interest in the corresponding
class of securities issued by FREMF 2017-K61. Each Freddie Mac SPC
K-061 security has the same designation as its underlying FREMF
2017-K61 class. All loans were originated specifically for Freddie
Mac by approved Seller Servicers. The certificates follow a
sequential-pay structure.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 68.2% of the properties
by balance and cash flow analysis of 79.0% of the pool.
The transaction has a Fitch stressed debt service coverage ratio
(DSCR) of 1.04, a Fitch stressed loan-to-value (LTV) of 120.5% and
a Fitch debt yield of 7.2%. Fitch's aggregate net cash flow
represents a variance of 11.29% to issuer cash flows.
KEY RATING DRIVERS
Higher Leverage Than Recent Freddie Mac Transactions: The pool's
Fitch DSCR and LTV are 1.04x and 120.5%, respectively. The
transaction's DSCR is in-line with the Fitch-rated 2016 DSCR for
10-year, K-series Freddie Mac deals of 1.04x, and slightly worse
than the 2015 average of 1.08x. The transaction's LTV is higher
than the 2016 and 2015 averages of 117.3% and 115.0%, respectively.
In addition, 72.3% of loans in the pool by balance have a Fitch
DSCR lower than 1.00x, which is worse than the 2016 average of
60.3%.
Limited Amortization: The pool is scheduled to amortize by 10.8% of
the initial pool balance prior to maturity, slightly above the
Fitch-rated Freddie Mac 10-year 2016 and 2015 averages of 10.6% and
10.2%, respectively. Seven loans (12.1%) are full-term
interest-only, and 47 loans (74.5%) are partial interest-only. The
remaining 15 loans (13.4%) are amortizing balloon loans with a term
of 10 years.
Credit Opinion Loan: Park Terrace Gardens represents 1.5% of the
total pool balance and received a credit opinion of 'AAAsf*' on a
stand-alone basis. The loan is secured by a 394-unit cooperative
development located in the Morningside Heights neighborhood of
Manhattan. Excluding this loan, the conduit has a Fitch stressed
DSCR and LTV of 1.01x and 121.9%, respectively.
RATING SENSITIVITIES
For this transaction, Fitch's net cash flow (NCF) was 13.4% below
the most recent year's net operating income (NOI; for properties
for which a full-year NOI was provided, excluding properties that
were stabilizing during this period). Unanticipated further
declines in property-level NCF could result in higher defaults and
loss severities on defaulted loans and in potential rating actions
on the certificates.
Fitch evaluated the sensitivity of the ratings assigned to FREMF
2017-K61 certificates and found that the transaction displays
average sensitivity to further declines in NCF. In a scenario in
which NCF declined a further 20% from Fitch's NCF, a downgrade of
the 'AAAsf' certificates to 'A+sf' could result. In a more severe
scenario, in which NCF declined a further 30% from Fitch's NCF, a
downgrade of the 'AAAsf' certificates to 'BBB+sf' could result.
GREENWICH CAPITAL 2004-GG1: Fitch Affirms 'D' Rating on Cl. L Debt
------------------------------------------------------------------
Fitch Ratings has upgraded one class, downgraded three classes, and
affirmed five classes of Greenwich Capital Commercial Funding Corp.
Commercial Mortgage Trust 2004-GG1.
KEY RATING DRIVERS
The upgrade reflects increased credit enhancement from paydown
since Fitch's last rating action. The downgrades are due to the
increased certainty of losses to the already distressed classes. As
of the January 2017 distribution date, the pool's aggregate
principal balance has been reduced to $105.1 million from $2.60
billion at issuance. One loan is defeased (0.50% of the pool) and
interest shortfalls are currently affecting classes H through P.
Increased Paydown: The pool has paid down approximately $48 million
in the last 12 months (or 29% of the January 2016 pool balance).
Approximately 96% of the pool has paid down since issuance.
Concentrated Pool: The pool is highly concentrated with only five
of the original 127 loans remaining. In addition, the largest loan
accounts for 98% of the current pool balance.
High Loss Expectations: Fitch modelled losses of 36.4% for the
remaining pool; expected losses as a percentage of the original
pool balance are at 4.4%, including $77.8 million (3%) of losses
incurred to date.
The majority of the modelled losses are attributed to the 400 West
Market Street loan (formerly known as Aegon Center) (98.1% of the
current pool). The loan is secured by a 35-story, 633,650 square
foot (sf) multi-tenant office tower in the Louisville, KY central
business district. The loan had previously transferred to special
servicing in March 2012 due to the vacancy of the largest tenant,
Aegon (previously 33% of the net rentable area [NRA]), which
vacated at its lease expiration in December 2012. The loan was
modified and returned to the master servicer in November 2013.
Terms of the modification included a bifurcation of the loan into a
senior ($82 million) and junior ($21.8 million) component), plus a
reduced interest rate and extension of the loan maturity by 60
months to April 2019. The loan remains current under the modified
terms.
Occupancy has remained relatively flat since Aegon vacated in 2012,
reporting at 73% as of September 2016. According to the servicer,
the borrower continues to market vacant space and renew leases of
existing tenants. There is approximately $12.6 million held in a
lender reserve as part of a cash flow sweep due to the Aegon
vacancy, which can be used for capital repairs and leasing costs.
The net operating income (NOI) debt service coverage ratio (DSCR)
reported at 2.34x for year to date September 2016 and 2.22x for YE
2015, per the modified terms. 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 2018. Unless collateral performance improves, recovery to
the B-note component is unlikely.
RATING SENSITIVITIES
The ratings on class F and G have Stable Outlooks due to sufficient
credit enhancement. The rating on class F has been capped at 'Asf'
due to possibility for future interest shortfalls. Downgrades to
the distressed classes are expected as losses are realized.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation
to this rating action.
Fitch has upgraded the following class:
-- $16.9 million class F at 'Asf' from 'BBBsf'; Outlook Stable.
Fitch has downgraded the following classes:
-- $39 million class H to 'Csf' from 'CCCsf'; RE 60%;
-- $6.5 million class J to 'Csf' from 'CCsf'; RE 0%;
-- $13 million class K to 'Csf' from 'CCsf'; RE 0%.
Fitch has affirmed the following classes:
-- $26 million class G at 'BBsf'; Outlook Stable;
-- $3.6 million 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%.
Classes A-1, A-2, A-3, A-4, A-5, A-6, A-7, B, C, D, E, OEA-B1, and
OEA-B2 have repaid in full. Fitch does not rate class P. Classes XC
and XP were previously withdrawn.
GS MORTGAGE 2006-GG6: Fitch Withdraws D Rating on Cl. F Debt
------------------------------------------------------------
Fitch Ratings has withdrawn 11 already distressed classes of GS
Mortgage Securities Corporation II commercial mortgage pass-through
certificates series 2006-GG6.
KEY RATING DRIVERS
The remaining classes rated 'Dsf' have been impacted by realized
losses and have been reduced to $0 except for class F. The $23.2
million class F certificate, with an original balance of $43.9
million, was reduced by $20.7 million due to realized losses and
partial paid down. The classes that have been reduced to $0 have
experienced non-recoverable realized losses and are no longer
considered by Fitch to be relevant to the agency's coverage.
As of the January 2017 remittance, the transaction has two loans
remaining with a balance of $23.2 million. Both of the remaining
loans are in special servicing and expected to take further losses
at disposition.
RATING SENSITIVITIES
The withdrawals reflect realized losses with no expected recovery
of any material amount of lost principal in the future.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation
to this rating action.
Fitch has withdrawn the following class as indicated:
-- $23.2 million class F to 'WDsf' from 'Dsf'; RE 0%.
Fitch has also withdrawn the ratings on the following classes as a
result of realized losses. The trust balances have been reduced to
$0 or have experienced non-recoverable realized losses and are no
longer considered by Fitch to be relevant to the agency's
coverage.
-- $0 class G to 'WDsf' from 'Dsf', RE 0%;
-- $0 class H to 'WDsf' from 'Dsf', RE 0%;
-- $0 class J to 'WDsf' from 'Dsf', RE 0%;
-- $0 class K to 'WDsf' from 'Dsf', RE 0%;
-- $0 class L to 'WDsf' from 'Dsf', RE 0%;
-- $0 class M to 'WDsf' from 'Dsf', RE 0%;
-- $0 class N to 'WDsf' from 'Dsf', RE 0%;
-- $0 class O to 'WDsf' from 'Dsf', RE 0%;
-- $0 class P to 'WDsf' from 'Dsf', RE 0%;
-- $0 class Q to 'WDsf' from 'Dsf', RE 0%.
Classes A-1, A-2, A-3, A-AB, A-4, A-1A, A-M, A-J, B, C, D, and E
have paid in full. Fitch does not rate the class S certificates.
Fitch previously withdrew the ratings on the interest-only class
X-P and X-C certificates.
GS MORTGAGE 2012-GCJ7: Moody's Affirms B2 Rating on Class F Certs
-----------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on twelve
classes in GS Mortgage Securities Trust, Commercial Mortgage
Pass-Through Certificates, Series 2012-GCJ7:
Cl. A-2, Affirmed Aaa (sf); previously on Mar 11, 2016 Affirmed Aaa
(sf)
Cl. A-3, Affirmed Aaa (sf); previously on Mar 11, 2016 Affirmed Aaa
(sf)
Cl. A-4, Affirmed Aaa (sf); previously on Mar 11, 2016 Affirmed Aaa
(sf)
Cl. A-S, Affirmed Aaa (sf); previously on Mar 11, 2016 Affirmed Aaa
(sf)
Cl. A-AB, Affirmed Aaa (sf); previously on Mar 11, 2016 Affirmed
Aaa (sf)
Cl. B, Affirmed Aa3 (sf); previously on Mar 11, 2016 Affirmed Aa3
(sf)
Cl. C, Affirmed A3 (sf); previously on Mar 11, 2016 Affirmed A3
(sf)
Cl. D, Affirmed Baa3 (sf); previously on Mar 11, 2016 Affirmed Baa3
(sf)
Cl. E, Affirmed Ba2 (sf); previously on Mar 11, 2016 Affirmed Ba2
(sf)
Cl. F, Affirmed B2 (sf); previously on Mar 11, 2016 Affirmed B2
(sf)
Cl. X-A, Affirmed Aaa (sf); previously on Mar 11, 2016 Affirmed Aaa
(sf)
Cl. X-B, Affirmed Ba3 (sf); previously on Mar 11, 2016 Affirmed Ba3
(sf)
RATINGS RATIONALE
The ratings on ten P&I classes were affirmed because the
transaction's key metrics, including Moody's loan-to-value (LTV)
ratio, Moody's stressed debt service coverage ratio (DSCR) and the
transaction's Herfindahl Index (Herf), are within acceptable
ranges.
The ratings on the two IO classes, Classes X-A and X-B, were
affirmed based on the credit performance (or the weighted average
rating factor or WARF) of the referenced classes.
Moody's rating action reflects a base expected loss of 4.1% of the
current balance, compared to 2.6% at Moody's last review. Moody's
base expected loss plus realized losses is now 3.5% of the original
pooled balance, compared to 2.5% at the 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.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in these ratings was "Approach to
Rating US and Canadian Conduit/Fusion CMBS" published in December
2014.
DESCRIPTION OF MODELS USED
Moody's review used the excel-based CMBS Conduit Model, which it
uses for both conduit and fusion transactions. Credit enhancement
levels for conduit loans are driven by property type, Moody's
actual and stressed DSCR, and Moody's property quality grade (which
reflects the capitalization rate Moody's uses to estimate Moody's
value). Moody's fuses the conduit results with the results of its
analysis of investment grade structured credit assessed loans and
any conduit loan that represents 10% or greater of the current pool
balance.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 26, compared to 29 at Moody's last review.
DEAL PERFORMANCE
As of the January 12, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by 16% to $1.37 billion
from $1.62 billion at securitization. The certificates are
collateralized by 71 mortgage loans ranging in size from less than
1% to 9% of the pool, with the top ten loans (excluding defeasance)
constituting 49% of the pool. Seven loans, constituting
approximately 9% of the pool, have defeased and are secured by US
government securities.
Sixteen loans, constituting 21% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
There have been no loans that have liquidated from the pool. One
loan, constituting 2% of the pool, is currently in special
servicing. The specially serviced loan is the Independence Place
Loan ($23.5 million -- 1.7% of the pool), which is secured by a
264-unit multifamily property located near Fort Stewart in
Hinesville, Georgia. As of December 2016 the property was 74%
leased compared to 77% at last review. The loan transferred to
special servicing in October 2014, and the property became Real
Estate Owned (REO) in March 2015.
Moody's received full year 2015 operating results for 97% of the
pool, and full or partial year 2016 operating results for 98% of
the pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 88%, compared to 86% at Moody's
last review. Moody's conduit component excludes loans with
structured credit assessments, defeased and CTL loans, and
specially serviced and troubled loans. Moody's net cash flow (NCF)
reflects a weighted average haircut of 13% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 9.8%.
Moody's actual and stressed conduit DSCRs are 1.54X and 1.26X,
respectively, compared to 1.54X and 1.25X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The top three conduit loans represent 22% of the pool balance. The
largest loan is the 1155 F Street Loan ($124.0 million -- 9% of the
pool), which is secured by a class A trophy office and retail
building located in Washington, D.C. The collateral is also
encumbered by $19.9 million of mezzanine debt. As of September
2016, the property was 96% leased, compared to 98% at last review.
The property's largest tenants include three law firms that make up
59% of the net rentable area (NRA). Moody's LTV and stressed DSCR
are 95% and 1.02X, respectively compared to 99% and 0.98X at the
last review.
The second largest loan is the Columbia Business Center Loan ($88.5
million -- 7% of the pool), which is secured by the fee and
leasehold interests in an industrial park consisting of 26
buildings located along the Columbia River in Vancouver,
Washington. Approximately 9% of the NRA is allocated to office use
with the remainder used for warehouse and manufacturing purposes.
The property was 97% leased as of September 2016 versus 98% leased
at the last review. Moody's LTV and stressed DSCR are 94% and
1.34X, respectively, compared to 97% and 1.30X at the last review.
The third largest loan is the Bellis Fair Mall Loan ($86.5 million
-- 6% of the pool), which is secured by a 538,226 SF component of a
776,136 SF single-story, enclosed regional mall located in
Bellingham, Washington. The property is approximately 90 miles
north of Seattle and 20 miles south of the international border
with Canada. This mall is anchored by Macy's Target, Kohl's and
J.C. Penney, with only Macy's being part of the collateral. The
property is the dominant mall within its trade area and the only
enclosed regional mall within the Bellingham and Northwest
Washington markets. The closest regional mall competition is 28
miles south of the subject. The occupancy at the property declined
to 76% as of September 2016 from 98% at last review after several
tenants vacated due to corporate bankruptcies. However, the
servicer indicated that several new tenants have completed or are
in final stages of signing leases at the property. Moody's LTV and
stressed DSCR are 85% and 1.27X, respectively, compared to 71% and
1.41X at the last review.
JFIN CLO 2017: Moody's Assigns (P)Ba3 Rating to Cl. E Sec. Notes
----------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to seven
classes of notes to be issued by JFIN CLO 2017 Ltd.
Moody's rating action is as follows:
US$225,000,000 Class A-1 Senior Secured Floating Rate Notes due
2029 (the "Class A-1 Notes"), Assigned (P)Aaa (sf)
US$30,000,000 Class A-F Senior Secured Fixed Rate Notes due 2029
(the "Class A-F Notes"), Assigned (P)Aaa (sf)
US$45,000,000 Class B Senior Secured Floating Rate Notes due 2029
(the "Class B Notes"), Assigned (P)Aa2 (sf)
US$11,000,000 Class C-1 Secured Deferrable Floating Rate Notes due
2029 (the "Class C-1 Notes"), Assigned (P)A2 (sf)
U.S.$15,000,000 Class C-F Secured Deferrable Fixed Rate Notes due
2029 (the "Class C-F Notes"), Assigned (P)A2 (sf)
US$21,000,000 Class D Secured Deferrable Floating Rate Notes due
2029 (the "Class D Notes"), Assigned (P)Baa3 (sf)
US$21,000,000 Class E Secured Deferrable Floating Rate Notes due
2029 (the "Class E Notes"), Assigned (P)Ba3 (sf)
The Class A-1 Notes, the Class A-F Notes, the Class B Notes, the
Class C-1 Notes, the Class C-F Notes, the Class D Notes and the
Class E Notes are referred to herein, collectively, as the "Rated
Notes."
Moody's issues provisional ratings in advance of the final sale of
financial instruments, but these ratings only represent Moody's
preliminary credit opinions. Upon a conclusive review of a
transaction and associated documentation, Moody's will endeavor to
assign definitive ratings. A definitive rating, if any, may differ
from a provisional rating.
RATINGS RATIONALE
Moody's provisional ratings of the Rated Notes address the expected
losses posed to noteholders. The provisional ratings reflect the
risks due to defaults on the underlying portfolio of assets, the
transaction's legal structure, and the characteristics of the
underlying assets.
JFIN CLO 2017 is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated first lien senior
secured corporate loans. At least 90% of the portfolio must consist
of senior secured loans, cash, and eligible investments, and up to
10% of the portfolio may consist of second lien loans and unsecured
loans. Moody's expect the portfolio to be approximately 85% ramped
as of the closing date.
Apex Credit Partners LLC will direct the selection, acquisition and
disposition of the assets on behalf of the Issuer and may engage in
trading activity, including discretionary trading, during the
transaction's four-year and five-month reinvestment period.
Thereafter, the Manager may reinvest unscheduled principal payments
and proceeds from sales of credit risk assets, subject to certain
restrictions.
In addition to the Rated Notes, the Issuer will issue two classes
of subordinated notes. The transaction incorporates interest and
par coverage tests which, if triggered, divert interest and
principal proceeds to pay down the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in October 2016.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 70
Weighted Average Rating Factor (WARF): 2700
Weighted Average Spread (WAS): 4.00%
Weighted Average Coupon (WAC): 6.50%
Weighted Average Recovery Rate (WARR): 46.50%
Weighted Average Life (WAL): 8 years.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
October 2016.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
Together with the set of modeling assumptions above, Moody's
conducted an additional sensitivity analysis, which was a component
in determining the ratings assigned to the Rated Notes. This
sensitivity analysis includes increased default probability
relative to the base case.
Below is a summary of the impact of an increase in default
probability (expressed in terms of WARF level) on the Rated Notes
(shown in terms of the number of notch difference versus the
current model output, whereby a negative difference corresponds to
higher expected losses), assuming that all other factors are held
equal:
Percentage Change in WARF -- increase of 15% (from 2700 to 3105)
Rating Impact in Rating Notches
Class A-1 Notes: 0
Class A-F Notes: 0
Class B Notes: -1
Class C-1 Notes: -1
Class C-F Notes: -2
Class D Notes: -1
Class E Notes: 0
Percentage Change in WARF -- increase of 30% (from 2700 to 3510)
Rating Impact in Rating Notches
Class A-1 Notes: -1
Class A-F Notes: -1
Class B Notes: -3
Class C-1 Notes: -3
Class C-F Notes: -3
Class D Notes: -2
Class E Notes: -1
JP MORGAN 2003-LN1: Moody's Affirms Ca Rating on Class K Certs
--------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on four classes
in J.P. Morgan Chase Commercial Mortgage Securities Corp.,
Commercial Pass-Through Certificates, Series 2003-LN1:
Cl. H, Affirmed A2 (sf); previously on May 12, 2016 Affirmed A2
(sf)
Cl. J, Affirmed B1 (sf); previously on May 12, 2016 Affirmed B1
(sf)
Cl. K, Affirmed Ca (sf); previously on May 12, 2016 Affirmed Ca
(sf)
Cl. X-1, Affirmed Caa3 (sf); previously on May 12, 2016 Affirmed
Caa3 (sf)
RATINGS RATIONALE
The rating on Class H was affirmed because the transaction's key
metrics, including Moody's loan-to-value (LTV) ratio, Moody's
stressed debt service coverage ratio (DSCR) and the transaction's
Herfindahl Index (Herf), are within acceptable ranges.
The ratings on Classes J and K were affirmed because the ratings
are consistent with Moody's expected loss. Class K has already
experienced a 49% realized loss as result of previously liquidated
loans.
The rating on IO class, Class X-1, was affirmed based on the credit
performance (or the weighted average rating factor or WARF) of its
referenced classes.
Moody's rating action reflects a base expected loss of 0.0% of the
current balance, compared to 34.0% at Moody's last review. Moody's
does not anticipate losses from the remaining collateral in the
current environment. However, over the remaining life of the
transaction, losses may emerge from macro stresses to the
environment and changes in collateral performance. Moody's ratings
reflect the potential for future losses under varying levels of
stress. Moody's base expected loss plus realized losses is now 4.0%
of the original pooled balance, compared to 4.1% at the last
review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in these ratings was "Moody's
Approach to Rating Large Loan and Single Asset/Single Borrower
CMBS" published in October 2015.
DESCRIPTION OF MODELS USED
Moody's analysis used the excel-based Large Loan Model. 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 and property type. Moody's also
further adjusts these aggregated proceeds for any pooling benefits
associated with loan level diversity and other concentrations and
correlations.
DEAL PERFORMANCE
As of the January 17, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by 98.5% to $17.7
million from $1.26 billion at securitization. The certificates are
collateralized by three mortgage loans ranging in size from 3.5% to
87.5% of the pool. Two loans, constituting 12.5% of the pool, have
defeased and are secured by US government securities.
Thirteen loans have been liquidated from the pool, contributing to
an aggregate realized loss of $47.9 million (for an average loss
severity of 56%).
As of the January 17, 2017 remittance statement cumulative interest
shortfalls were $2.04 million and Classes J and K did not receive
monthly interest proceeds. Moody's anticipates interest shortfalls
will continue due to principal shortfall logic caused by a
previously liquidated specially serviced loan. Interest shortfalls
are caused by special servicing fees, including workout and
liquidation fees, appraisal entitlement reductions (ASERs), loan
modifications and extraordinary trust expenses.
The pool contains one performing non-defeased loan, representing
87.5% of the pool balance. The performing loan is the Piilani
Shopping Center Loan ($15.7 million), which is secured by a 66,000
square foot (SF) retail center located on the western coast of Maui
in Kihei, Hawaii. As of September 2016, the property was 94%
leased, compared to 98% at year-end 2015. The collateral is shadow
anchored by a Safeway grocery store. The loan has an anticipated
repayment date (ARD) in July 2018 and final maturity date in July
2033. Moody's LTV and stressed DSCR are 49.6% and 1.96X,
respectively, compared to 52.2% and 1.87X at the last review.
JP MORGAN 2003-ML1: Fitch Affirms D Rating on Class N Debt
----------------------------------------------------------
Fitch Ratings has affirmed all classes of J.P. Morgan Chase
Commercial Mortgage Securities Corp. (JPMCC) commercial mortgage
pass-through certificates, series 2003-ML1.
KEY RATING DRIVERS
The affirmations are based on the stable performance of the pool
since Fitch's last rating action. As of the January 2017
distribution date, the pool's aggregate principal balance has been
reduced by 96.7% to $30.7 million from $929.8 million at issuance.
Per servicer reporting, five loans (28% of the pool's current
balance) are fully defeased and there is one specially serviced
loan (32.6%). Additionally, interest shortfalls are currently
affecting classes M through NR.
Highly Concentrated Pool: The pool is highly concentrated, with
only 12 loans remaining, and contains a high percentage of retail
loans (87.5% of the current balance).
Defeasance: Five loans, with a total current balance of $8.6
million, are fully defeased. This total balance covers 98.2% of the
current balance of class J.
Specially Serviced Loan: The largest asset in the pool is currently
with the special servicer. The High Ridge Center loan (32.6%),
which is secured by a 260,664 square foot (sf) retail center
located in Racine, WI, was transferred to the special servicer in
December 2012 after the borrower requested a loan modification
citing cash flow issues stemming from increased vacancy at the
property. The property was foreclosed upon and has been real estate
owned (REO) since February 2015. The only tenants at the property,
the Home Depot (rated 'A') and Kmart (parent company is Sears
Holdings Corporation, rated 'CC') account for 76% of the net
rentable area at the property and both have leases expiring in
2018. The special servicer did not indicate whether either tenant
intends to renew their lease. Per servicer reporting, the net
operating income (NOI) debt service coverage ratio (DSCR) was 1.10x
as of year-end (YE) 2015. Fitch will continue to monitor the loan
for leasing updates.
RATING SENSITIVITIES
The Rating Outlooks for classes J and K are Stable due to the
overall stable performance of the pool. The Outlook for class L
remains Negative as the departure of the only two tenants at the
High Ridge Center could drastically effect disposition timing and
the recovery value of this asset. Upgrades are unlikely given the
highly concentrated nature of the pool. Downgrades are possible if
any non-defeased loan experiences a substantial decline.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation
to this rating action.
Fitch has affirmed the following ratings:
-- $8.8 million class J at 'AAAsf'; Outlook Stable;
-- $5.8 million class K at 'BBBsf'; Outlook Stable;
-- $5.8 million class L at 'BBsf'; Outlook Negative;
-- $6.9 million class M at 'Csf'; RE 40%;
-- $3.3 million class N at 'Dsf'; RE 0%.
The class A-1, A-2, B, C, D, E, F, G, H, and X-2 certificates have
paid in full. Fitch does not rate the NR certificates. Fitch
previously withdrew the rating on the interest-only class X-1
certificates.
JP MORGAN 2011-C3: Fitch Affirms 'B-sf' Rating on Class J Certs
---------------------------------------------------------------
Fitch Ratings has affirmed 10 classes of J.P. Morgan Chase
Commercial Mortgage Securities Corp (JPMCC) commercial mortgage
pass-through certificates series 2011-C3.
KEY RATING DRIVERS
The affirmations reflect stable pool performance since issuance.
There are two Fitch Loans of Concern (13.3% of the pool); the
largest (11.5%) is on the master servicer's watchlist due to the
loss of the largest tenant, which represented approximately 25% of
the property's rental income. The smaller loan (1.8%) transferred
to special servicing in November 2013 due to imminent non-monetary
default, but has a potential near-term disposition.
As of the January 2017 distribution date, the pool's aggregate
principal balance has been reduced by 28.8% to $1.1 billion from
$1.5 billion at issuance. Two loans (2.8% of the pool) are defeased
and interest shortfalls are currently affecting the non-rated
class.
Property Type Concentration: Retail properties represent 62.9% of
the pool.
Concentrated Pool by Loan Size: The top 15 loans represent 88.7% of
the pool.
Maturity Concentration: The current pool's loans maturity schedule
is as follows: 24.3% (2018), 19.1% (2020) and 56.6% (2023).
RATING SENSITIVITIES
The Rating Outlooks for all classes remain Stable as no rating
actions are anticipated. Fitch's analysis included an additional an
additional stress on The Galleria Office Towers which limited the
potential for upgrades on class B. In addition, potential upgrades
are also limited by the pool's high retail concentration (62.9%),
lack of available sales information, and overall percentage of
Loans of Concern (13.3%). Future affirmations are expected unless
pool performance improves and credit enhancement through additional
pay down or defeasance increases. Downgrades are possible if
expected losses increase.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation
to this rating action.
Fitch has affirmed the following classes:
-- $323.5 million class A-3 at 'AAAsf'; Outlook Stable;
-- $485.4 million class A-4 at 'AAAsf'; Outlook Stable;
-- $652.9 million class X-A* at 'AAAsf'; Outlook Stable;
-- $41.1 million class B at 'AAsf'; Outlook Stable;
-- $52.3 million class C at 'Asf'; Outlook Stable;
-- $35.5 million class D at 'BBB+sf'; Outlook Stable;
-- $41.1 million class E at 'BBB-sf'; Outlook Stable;
-- $9.3 million class G at 'BBsf'; Outlook Stable;
-- $16.8 million class H at 'Bsf'; Outlook Stable;
-- $3.7 million class J at 'B-sf'; Outlook Stable.
*Notional amount and interest-only.
The class A-1, A2 and A-3FL certificates have paid in full. Fitch
does not rate the class F, X-B, and NR certificates.
JP MORGAN 2013-C10: Fitch Affirms 'Bsf' Rating on Class F Debt
--------------------------------------------------------------
Fitch Ratings has affirmed all classes of J.P. Morgan Chase
Commercial Mortgage Securities Trust (JPMCC) commercial mortgage
pass-through certificates, series 2013-C10.
KEY RATING DRIVERS
The affirmations are the result of the pool exhibiting stable
performance since issuance. Underlying pool collateral has
experienced moderate net operating income (NOI) growth, increasing
8.4% since issuance. Since there has been no material change to
pool-wide metrics, the original rating analysis was considered in
affirming the transaction.
As of the January 2017 distribution date, the pool's aggregate
principal balance has been reduced by 4.2% to $1.22 billion from
$1.28 billion at issuance. Per servicer reporting, there are no
specially serviced loans and all loans are current. Two loans,
representing 1.7% of the pool's current balance, are fully
defeased. Interest shortfalls are currently affecting class NR.
Pool Concentration: The top 10 loans in the pool account for 54.4%
of the current balance. Additionally, the pool contains a high
percentage of retail (35.9% of the current balance) and office
(34%) loans.
Interest-Only Periods: Five loans (14.5%), including the largest
loan in the pool (10.6%), are interest-only for the full term of
the loan. Seven loans (25.5%) are partial interest-only prior to
amortizing. This deal is expected to experience amortization of
13.6% between securitization and maturity.
Low Mortgage Coupons: The pool's weighted average coupon is 4.17%,
well below historical averages. At issuance, Fitch accounted for
increased refinance risk in a higher interest rate environment by
reviewing an interest rate sensitivity that assumes an interest
rate floor of 5%.
RATING SENSITIVITIES
Rating Outlooks for all classes remain Stable due to overall stable
performance of the pool and continued amortization. Upgrades may
occur with improved pool performance and additional paydown or
defeasance. Downgrades are possible should overall pool performance
decline.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation
to this rating action.
Fitch has affirmed the following ratings:
-- $9.3 million class A-1 at 'AAAsf'; Outlook Stable;
-- $87.2 million class A-2 at 'AAAsf'; Outlook Stable;
-- $22.4 million class A-3 at 'AAAsf'; Outlook Stable;
-- $185 million class A-4 at 'AAAsf'; Outlook Stable;
-- $430 million class A-5 at 'AAAsf'; Outlook Stable;
-- $106.7 million class A-SB at 'AAAsf'; Outlook Stable;
-- $107.1 million class A-S at 'AAAsf'; Outlook Stable;
-- $947.7 million* class X-A at 'AAAsf'; Outlook Stable;
-- $84.7 million class B at 'AA-sf'; Outlook Stable;
-- $55.9 million class C at 'A-sf'; Outlook Stable;
-- $47.9 million class D at 'BBB-sf'; Outlook Stable;
-- $30.4 million class E at 'BBsf'; Outlook Stable;
-- $12.8 million class F at 'Bsf'; Outlook Stable.
*Notional and interest-only
Fitch does not rate the class NR and X-B certificates.
KEY COMMERCIAL 2007-SL1: Fitch Hikes Class C Debt Rating to CCCsf
-----------------------------------------------------------------
Fitch Ratings has upgraded two classes and affirmed seven classes
of Key Commercial Mortgage Securities Trust 2007-SL1.
KEY RATING DRIVERS
Increased Credit Enhancement: The credit enhancement of classes B
and C have increased due to significant paydown since Fitch's last
rating action in January 2016. As of the January 2017 distribution
date, the pool's aggregate principal balance has been reduced by
approximately 94% to $13.3 million from $237.5 million at issuance,
with $20.1 million in principal paydown over the past 12 months.
Concentrated Pool With Adverse Selection: The pool is highly
concentrated with only seven of the original 155 loans remaining.
Six of the loans (81% of the pool) have been identified as a Fitch
Loan of Concern, including three loans (22%) currently in special
servicing. The four non-specially serviced loans (78%) are
currently on the servicers watch list due to underperformance
including low debt service coverage ratio (DSCR), coupled with near
term loan maturities. In addition, all of the remaining loans are
secured by collateral in secondary markets.
The largest loan in the pool is secured by a 72,374 square foot
(sf) mixed-use property (retail/self-storage) (41.7% of the pool)
located in Kent, WA, which is approximately 20 miles south of
Seattle. Despite high occupancy, which has reported above 96% since
2013, the property has had cash flow issues since 2010 due to
increasing expenses including higher real estate taxes, utility
costs, and advertising expenses. The net operating income (NOI)
debt service coverage ratio (DSCR), which has reported below 1.0x
since 2011, was 1.10x for year-end (YE) 2015, 0.71x for YE 2014,
and 0.97x for YE 2013. The loan is on the servicers watch list due
to the upcoming loan maturity on Feb. 1, 2017. According to the
servicer, the borrower has been unresponsive regarding refinancing.
The loan has remained current since issuance.
RATING SENSITIVITIES
The Rating Outlook on class B is Stable as credit enhancement is
high and downgrades are not expected. Further upgrades were not
warranted, however, as the transaction is highly concentrated, and
includes a large percentage of Fitch Loans of Concern (81%).
Downgrades, although not likely, could occur if losses are greater
than anticipated.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation
to this rating action.
Fitch has upgraded the following classes and assigned Rating
Outlooks as indicated:
-- $2.99 million class B to 'Bsf' from 'CCCsf'; Outlook Stable
assigned;
-- $5.6 million class C to 'CCCsf' from 'Csf'; RE 100%.
Fitch has affirmed the following classes:
-- $4.7 million class D at 'Dsf'; RE 30%;
-- $0 class E at 'Dsf'; RE 0%;
-- $0 class F at 'Dsf'; RE 0%;
-- $0 class G at 'Dsf'; RE 0%;
-- $0 class H at 'Dsf'; RE 0%;
-- $0 class J at 'Dsf'; RE 0%.; -- $0 class K at 'Dsf'; RE 0%.
Classes A-1, A-2, A-1A have repaid in full. Fitch does not rate
classes L, R and LR. Class X was previously withdrawn.
KMART FUNDING: Moody's Raises Rating on Cl. G Secured Bonds to Ca
-----------------------------------------------------------------
Moody's Investors Service has upgraded the rating of Kmart Funding
Corporation Secured Lease Bonds:
Cl. G, Upgraded to Ca; previously on March 17, 2016 Affirmed at C
RATINGS RATIONALE
The rating was upgraded due to higher expected recovery than
previously anticipated. The Class G is in default and has
experienced $5.0 million realized loss.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING:
The ratings of Credit Tenant Lease (CTL) deals are primarily based
on the senior unsecured debt rating (or the corporate family
rating) of the tenants leasing the real estate collateral
supporting the bonds. Other factors that are also considered are
Moody's dark value of the collateral (value based on the property
being vacant or dark), which is used to determine a recovery rate
upon a loan's default and the rating of the residual insurance
provider, if applicable. Factors that may cause an upgrade of the
ratings include an upgrade in the rating of the corporate tenant or
significant loan paydowns or amortization which results in a lower
loan to a dark value ratio. Factors that may cause a downgrade of
the ratings include a downgrade in the rating of the corporate
tenant or the residual insurance provider.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in this rating was "Moody's Approach
to Rating Credit Tenant Lease and Comparable Lease Financings"
published in October 2016.
No model was used in this review.
DEAL PERFORMANCE
This credit tenant lease (CTL) transaction at origination consisted
of seven classes supported by twenty-four retail properties leased
to Kmart under fully bondable, triple net leases. In 2001, Kmart
filed voluntary petitions for reorganization under Chapter 11 of
the U.S. Bankruptcy Code and subsequently rejected the leases for
seventeen properties secured in this transaction. Leases for three
of the properties were later assumed by other retailers and
fourteen properties were liquidated from the trust. Due to the
liquidations of properties originally occupied by Kmart, Class G
has experienced $5.0 million realized loss. The final principal
distribution date is July 1, 2018.
LB-UBS COMMERCIAL 2007-C7: Fitch Affirms D Rating on Cl. G Notes
----------------------------------------------------------------
Fitch Ratings has affirmed 19 classes of LB-UBS Commercial Mortgage
Trust (LB-UBS) commercial mortgage pass-through certificates series
2007-C7.
KEY RATING DRIVERS
Stable Loss Expectations: Fitch modelled losses of 11% of the
original pool balance, including $206.1 million (6.5%) of losses
incurred to date. This is a slight increase from the previous
rating action in February 2016, when loss expectations of the
original pool balance were 10.7%.
Maturity Concentration: Sixty-six loans (99.8% of pool) are
scheduled to mature over the next 12 months, with two loans in
first quarter 2017 (3.3%), eight loans in second quarter (3.1%), 29
loans in third quarter (14.3%) and 27 loans in fourth quarter
(79.1%). First quarter maturities include the $48.6 million Willis
Tower (f/k/a Sears Tower) loan (2.4%), which the servicer has
reported is expected to pay in full prior to its Feb. 11, 2017
maturity date.
Defeasance Collateral: As of January 2017, nine loans (24.2% of the
pool) were defeased, including the largest loan in the pool
(21.5%). All the defeased loans are scheduled to mature over the
next 12 months. In total, 40.5% of the original pool has paid down
or is defeased.
Fitch Loans of Concern: Fitch identified 20 loans (43.4% of the
pool) as Fitch Loans of Concern (FLOCs), including seven loans
(3.7%) that are currently in special servicing as well as eight of
the top 15 loans (39.2%). Performance concerns in the top 15 FLOCs
include previously modified debt, tenant vacancies, low debt
service coverage ratio (DSCR) and property performance below
underwritten expectations.
As of the January 2017 distribution date, the pool's aggregate
principal balance has been reduced by 36.9% to $2 billion from
$3.17 billion at issuance. Interest shortfalls are currently
affecting classes E through T.
RATING SENSITIVITIES
The Rating Outlooks on classes A-3, A-1A and A-M are Stable due to
sufficient credit enhancement, increased defeasance, and continued
paydown. The Negative Rating Outlook on class A-J reflects the
overall high leverage and performance concerns on several loans in
the top 15, including previously modified debt, tenant vacancies,
low DSCR and property performance below underwritten expectations.
The Negative Rating Outlook also reflects the potential for further
rating actions should realized losses be greater than Fitch's
expectations. A Stable Rating Outlook for the class may be
considered should property performance stabilize and servicer
updates indicate stronger refinance capability upon maturity or
better recoveries from updated property valuations.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third party due diligence was provided or reviewed in relation
to this rating action.
Fitch has affirmed the following ratings and revised Rating
Outlooks as indicated:
-- $1.2 billion class A-3 at 'AAAsf'; Outlook Stable;
-- $100.7 million class A-1A at 'AAAsf'; Outlook Stable;
-- $317 million class A-M at 'AAAsf'; Outlook to Stable from
Negative;
-- $269.5 million class A-J at 'B-sf'; Outlook Negative;
-- $47.6 million class B at 'CCCsf'; RE 45%;
-- $35.7 million class C at 'CCsf'; RE 0%;
-- $23.8 million class D at 'Csf'; RE 0%;
-- $27.7 million class E at 'Csf'; RE 0%;
-- $15.9 million class F at 'Csf'; RE 0%;
-- $7.8 million class G at 'Dsf'; RE 0%;
-- $0 million class H at 'Dsf'; RE 0%;
-- $0 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 P at 'Dsf'; RE 0%;
-- $0 class Q at 'Dsf'; RE 0%;
-- $0 class S at 'Dsf'; RE 0%.
The class A-1, A-2 and A-AB certificates have paid in full. Fitch
does not rate the class T certificates. Fitch previously withdrew
the ratings on the interest-only class X-CP, X-CL and X-W
certificates.
MORGAN STANLEY 2007-TOP25: Moody's Cuts Class D Debt Rating to 'C'
------------------------------------------------------------------
Moody's Investors Service has upgraded the rating on one class,
affirmed the ratings on two classes and downgraded the ratings on
two classes of Morgan Stanley Capital I Trust 2007-TOP25 as
follows:
Cl. A-J, Upgraded to Ba2 (sf); previously on Jul 28, 2016 Affirmed
B1 (sf)
Cl. B, Affirmed Caa2 (sf); previously on Jul 28, 2016 Affirmed Caa2
(sf)
Cl. C, Affirmed Caa3 (sf); previously on Jul 28, 2016 Affirmed Caa3
(sf)
Cl. D, Downgraded to C (sf); previously on Jul 28, 2016 Affirmed Ca
(sf)
Cl. X, Downgraded to Caa2 (sf); previously on Jul 28, 2016 Affirmed
Ba3 (sf)
RATINGS RATIONALE
The rating on Class A-J was upgraded based primarily on an increase
in credit support resulting from loan paydowns and amortization.
The deal has paid down 84.5% since Moody's last review.
The ratings on Classes B and C were affirmed because the rating is
consistent with Moody's expected loss.
The rating on Class D was downgraded due to realized and
anticipated losses from specially serviced and troubled loans.
Class D has already experienced a 26% realized loss as result of
previously liquidated loans.
The rating on the IO Class, Class X, was downgrades due to a
decline in the credit performance of its reference classes
resulting from principal paydowns of higher quality reference
classes.
Moody's rating action reflects a base expected loss of 20.4% of the
current balance compared to 3.5% at Moody's last review. Moody's
base expected loss plus realized losses is now 8.0% of the original
pooled balance compared to 7.9% at last review. Moody's provides a
current list of base expected losses for conduit and fusion CMBS
transactions on moodys.com at
http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in these ratings was "Moody's
Approach to Rating Large Loan and Single Asset/Single Borrower
CMBS" published in October 2015.
Moody's analysis incorporated a loss and recovery approach in
rating the P&I classes in this deal since 73.9% of the pool is in
special servicing and Moody's has identified one troubled loan
representing approximately 3.7% of the pool. In this approach,
Moody's determines a probability of default for each specially
serviced and troubled loan that it expects will generate a loss and
estimates a loss given default based on a review of broker's
opinions of value (if available), other information from the
special servicer, available market data and Moody's internal data.
The loss given default for each loan also takes into consideration
repayment of servicer advances to date, estimated future advances
and closing costs. Translating the probability of default and loss
given default into an expected loss estimate, Moody's then applies
the aggregate loss from specially serviced and troubled loans to
the most junior classes and the recovery as a pay down of principal
to the most senior classes.
DESCRIPTION OF MODELS USED
Moody's analysis used the excel-based Large Loan Model 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 and property type. Moody's also further adjusts these
aggregated proceeds for any pooling benefits associated with loan
level diversity and other concentrations and correlations.
DEAL PERFORMANCE
As of the January 12, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by 91.2% to $137.5
million from $1.55 billion at securitization. The certificates are
collateralized by 15 mortgage loans ranging in size from less than
1% to 52% of the pool. One loan, constituting less than 1% of the
pool, has defeased and is secured by US government securities.
Three loans, constituting 7.7% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Eighteen loans have been liquidated from the pool with a loss,
resulting in an aggregate realized loss of approximately $95.8
million (for an average loss severity of 68.4%). Six loans,
constituting 74% of the pool, are currently in special servicing.
The largest specially serviced loan is Shoppes at Park Place ($71
million -- 51.6% of the pool), which is secured by a 325,000 square
foot (SF) retail center located in Pinellas Park, Florida
approximately 15 miles west of Tampa. The loan transferred to
special servicing in January 2017 due to maturity default.
The remaining five specially serviced loans are secured by a mix of
property types. Moody's estimates an aggregate $27.3 million loss
for the specially serviced loans (27% expected loss on average).
Moody's has assumed a high default probability for one poorly
performing loan, constituting 3.7% of the pool, and has estimated a
moderate loss from this troubled loan.
Moody's received full year 2015 operating results for 86% of the
pool. Moody's weighted average conduit LTV is 69% compared to 94%
at last review. Moody's conduit component excludes loans with
structured credit assessments, defeased and CTL loans, and
specially serviced and troubled loans. Moody's net cash flow (NCF)
reflects a weighted average haircut of 11% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 9.8%.
Moody's actual and stressed conduit DSCRs are 1.90X and 1.58X,
respectively, compared to 1.55X and 1.20X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The top three loans represent 15% of the pool balance. The largest
loan is the Franklin Center Loan ($10 million -- 7.3% of the pool),
which is secured by a 320 bed (160 room) nursing
home/rehabilitation center located in Flushing, New York. The
property was 100% occupied and reported to be in good condition as
of the November 2016 property inspection. The loan is interest only
for its entire term and is scheduled to mature in September 2021.
Moody's LTV and stressed DSCR are 73.8% and 1.32X, respectively and
unchanged since Moody's last review.
The second largest is the Village One Apartments Loan ($5.4 million
-- 3.9% of the pool), which is secured by a 320 unit garden style
multifamily apartment property located in Menand, New York just
outside of Albany. The property was 95% occupied as of June 2016.
The loan is interest only for its entire term and is scheduled to
mature in December 2021. Moody's LTV and stressed DSCR are 56.5%
and 1.86X, respectively and remains unchanged since Moody's last
review.
The third largest is the Cherryvale Plaza Loan ($5.0 million --
3.6% of the pool), which is secured by an Office Depot/Aldi
anchored multitenant shopping center with second floor offices. The
property is located in Reisterstown, Maryland approximately 25
miles northwest of Baltimore. As of September 2016, the property
was 98% leased, with only one vacant unit. The June 2016 inspection
reported the property in good overall condition. The loan has
amortized 23% since securitization and is scheduled to mature in
August 2021. Moody's LTV and stressed DSCR are 49.9% and 2.02X,
respectively, compared to 50.8% and 1.98X at the last review.
NRZ ADVANCE 2015-ON1: S&P Gives Prelim. BB Rating on Cl. E-T1 Debt
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to NRZ Advance
Receivables Trust 2015-ON1's $400 million advance
receivables-backed notes series 2017-T1.
The note issuance is a servicer advance transaction backed by
servicer advance and accrued and unpaid servicing fee
reimbursements.
The preliminary ratings are based on information as of Jan. 27,
2017. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The strong likelihood of reimbursement of servicer advance
receivables given the priority of such reimbursement
payments;
-- The transaction's revolving period, during which collections
or draws on the outstanding variable-funding note (VFN) may
be used to fund additional advance receivables, and the
specified eligibility requirements, collateral value
exclusions, credit enhancement test (the collateral test),
and amortization triggers intended to maintain pool quality
and credit enhancement during this period;
-- The transaction's use of predetermined, rating category-
specific advance rates for each receivable type in the pool
that discount the receivables, which are non-interest
bearing, to satisfy the interest obligations on the notes,
as well as provide for dynamic overcollateralization;
-- The projected timing of reimbursements of the servicer
advance receivables, which, in the 'AAA', 'AA', and 'A'
scenarios, reflects S&P's assumption that the servicer would
be replaced, while in the 'BBB' and 'BB' scenarios, reflects
the servicer's historical reimbursement experience;
-- The credit enhancement in the form of overcollateralization,
subordination, and the series reserve accounts;
-- The timely interest and full principal payments made under
S&P's stressed cash flow modeling scenarios consistent with
the assigned preliminary ratings; and
-- The transaction's sequential turbo payment structure that
applies during any full amortization period.
PRELIMINARY RATINGS ASSIGNED
NRZ Advance Receivables Trust 2015-ON1 Series 2017-T1
Class Rating Type Interest Amount
rate (mil. $)(i)
A-T1 AAA (sf) Term note Fixed 319.100
B-T1 AA (sf) Term note Fixed 13.219
C-T1 A (sf) Term note Fixed 15.889
D-T1 BBB (sf) Term note Fixed 46.573
E-T1 BB (sf) Term note Fixed 5.219
ONEMAIN DIRECT 2017-1: Moody's Assigns (P)B2 Rating to Class E Debt
-------------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to the
notes to be issued by OneMain Direct Auto Receivables Trust 2017-1
(ODART 2017-1). This is the first ODART auto loan transaction of
the year for Springleaf Finance Corporation (SFC; B3 Positive ).
The notes will be backed by a pool of retail automobile loan
contracts originated by SFC, who is also the servicer and
administrator for the transaction.
The complete rating actions are:
Issuer: OneMain Direct Auto Receivables Trust 2017-1
Class A, Assigned (P)Aa3 (sf)
Class B, Assigned (P)A2 (sf)
Class C, Assigned (P)Baa2 (sf)
Class D, Assigned (P)Ba2 (sf)
Class E, Assigned (P)B2 (sf)
RATINGS RATIONALE
The ratings are based on the quality of the underlying collateral
and its expected performance, the strength of the capital
structure, and the experience and expertise of SFC as the
servicer.
Moody's median cumulative net loss expectation for the 2017-1 pool
is 7.0%. Moody's based its cumulative net loss expectation on an
analysis of the credit quality of the underlying collateral; the
historical performance of similar collateral, including
securitization performance and managed portfolio performance; the
ability of SFC to perform the servicing functions; and current
expectations for the macroeconomic environment during the life of
the transaction.
At closing, the Class A notes, Class B notes, Class C notes, Class
D, and Class E notes are expected to benefit from 31.00%, 22.00%,
16.00%, 7.00%, and 1.00% of hard credit enhancement, respectively.
Hard credit enhancement for the notes consists of a combination of
overcollateralization, a non-declining reserve account, and
subordination, except for the Class E notes, which do not benefit
from subordination. The notes will also benefit from excess
spread.
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Auto Loan- and Lease-Backed ABS" published in
October 2016.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the Class A, B, C, D, and E notes if, given
current expectations of portfolio losses, levels of credit
enhancement are consistent with higher ratings. In sequential pay
structures, such as the one in this transaction, credit enhancement
grows as a percentage of the collateral balance as collections pay
down senior notes. Prepayments and interest collections directed
toward note principal payments will accelerate this build of
enhancement. Moody's expectation of pool losses could decline as a
result of a lower number of obligor defaults or appreciation in the
value of the vehicles securing an obligor's promise of payment.
Portfolio losses also depend greatly on the US job market, the
market for used vehicles, and changes in servicing practices.
Down
Moody's could downgrade the notes if, given current expectations of
portfolio losses, levels of credit enhancement are consistent with
lower ratings. Credit enhancement could decline if excess spread is
not sufficient to cover losses in a given month. Moody's
expectation of pool losses could rise as a result of a higher
number of obligor defaults or deterioration in the value of the
vehicles securing an obligor's promise of payment. Portfolio losses
also depend greatly on the US job market, the market for used
vehicles, and poor servicing. Other reasons for worse-than-expected
performance include error on the part of transaction parties,
inadequate transaction governance, and fraud.
PUTNAM STRUCTURED 2002-1: Moody's Affirms Caa3 Rating on A-2 Debt
-----------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on the following
notes issued by Putnam Structured Product CDO 2002-1 Ltd.:
US$176,000,000 Class A-1MT -a Medium Term Floating Rate Notes Due
2038, Affirmed Baa2 (sf); previously on Feb 18, 2016 Affirmed Baa2
(sf)
US$176,000,000 Class A-1MT -b Medium Term Floating Rate Notes Due
2038, Affirmed Baa2 (sf); previously on Feb 18, 2016 Affirmed Baa2
(sf)
US$176,000,000 Class A-1MT -c Medium Term Floating Rate Notes Due
2038, Affirmed Baa2 (sf); previously on Feb 18, 2016 Affirmed Baa2
(sf)
US$176,000,000 Class A-1MM -d Floating Rate Notes Due 2038,
Affirmed Baa2 (sf); previously on Feb 18, 2016 Affirmed Baa2 (sf)
US$176,000,000 Class A-1MM -e Floating Rate Notes Due 2038,
Affirmed Baa2 (sf); previously on Feb 18, 2016 Affirmed Baa2 (sf)
US$176,000,000 Class A-1MM -f Floating Rate Notes Due 2038,
Affirmed Baa2 (sf); previously on Feb 18, 2016 Affirmed Baa2 (sf)
U.S.$176,000,000 Class A-1MM -g Floating Rate Notes Due 2038,
Affirmed Baa2 (sf); previously on Feb 18, 2016 Affirmed Baa2 (sf)
US$176,000,000 Class A-1MM -h Floating Rate Notes Due 2038,
Affirmed Baa2 (sf); previously on Feb 18, 2016 Affirmed Baa2 (sf)
US$176,000,000 Class A-1MM -i Floating Rate Notes Due 2038,
Affirmed Baa2 (sf); previously on Feb 18, 2016 Affirmed Baa2 (sf)
US$176,000,000 Class A-1MM -j Floating Rate Notes Due 2038,
Affirmed Baa2 (sf); previously on Feb 18, 2016 Affirmed Baa2 (sf)
US$80,000,000 Class A-2 Floating Rate Notes Due 2038, Affirmed Caa3
(sf); previously on Feb 18, 2016 Affirmed Caa3 (sf)
RATINGS RATIONALE
Moody's has affirmed the ratings on the transaction because its key
transaction metrics are commensurate with existing ratings. The
affirmation is the result of Moody's on-going surveillance of
commercial real estate collateralized debt obligation (CRE CDO and
ReRemic) transactions.
Putnam 2002-1 is a static cash transaction backed by a portfolio
of: i) commercial mortgage backed securities (CMBS) (48.9% of the
pool balance); ii) asset backed securities (ABS) (48.2%; of which
20.2% of these are government-sponsored mortgage-backed securities
(RMBS); and the remainder is primarily in the form of subprime and
Alt-A RMBS); and iii) CRE CDOs (2.9%). As of the trustee's January
3, 2017 report, the aggregate note balance of the transaction,
including preferred shares, is $329.9 million, compared to $2
billion at issuance with the paydown directed to the senior most
outstanding class of notes, as a result of full and partial
amortization of the underlying collateral.
The pool contains fourteen assets totaling $76.2 million (18.8% of
the collateral pool balance) that are listed as defaulted
securities as of the trustee's January 3, 2017 report. Four of
these assets (71.2% of the defaulted balance) are CMBS, one asset
is CRE CDO (13.1%), and nine assets are ABS (primarily in the form
of non-government sponsored RMBS (15.6%). While there have been
limited realized losses on the underlying collateral to date,
Moody's does expect low/moderate losses to occur on the defaulted
securities.
Moody's has identified the following as key indicators of the
expected loss in CRE CDO transactions: the weighted average rating
factor (WARF), the weighted average life (WAL), the weighted
average recovery rate (WARR), and Moody's asset correlation (MAC).
Moody's typically models these 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 its assessments for the collateral it does not
rate. The rating agency modeled a bottom-dollar WARF of 3319,
compared to 3464 at last review. The current ratings on the
Moody's-rated collateral and the assessments of the non-Moody's
rated collateral follow: Aaa-Aa3 (23.6% compared to 26.5% at last
review); A1-A3 (16.8% compared to 10.2% at last review); Baa1-Baa3
(3.6%, compared to 2.0% at last review); Ba1-Ba3 (5.4% compared to
5.3% at last review); B1-B3 (19.9% compared to 25.7% at last
review); and Caa1-Ca/C (30.6% compared to 30.3% at last review).
Moody's modeled a WAL of 5.5 years, compared to 4.0 years at last
review. The WAL is based on assumptions about extensions on the
underlying look-through collateral.
Moody's modeled a fixed WARR of 34%, compared to 29.3% at last
review.
Moody's modeled a MAC of 3.3%, compared to 0% at last review.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's
Approach to Rating SF CDOs" published in October 2016.
Factors that would lead to an upgrade or downgrade of the ratings:
The performance of the notes is subject to uncertainty, because it
is sensitive to the performance of the underlying portfolio, which
in turn depends on economic and credit conditions that are subject
to change. The servicing decisions of the master and special
servicer and surveillance by the operating advisor with respect to
the collateral interests and oversight of the transaction will also
affect the performance of the rated notes.
Moody's Parameter Sensitivities: Changes to any one or more of the
key parameters could have rating implications for some of the rated
notes, although a change in one key parameter assumption could be
offset by a change in one or more of the other key parameter
assumptions. The rated notes are particularly sensitive to changes
in the ratings recovery rates of the underlying collateral and
credit assessments. The rated notes are particularly sensitive to
changes in the ratings recovery rates of the underlying collateral
and credit assessments. Reducing the recovery rates of the
collateral pool by -5% would result in an average modeled rating
movement on the rated notes of zero notches downward (e.g., one
notch down implies a ratings movement of Baa3 to Ba1). Increasing
the recovery rate of the collateral pool by +5% would result in an
average modeled rating movement on the rated notes of zero notches
upward (e.g., one notch up implies a ratings movement of Baa3 to
Baa2).
The primary sources of uncertainty in Moody's assumptions are the
extent of growth in the current macroeconomic environment given the
weak recovery and certain commercial real estate property markets.
Commercial real estate property values continue to improve
modestly, 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, sustained growth will not be possible until investment
increases steadily for a significant period, non-performing
properties are cleared from the pipeline and fears of a euro area
recession abate.
RESIX FINANCE 2003-A: Fitch Hikes Rating on Cl. B9 Debt From BBsf
-----------------------------------------------------------------
Fitch Ratings has taken the following actions on RESIX Finance
Limited 2003-A, a repackage of notes issued from the synthetic
transaction RESI Finance Limited Partnership 2003-A:
-- Class B9 upgraded to 'BBBsf' from 'BBsf'; Outlook remains
Positive;
-- Class B8 marked as 'PIF' from 'BBsf'.
KEY RATING DRIVERS
Class B9 from RESIX 2003-A is a pass-through of a note in RESI
Finance 2003-A, and the upgrade reflects the upgrade of the
underlying class in September 2016.
RATING SENSITIVITIES
Fitch's analysis includes rating stress scenarios from 'CCCsf' to
'AAAsf'. The 'CCCsf' scenario is intended to be the most-likely
base-case scenario. Rating scenarios above 'CCCsf' are increasingly
more stressful and less likely to occur. Although many variables
are adjusted in the stress scenarios, the primary driver of the
loss scenarios is the home price forecast assumption. In the 'Bsf'
scenario, Fitch assumes home prices decline 10% below their
long-term sustainable level. The home-price decline assumption is
increased by 5% at each higher rating category up to a 35% decline
in the 'AAAsf' scenario.
In addition to increasing mortgage pool losses at each rating
category to reflect increasingly stressful economic scenarios,
Fitch analyzes various loss-timing, prepayment, loan modification,
servicer advancing, and interest rate scenarios as part of the cash
flow analysis. Each class is analyzed with 43 different
combinations of loss, prepayment and interest rate projections.
Classes currently rated below 'Bsf' are at-risk to default at some
point in the future. As default becomes more imminent, bonds
currently rated 'CCCsf' and 'CCsf' will migrate towards 'Csf' and
eventually 'Dsf'.
The ratings of bonds currently rated 'Bsf' or higher will be
sensitive to future mortgage borrower behavior, which historically
has been strongly correlated with home-price movements. Despite
recent positive trends, Fitch currently expects home prices to
decline in some regions before reaching a sustainable level. While
Fitch's ratings reflect this home price view, the ratings of
outstanding classes may be subject to revision to the extent actual
home price and mortgage performance trends differ from those
currently projected by Fitch.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation
to this rating action.
RFC CDO 2006-1: Fitch Lowers Rating on Class C Debt to 'Csf'
------------------------------------------------------------
Fitch Ratings has downgraded three and affirmed six classes of RFC
CDO 2006-1, Ltd. /LLC (RFC 2006-1).
KEY RATING DRIVERS
The downgrades reflect a higher certainty of loss to the
outstanding collateralized debt obligation (CDO) liabilities based
on the poor quality of the remaining assets in the portfolio. The
CDO is undercollateralized by $106.9 million.
Since Fitch's last rating action and as of the January 2017 trustee
report, the CDO liabilities have paid down by an additional $23.2
million from the repayment of two commercial mortgage-backed
securities (CMBS) bonds, the partial repayment of one commercial
real estate (CRE) loan, the amortization of one CMBS bond, and the
diversion of interest proceeds from the failure of all
overcollateralization and interest coverage tests. Realized losses
since the last rating action total $4.4 million.
The portfolio is highly concentrated with only six assets
remaining. As of the January 2017 trustee report and per Fitch
categorizations, the CDO was substantially invested in one whole
loan (48.6%), four CMBS bonds (21.7%) and one mezzanine debt
position (29.6%). Fitch has designated 84.4% of the portfolio as
assets of concern, which include two distressed CMBS bonds (6.1%),
one CRE loan that was previously modified and one highly leveraged
mezzanine loan.
This transaction was analyzed according to the 'Surveillance
Criteria for U.S. CREL CDOs', which applies stresses to property
cash flows and debt service coverage ratio tests to project future
default levels for the underlying portfolio. Recoveries for the
loan assets are based on stressed cash flows and Fitch's long-term
capitalization rates. Due to the high concentration nature of the
pool, Fitch did not perform a standard cash flow modelling as it
would not add additional value to the analysis. Instead, Fitch
applied a deterministic analysis based on loss expectations on an
asset-by-asset basis. The liquidated credit enhancement level for
each class was then compared to the credit quality of the remaining
assets.
The ratings on classes B through K are based upon a deterministic
analysis that considers Fitch's base case loss expectation for the
pool and the current percentage of assets of concern, factoring in
anticipated recoveries relative to each class' credit enhancement.
The largest component of Fitch's base case loss expectation is a
hotel loan (48.6%), which is secured by a 72-room boutique hotel
located in the Times Square area of New York City. The loan was
restructured in 2012 into an A-note, B-note and hope note, and the
maturity was extended to 2019. The B note was subsequently
purchased by an investor related to the borrower and the proceeds
have previously been applied to the CDO. In 2015, the property
generated negative cash flow, representing a 180% decline from
2014, stemming from increased market competition and higher
operating expenses. Fitch modeled significant losses in its base
case scenario.
The second largest component of Fitch's base case loss expectation
is a mezzanine loan (29.6%) secured by an interest in the JW
Marriott Hotel, a 575-room full-service hotel located in Tucson,
Arizona. Fitch modeled a full loss on this highly leveraged
position in its base case scenario.
The transaction exited its reinvestment period in April 2011. The
CDO's asset manager is CV Holdings, Inc., formerly known as Realty
Finance Corp. (RFC).
RATING SENSITIVITIES
The ratings on classes B through K may be subject to further rating
actions as losses are realized.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation
to this rating action.
Fitch has downgraded the following classes:
-- $16.8 million class B to 'CCsf' from 'CCCsf'; RE75%;
-- $15 million class C to 'Csf' from 'CCCsf'; RE 0%;
-- $13.5 million class D to 'Csf' from 'CCsf'; RE 0%.
Fitch has affirmed the following classes:
-- $9 million class E at 'Csf'; RE 0%;
-- $10.5 million class F at 'Csf'; RE 0%;
-- $13.5 million class G a at 'Csf'; RE 0%;
-- $4.5 million class H at 'Csf'; RE 0%;
-- $24 million class J at 'Csf'; RE 0%;
-- $20.3 million class K at 'Csf'; RE 0%.
Classes A-1 and A-2 have paid in full. Fitch does not rate the
Preferred Shares.
RFC CDO 2006-1: Moody's Lowers Rating on Class D Notes to 'C'
-------------------------------------------------------------
Moody's Investors Service has downgraded the ratings on the
following notes issued by RFC CDO 2006-1, Ltd.:
Cl. C, Downgraded to Ca (sf); previously on Mar 9, 2016 Affirmed
Caa2 (sf)
Cl. D, Downgraded to C (sf); previously on Mar 9, 2016 Affirmed Ca
(sf)
Moody's has also affirmed the ratings on the following notes:
Cl. B, Affirmed Caa1 (sf); previously on Mar 9, 2016 Affirmed Caa1
(sf)
Cl. E, Affirmed C (sf); previously on Mar 9, 2016 Affirmed C (sf)
Cl. F, Affirmed C (sf); previously on Mar 9, 2016 Affirmed C (sf)
Cl. G, Affirmed C (sf); previously on Mar 9, 2016 Affirmed C (sf)
Cl. J, Affirmed C (sf); previously on Mar 9, 2016 Affirmed C (sf)
Cl. K, Affirmed C (sf); previously on Mar 9, 2016 Affirmed C (sf)
RATINGS RATIONALE
Moody's has downgraded the ratings of two classes of notes due to
$106.8 million in cumulative implied losses and low expected
recovery rate from impaired securities (84.4% of the outstanding
collateral pool). Additionally, both the weighted average rating
factor (WARF) and weighted average recovery rate (WARR) are
migrating downward as evidenced by WARF and WARR. Moody's has also
affirmed the ratings of six classes because key transaction metrics
are commensurate with the existing ratings. 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.
RFC CDO 2006-1, Ltd. is a currently static cash transaction
(reinvestment period ended in April 2011) backed by a portfolio of:
i) b-notes (33.8% of collateral pool balance); ii) mezzanine
interests (29.6%); iii) commercial mortgage backed securities
(CMBS) (21.7%); and iv) senior participations (14.9%). As of the
December 27, 2016 payment date, the aggregate note balance of the
transaction, including preferred shares, has decreased to $174.4
million from $600.0 million at securitization, with the pay-down
directed to the senior most class of notes outstanding, as a result
of the combination of principal repayment of collateral, resolution
and sales of impaired collateral, and the failing of certain par
value tests. Currently, the transaction has implied
under-collateralization of $106.8 million, compared to $102.8
million at last review primarily due to implied losses on the
collateral.
The collateral pool contains five assets totaling $57.0 million
(84.4% of the collateral pool balance) listed as impaired
securities as of the December 27, 2016 payment date. These are one
hope note (33.8%), one mezzanine interest (29.6%), one A-note
(14.8%), and two CMBS securities (6.2%). There have been over 17%
of implied losses on the underlying collateral to date since
securitization and Moody's does expect high severity of losses on
the impaired securities.
Moody's has identified the following as key indicators of the
expected loss in CRE CLO transactions: the weighted average rating
factor (WARF), the weighted average life (WAL), the weighted
average recovery rate (WARR), and Moody's asset correlation (MAC).
Moody's typically models these 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 its assessments for the collateral it does not
rate. The rating agency modeled a bottom-dollar WARF of 8414,
compared to 6996 at last review. The current distribution of
Moody's rated collateral and assessments for non-Moody's rated
collateral is as follows: Aaa-Aa3 and 15.6% compared to 10.8% at
last review, A1-A3 and 0.0% compared to 10.9% at last review, B1-B3
and 0.0% compared to 10.4% at last review, Caa1-Ca/C and 84.4%
compared to 67.9% at last review.
Moody's modeled a WAL of 1.7 years, compared to 2.3 years at last
review The WAL is based on assumptions about extensions on
underlying collateral and look-through CMBS collateral.
Moody's modeled a fixed WARR of 6.7%, compared to 10.6% at last
review.
Moody's modeled a MAC of 2.1%, compared to 15.2% at last review.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's
Approach to Rating SF CDOs" published in October 2016.
Factors that would lead to an upgrade or downgrade of the ratings:
The performance of the notes is subject to uncertainty, because it
is sensitive to the performance of the underlying portfolio, which
in turn depends on economic and credit conditions that are subject
to change. The servicing decisions of the master and special
servicer and surveillance by the operating advisor with respect to
the collateral interests and oversight of the transaction will also
affect the performance of the rated notes.
Moody's Parameter Sensitivities: Changes to any one or more of the
key parameters could have rating implications for some of the rated
notes, although a change in one key parameter assumption could be
offset by a change in one or more of the other key parameter
assumptions. The rated notes are particularly sensitive to changes
in the recovery rates of the underlying collateral and credit
assessments. Reducing the recovery rates of the 100% of the
collateral pool by -10.0% would result in an average modeled rating
movement on the rated notes of zero to one notch downward (e.g.,
one notch down implies a ratings movement of Baa3 to Ba1).
Increasing the recovery rate of 100% of the collateral pool by
+10.0% would result in an average modeled rating movement on the
rated notes of zero to one notch upward (e.g., one notch upward
implies a ratings movement of Baa3 to Baa2).
The primary sources of uncertainty in Moody's assumptions are the
extent of growth in the current macroeconomic environment given the
weak recovery and certain commercial real estate property markets.
Commercial real estate property values continue to improve
modestly, 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, sustained growth will not be possible until investment
increases steadily for a significant period, non-performing
properties are cleared from the pipeline and fears of a euro area
recession abate.
ROCKWALL CDO II: Moody's Affirms B1 Rating on Cl. B-2L Debt
-----------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by Rockwall CDO II Ltd.:
US$76,000,000 Class A-2L Floating Rate Extendable Notes Due 2024,
Upgraded to Aa1 (sf); previously on Oct 14, 2015 Upgraded to Aa2
(sf)
US$48,000,000 Class A-3L Floating Rate Extendable Notes Due 2024,
Upgraded to A3 (sf); previously on Oct 14, 2015 Upgraded to Baa1
(sf)
Moody's also affirmed the ratings on the following notes:
US$635,000,000 Class A-1LA Floating Rate Extendable Notes Due 2024
(current outstanding balance of $136,967,460), Affirmed Aaa (sf);
previously on Oct 14, 2015 Affirmed Aaa (sf)
US$115,000,000 Class A-1LB Floating Rate Extendable Notes Due 2024,
Affirmed Aaa (sf); previously on Oct 14, 2015 Upgraded to Aaa (sf)
US$36,000,000 Class B-1L Floating Rate Extendable Notes Due 2024
(current outstanding balance of $28,510,000), Affirmed Ba2 (sf);
previously on Oct 14, 2015 Upgraded to Ba2 (sf)
US$26,000,000 Class B-2L Floating Rate Extendable Notes Due 2024
(current outstanding balance of $16,838,371), Affirmed B1 (sf);
previously on Oct 14, 2015 Affirmed B1 (sf)
US$10,000,000 Combination Notes Due 2024 (current rated balance of
$4,655,927), Affirmed Ba1 (sf); previously on Oct 14, 2015 Upgraded
to Ba1 (sf)
Rockwall CDO II Ltd., issued in May 2007, is a collateralized loan
obligation (CLO) backed primarily by a portfolio of senior secured
loans with significant exposure to CLO tranches. As per Moody's
calculation, outstanding CLO tranches currently represent
approximately 26% of the portfolio.The transaction's reinvestment
period ended in August 2014.
RATINGS RATIONALE
The upgrade rating actions are primarily a result of deleveraging
of the senior notes and an increase in the transaction's
over-collateralization (OC) ratios since June 2016. The Class A-1LA
notes have been paid down by approximately 57% or $178.3 million
since that time. A portion of the proceeds used to deleverage the
notes resulted from the redemption of CLO tranches in the
underlying collateral pool. Based on the trustee's December 2016
report, the OC ratios for the Class A, Class B-1L and Class B-2L
notes are reported at 123.48%, 114.78% and 108.03%, respectively,
versus June 2016 levels of 116.57%, 110.87% and 107.49%
respectively. Additionally, the deal currently holds $24.2 million
of principal proceeds which are expected to be paid to the Class
A-1LA notes on the next payment date in February 2017. Finally,
Moody's also considered in its analysis the scheduled redemptions
for some CLO tranches currently held in the underlying portfolio.
Despite the increase in the OC ratios of the Class B-1L and B-2L
notes, Moody's affirmed the ratings of the notes owing to exposures
to lower rated CLO securities and some thinly traded or untraded
loans, whose lack of liquidity may pose additional risks relating
to the issuer's ultimate ability or inclination to pursue a
liquidation of such assets, especially if the sales can be
transacted only at heavily discounted price levels.
Nevertheless, the credit quality of the portfolio has deteriorated
since June 2016. Based on the trustee's December 2016 report, the
weighted average rating factor is currently 2192 compared to 1741
in June 2016.
Methodology Used for the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
October 2016.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
This transaction is subject to a number of factors and
circumstances that could lead to either an upgrade or downgrade of
the ratings:
1) Macroeconomic uncertainty: CLO performance is subject to a)
uncertainty about credit conditions in the general economy and b)
the large concentration of upcoming speculative-grade debt
maturities, which could make refinancing difficult for issuers.
2) Collateral Manager: Performance can also be affected positively
or negatively by a) the manager's investment strategy and behavior
and b) differences in the legal interpretation of CLO documentation
by different transactional parties owing to embedded ambiguities.
3) Collateral credit risk: A shift towards collateral of better
credit quality, or better credit performance of assets
collateralizing the transaction than Moody's current expectations,
can lead to positive CLO performance. Conversely, a negative shift
in credit quality or performance of the collateral can have adverse
consequences for CLO performance.
4) Deleveraging: An important source of uncertainty in this
transaction is whether deleveraging from unscheduled principal
proceeds will continue and at what pace. Deleveraging of the CLO
could accelerate owing to high prepayment levels in the loan
market, early redemptions on underlying CLO tranches and/or
collateral sales by the manager, which could have a significant
impact on the notes' ratings. Note repayments that are faster than
Moody's current expectations will usually have a positive impact on
CLO notes, beginning with those with the highest payment priority.
5) Recovery of defaulted assets: Fluctuations in the market value
of defaulted assets reported by the trustee and those that Moody's
assumes as having defaulted could result in volatility in the
deal's OC levels. Further, the timing of recoveries and whether a
manager decides to work out or sell defaulted assets create
additional uncertainty. 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.
Realization of higher than assumed recoveries would positively
impact the CLO.
6) Exposure to credit estimates: The deal has exposure to
securities whose default probabilities Moody's has assessed through
credit estimates. Moody's normally updates such estimates at least
once annually, but if such updates do not occur, the transaction
could be negatively affected by any default probability adjustments
Moody's assumes in lieu of updated credit estimates.
7) Combination notes: The rating on the combination notes, which
combines cash flows from one or more of the CLO's debt tranches and
the equity tranche, is subject to a higher degree of volatility
than the other rated notes. Moody's models haircuts to the cash
flows from the equity tranche based on the target rating of the
combination notes. Actual equity distributions that differ
significantly from Moody's assumptions can lead to a faster (or
slower) speed of reduction in the combination notes' rated balance,
thereby resulting in better (or worse) ratings performance than
previously expected.
8) Exposure to assets with low credit quality and weak liquidity:
The presence of assets rated Caa3 with a negative outlook, Caa2 or
Caa3 on review for downgrade or the worst Moody's speculative grade
liquidity (SGL) rating, SGL-4, exposes the notes to additional
risks if these assets default. The historical default rate is
higher than average for these assets. Due to the deal's exposure to
such assets, which constitute around $5.9 million of par, Moody's
ran a sensitivity case defaulting those assets.
9) Exposure to CLO securities: The portfolio includes a material
concentration in CLO securities. Moody's views CLOs as highly
correlated, and the specific CLO securities that the issuer has
invested in have longer average lives and are of relatively better
average credit quality than the loans in the portfolio. Therefore,
as the deal further seasons and amortizes, the CLO securities,
currently representing 26% of the total collateral, may comprise an
even larger portion of the portfolio. Conversely, if a larger
portion of the CLO tranches are redeemed, the corporate loan
collateral that has a relatively worse average credit quality, may
comprise an even larger portion of the portfolio.
In addition to the base case analysis, Moody's also conducted
sensitivity analyses to test the impact of a number of default
probabilities on the rated notes relative to the base case modeling
results, which may be different from the current public ratings of
the notes. Below is a summary of the impact of different default
probabilities (expressed in terms of WARF) on all of the rated
notes (by the difference in the number of notches versus the
current model output, for which a positive difference corresponds
to lower expected loss):
Moody's Adjusted WARF -- 20% (1899)
Class A-1LA: 0
Class A-1LB: 0
Class A-2L: +1
Class A-3L: +3
Class B-1L: +2
Class B-2L: +2
Combination Notes: +3
Moody's Adjusted WARF + 20% (2849)
Class A-1LA: 0
Class A-1LB: 0
Class A-2L: -1
Class A-3L: -2
Class B-1L: -1
Class B-2L: -1
Combination Notes: -1
Loss and Cash Flow Analysis:
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. In its base case,
Moody's analyzed the collateral pool as having a performing par and
principal proceeds balance of $442.5 million, defaulted par of
$45.6 million, a weighted average default probability of 14.67%
(implying a WARF of 2374), a weighted average recovery rate upon
default of 38.95%, a diversity score of 30 and a weighted average
spread of 2.9%(before accounting for LIBOR floors).
Moody's incorporates the default and recovery properties of the
collateral pool in cash flow model analysis where they are subject
to stresses as a function of the target rating on each CLO
liability reviewed. Moody's derives the default probability from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate for future defaults is based primarily on the seniority of the
assets in the collateral pool. Moody's generally applies recovery
rates for CLO securities as published in "Moody's Approach to
Rating SF CDOs". In some cases, alternative recovery assumptions
may be considered based on the specifics of the analysis of the CLO
transaction. In each case, historical and market performance and
the collateral manager's latitude for trading the collateral are
also factors.
A proportion of the collateral pool includes debt obligations whose
credit quality Moody's assesses through credit estimates. Moody's
analysis reflects adjustments with respect to the default
probabilities associated with credit estimates. Specifically,
Moody's assumed an equivalent of Caa3 for assets with credit
estimates that have not been updated within the last 15 months and
for assets with no rating information, which represent
approximately 5.3% of the collateral pool.
SAXON ASSET: Moody's Takes Action on $41MM of Subprime RMBS
-----------------------------------------------------------
Moody's Investors Service has downgraded the ratings of nine
tranches from six transactions, and upgraded the ratings of two
tranches from two transactions issued by Saxon, backed by subprime
mortgage loans.
Complete rating actions are:
Issuer: Saxon Asset Securities Trust 2002-1
Cl. AF-5, Downgraded to B1 (sf); previously on Feb 1, 2016 Upgraded
to A3 (sf)
Cl. AF-6, Downgraded to Baa3 (sf); previously on Jul 30, 2013
Confirmed at A1 (sf)
Cl. AV-1, Upgraded to Aa3 (sf); previously on May 4, 2012
Downgraded to A1 (sf)
Issuer: Saxon Asset Securities Trust 2004-3
Cl. A-4, Downgraded to A3 (sf); previously on May 12, 2016 Upgraded
to A1 (sf)
Issuer: Saxon Asset Securities Trust 2000-1
Cl. MF-2, Downgraded to B1 (sf); previously on Apr 1, 2013
Downgraded to A3 (sf)
Issuer: Saxon Asset Securities Trust 2001-2
Cl. AF-5, Downgraded to B1 (sf); previously on Oct 16, 2015
Upgraded to Baa1 (sf)
Cl. AF-6, Downgraded to Baa3 (sf); previously on Mar 10, 2011
Downgraded to A1 (sf)
Issuer: Saxon Asset Securities Trust 2003-1
Cl. AF-6, Downgraded to A3 (sf); previously on May 18, 2012
Downgraded to A2 (sf)
Issuer: Saxon Asset Securities Trust 2003-2
Cl. AF-5, Downgraded to A3 (sf); previously on Feb 8, 2016 Upgraded
to A1 (sf)
Cl. AF-6, Downgraded to A3 (sf); previously on Feb 8, 2016 Upgraded
to A1 (sf)
Cl. M-2, Upgraded to B3 (sf); previously on Feb 8, 2016 Upgraded to
Caa2 (sf)
RATINGS RATIONALE
The rating upgrades are primarily due to the total credit
enhancement available to the bonds.
The ratings downgrades to Saxon Asset Securities Trust 2003-1 Class
AF-6 and Saxon Asset Securities Trust 2003-2 Classes AF-5 and AF-6
are primarily due to a decreased expectation of the transactions'
ability to reimburse interest shortfalls were they to occur. These
transactions do not cross-collateralize interest between their own
fixed rate and adjustable rate senior tranches.
The ratings downgrade to Saxon Asset Securities Trust 2004-3 Class
A-4 is primarily due to a structural feature that limits the
transaction's ability to reimburse interest shortfalls were they to
occur. This transaction uses a structure with an available funds
rate cap that limits tranche interest based on mortgage funds
collected rather than mortgage funds due. Recoupment of prior
payment advances on delinquent loans could potentially deplete
available interest funds in a period and thus cause this tranche to
be paid no interest in a period where funds were otherwise
available.
The ratings downgrades to Saxon Asset Securities Trust 2002-1
Classes AF-5 and AF-6, Saxon Asset Securities Trust 2001-2 Classes
AF-5 and AF-6, and Saxon Asset Securities Trust 2000-1 Class MF-2
are solely due to outstanding interest shortfalls which are not
expected to be reimbursed.
The cash flow model previously used in rating Saxon Asset
Securities Trust 2002-1 was corrected, although this correction did
not contribute to rating actions. In prior rating actions, the cash
flow model applied inaccurate interest cross collateralization
between the Class AV and Class AF senior tranches.
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in November 2013.
Factors that would lead to an upgrade or downgrade of the ratings:
Ratings in the US RMBS sector remain exposed to the high level of
macroeconomic uncertainty, and in particular the unemployment rate.
The unemployment rate fell to 4.7% in December 2016 from 5.0% in
December 2015. Moody's forecasts an unemployment central range of
4.5% to 5.5% for the 2017 year. Deviations from this central
scenario could lead to rating actions in the sector.
House prices are another key driver of US RMBS performance. Moody's
expects house prices to continue to rise in 2017. Lower increases
than Moody's expects or decreases could lead to negative rating
actions.
Finally, 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.
SOUND POINT XV: Moody's Assigns (P)Ba3 Rating to Class E Notes
--------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to five
classes of notes to be issued by Sound Point CLO XV, Ltd.
Moody's rating actions are:
U.S.$256,000,000 Class A Senior Secured Floating Rate Notes due
2029 (the "Class A Notes"), Assigned (P)Aaa (sf)
U.S.$46,000,000 Class B Senior Secured Floating Rate Notes due 2029
(the "Class B Notes"), Assigned (P)Aa2 (sf)
U.S.$23,500,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2029 (the "Class C Notes"), Assigned (P)A2 (sf)
U.S.$22,500,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2029 (the "Class D Notes"), Assigned (P)Baa3 (sf)
U.S.$20,000,000 Class E Junior Secured Deferrable Floating Rate
Notes due 2029 (the "Class E Notes"), Assigned (P)Ba3 (sf)
The Class A Notes, the Class B Notes, the Class C Notes, the Class
D Notes and the Class E Notes are referred to herein, collectively,
as the "Rated Notes."
Moody's issues provisional ratings in advance of the final sale of
financial instruments, but these ratings only represent Moody's
preliminary credit opinions. Upon a conclusive review of a
transaction and associated documentation, Moody's will endeavor to
assign definitive ratings. A definitive rating, if any, may differ
from a provisional rating.
RATINGS RATIONALE
Moody's provisional ratings of the Rated Notes address the expected
losses posed to noteholders. The provisional ratings reflect the
risks due to defaults on the underlying portfolio of assets, the
transaction's legal structure, and the characteristics of the
underlying assets.
Sound Point CLO XV is a managed cash flow CLO. The issued notes
will be collateralized primarily by broadly syndicated first lien
senior secured corporate loans. At least 90% of the portfolio must
consist of senior secured loans, cash, and eligible investments,
and up to 10% of the portfolio may consist of second lien loans and
senior unsecured loans. Moody's expect the portfolio to be
approximately 70% ramped as of the closing date.
Sound Point Capital Management, LP (the "Manager") will direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's four-year
reinvestment period. Thereafter, the Manager may reinvest
unscheduled principal payments and proceeds from sales of credit
risk assets, subject to certain restrictions.
In addition to the Rated Notes, the Issuer will issue subordinated
notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in October 2016.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 55
Weighted Average Rating Factor (WARF): 2580
Weighted Average Spread (WAS): 3.60%
Weighted Average Coupon (WAC): 4.00%
Weighted Average Recovery Rate (WARR): 46.0%
Weighted Average Life (WAL): 8.25 years.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
October 2016.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
Together with the set of modeling assumptions above, Moody's
conducted an additional sensitivity analysis, which was a component
in determining the ratings assigned to the Rated Notes. This
sensitivity analysis includes increased default probability
relative to the base case.
Below is a summary of the impact of an increase in default
probability (expressed in terms of WARF level) on the Rated Notes
(shown in terms of the number of notch difference versus the
current model output, whereby a negative difference corresponds to
higher expected losses), assuming that all other factors are held
equal:
Percentage Change in WARF -- increase of 15% (from 2580 to 2967)
Rating Impact in Rating Notches
Class A Notes: 0
Class B Notes: -1
Class C Notes: -2
Class D Notes: -1
Class E Notes: 0
Percentage Change in WARF -- increase of 30% (from 2580 to 3354)
Rating Impact in Rating Notches
Class A Notes: -1
Class B Notes: -3
Class C Notes: -4
Class D Notes: -2
Class E Notes: -1
STACR 2017-DNA1: Fitch to Rate Class M-2 Notes 'BBsf'
-----------------------------------------------------
Fitch Ratings expects to rate Freddie Mac's risk-transfer
transaction, Structured Agency Credit Risk Debt Notes Series
2017-DNA1 (STACR 2017-DNA1) as follows:
-- $290,000,000 class M-1 notes 'BBB-sf'; Outlook Stable;
-- $187,500,000 class M-2A notes 'BBsf'; Outlook Stable;
-- $187,500,000 class M-2B notes 'B+sf'; Outlook Stable;
-- $375,000,000 class M-2 exchangeable notes 'B+sf'; Outlook
Stable;
-- $375,000,000 class M-2R exchangeable notes 'B+sf'; Outlook
Stable;
-- $375,000,000 class M-2S exchangeable notes 'B+sf'; Outlook
Stable;
-- $375,000,000 class M-2T exchangeable notes 'B+sf'; Outlook
Stable;
-- $375,000,000 class M-2U exchangeable notes 'B+sf'; Outlook
Stable;
-- $375,000,000 class M-2I notional exchangeable notes 'B+sf';
Outlook Stable;
-- $187,500,000 class M-2AR exchangeable notes 'BBsf'; Outlook
Stable;
-- $187,500,000 class M-2AS exchangeable notes 'BBsf'; Outlook
Stable;
-- $187,500,000 class M-2AT exchangeable notes 'BBsf'; Outlook
Stable;
-- $187,500,000 class M-2AU exchangeable notes 'BBsf'; Outlook
Stable;
-- $187,500,000 class M-2AI notional exchangeable notes 'BBsf';
Outlook Stable;
-- $187,500,000 class M-2BR exchangeable notes 'B+sf'; Outlook
Stable;
-- $187,500,000 class M-2BS exchangeable notes 'B+sf'; Outlook
Stable;
-- $187,500,000 class M-2BT exchangeable notes 'B+sf'; Outlook
Stable;
-- $187,500,000 class M-2BU exchangeable notes 'B+sf'; Outlook
Stable;
-- $187,500,000 class M-2BI notional exchangeable notes 'B+sf';
Outlook Stable.
The following classes will not be rated by Fitch:
-- $60,000,000 class B-1 notes;
-- $17,000,000 class B-2 notes;
-- $32,691,709,047 class A-H reference tranche;
-- $117,584,943 class M-1H reference tranche;
-- $75,731,942 class M-2AH reference tranche;
-- $75,731,942 class M-2BH reference tranche;
-- $109,827,059 class B-1H reference tranche;
-- $152,827,059 class B-2H reference tranche.
The 'BBB-sf' rating for the M-1 notes reflects the 2.55%
subordination provided by the 0.77% class M-2A notes, the 0.77%
class M-2B notes, the 0.50% class B-1 notes and the 0.50% class
B-2 notes. The 'BBsf' rating for the M-2A notes reflects the 1.00%
subordination provided by the 0.50% class B-1 notes and the 0.50%
class B-2 notes. The 'B+sf' rating for the M-2B notes reflects the
0.50% subordination provided by the 0.50% class B-2 notes. The
notes are general unsecured obligations of Freddie Mac
('AAA'/Outlook Stable) subject to the credit and principal payment
risk of a pool of certain residential mortgage loans held in
various Freddie Mac-guaranteed MBS.
STACR 2017-DNA1 represents Freddie Mac's 14th risk transfer
transaction applying actual loan loss severity (LS) issued as part
of the Federal Housing Finance Agency's Conservatorship Strategic
Plan for 2013 - 2017 for each of the government-sponsored
enterprises (GSEs) to demonstrate the viability of multiple types
of risk-transfer transactions involving single-family mortgages.
The objective of the transaction is to transfer credit risk from
Freddie Mac to private investors with respect to a $33.97 billion
pool of mortgage loans currently held guaranteed by Freddie Mac
where principal repayment of the notes is subject to the
performance of a reference pool of mortgage loans. As loans
liquidate or other credit events occur, the outstanding principal
balance of the debt notes will be reduced by the actual loan's LS
percentage related to those credit events, which includes
borrower's delinquent interest.
While the transaction structure simulates the behavior and credit
risk of traditional RMBS senior-subordinate securities, Freddie Mac
will be responsible for making monthly payments of interest and
principal to investors. Because of the counterparty dependence on
Freddie Mac, Fitch's expected rating on the M-1, M-2A and M-2B
notes will be based on the lower of: the quality of the mortgage
loan reference pool and credit enhancement (CE) available through
subordination, and Freddie Mac's Issuer Default Rating. The M-1,
M-2A M-2B, B-1, and B-2 notes will be issued as LIBOR-based
floaters. In the event that the one-month LIBOR rate falls below
zero and becomes negative, the coupons of the interest-only MAC
notes may be subject to a downward adjustment, so that the
aggregate interest payable within the related MAC combination does
not exceed the interest payable to the notes for which such classes
were exchanged. The notes will carry a 12.5-year legal final
maturity.
KEY RATING DRIVERS
High-Quality Mortgage Pool (Positive): The reference pool consists
of 137,250 high quality mortgage loans totaling $33.97 billion that
were acquired by Freddie Mac between April 1, 2016 and June 30,
2016. The reference pool consists of loans with original
loan-to-value ratios (LTVs) of over 60% and less than or equal to
80% with a weighted average (WA) original combined LTV of 76.0%.
The WA debt-to-income (DTI) ratio of 34.9% and credit score of 751
reflect the strong credit profile of post-crisis mortgage
originations.
Actual Loss Severities (Neutral): This will be Freddie Mac's 14th
actual loss risk transfer transaction in which losses borne by the
noteholders will not be based on a fixed LS schedule. The notes in
this transaction will experience losses realized at the time of
liquidation or loan modification which will include both lost
principal and delinquent interest.
12.5-Year Hard Maturity (Positive): The M-1, M-2A, and M-2B notes
benefit from a 12.5-year legal final maturity. Thus, any credit
events on the reference pool that occur beyond year 12.5 are borne
by Freddie Mac and do not affect the transaction. In addition,
credit events that occur prior to maturity with losses realized
from liquidations or loan modifications that occur after the final
maturity date will not be passed through to noteholders.
Solid Lender Review and Acquisition Processes (Positive): Fitch
found that Freddie Mac has a well-established and disciplined
process in place for the purchase of loans and views its
lender-approval and oversight processes for minimizing counterparty
risk and ensuring sound loan quality acquisitions as positive. Loan
quality control (QC) review processes are thorough and indicate a
tight control environment that limits origination risk. Fitch has
determined Freddie Mac to be an above-average aggregator for its
2013 and later product. The lower risk was accounted for by Fitch
by applying a lower default estimate for the reference pool.
Advantageous Payment Priority (Positive): The M-1 class strongly
benefits from the sequential pay structure and stable CE provided
by the more junior M-2A, M-2B, B-1, and B-2 classes, which are
locked out from receiving any principal until classes with a more
senior payment priority are paid in full. However, available CE for
the junior classes as a percentage of the outstanding reference
pool increases in tandem with the paydown of the M-1 class. Given
the size of the M-1 class relative to the combined total of all the
junior classes, together with the sequential pay structure, the
class M-1 will de-lever and CE as a percentage will build faster
than in a pro rata payment structure.
Solid Alignment of Interests (Positive): While the transaction is
designed to transfer credit risk to private investors, Fitch
believes the transaction benefits from a solid alignment of
interests. Freddie Mac will retain credit risk in the transaction
by holding the senior reference tranche A-H, which has 3.75% of
loss protection, as well as a minimum of 5% of the M-1, M-2A, M-2B,
and B-1 tranches and a minimum of 75% of the first-loss B-2
tranche. Initially, Freddie Mac will retain an approximately 28.8%
vertical slice/interest in the M-1, M-2A, and M-2B tranches.
Receivership Risk Considered (Neutral): Under the Federal Housing
Finance Regulatory Reform Act, the Federal Housing Finance Agency
(FHFA) must place Freddie Mac into receivership if it determines
that the government-sponsored enterprise's (GSE) assets are less
than its obligations for longer than 60 days following the deadline
of its SEC filing. As receiver, FHFA could repudiate any contract
entered into by Freddie Mac if it is determined that such action
would promote an orderly administration of Freddie Mac's affairs.
Fitch believes that the U.S. government will continue to support
Freddie Mac, as reflected in its current rating of the GSE.
However, if, at some point, Fitch views the support as being
reduced and receivership likely, the rating of Freddie Mac could be
downgraded and ratings on the M-1, M-2A, and M-2B notes, along with
their corresponding MAC notes, could be affected.
RATING SENSITIVITIES
Fitch's analysis incorporates sensitivity analyses to demonstrate
how the ratings would react to steeper market value declines (MVDs)
than assumed at both the MSA and national levels. The implied
rating sensitivities are only an indication of some of the
potential outcomes and do not consider other risk factors that the
transaction may become exposed to or be considered in the
surveillance of the transaction.
This defined stress sensitivity analysis demonstrates how the
ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0%, in addition to the
model projected 24.0% at the 'BBBsf' level, 22.4% at the
'BBB-sf' level and 14.5% at the 'Bsf' level. The analysis indicates
that there is some potential rating migration with higher MVDs,
compared with the model projection.
Fitch also conducted defined rating sensitivities which determine
the stresses to MVDs that would reduce a rating by one full
category, to non-investment grade, and to 'CCCsf'. For example,
additional MVDs of 11%, 11% and 34% would potentially move the
'BBBsf' rated class down one rating category, to non-investment
grade, to 'CCCsf', respectively.
SUGAR CREEK: Moody's Hikes Rating on Class E Notes From Ba1
-----------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by Sugar Creek CLO, Ltd.
Class D Secured Deferrable Floating Rate Notes Due 2022, Upgraded
to Aa3 (sf); previously on April 29, 2015 Upgraded to Baa1 (sf)
Class E Secured Deferrable Floating Rate Notes Due 2022, Upgraded
to Baa2 (sf); previously on April 29, 2015 Upgraded to Ba1 (sf)
Moody's also affirmed the rating on the following notes:
Class A Senior Secured Floating Rate Notes (current balance of
$49,282,478.06) Due 2022, Affirmed Aaa (sf); previously on April
29, 2015 Affirmed Aaa (sf)
Sugar Creek CLO, Ltd., issued in May 2012, is a collateralized loan
obligation (CLO) backed entirely by a portfolio of senior secured
loans. The transaction's reinvestment period ended in July 2015.
RATINGS RATIONALE
These rating actions are primarily a result of deleveraging of the
senior notes and an increase in the transaction's
over-collateralization (OC) ratios since June 2016. The Class A
notes have been paid down by approximately 67% or $98.5 million
since that time. Based on Moody's calculations, the OC ratios for
the Class A, Class B, Class C, Class D and Class E notes are
287.69%, 183.46%, 146.49%, 129.74% and 118.61%, respectively,
versus June 2016 levels of 153.20%, 132.60%, 121.20%, 114.90% and
110.20%, respectively.
Methodology Used for the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
October 2016.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
This transaction is subject to a number of factors and
circumstances that could lead to either an upgrade or downgrade of
the ratings:
1) Macroeconomic uncertainty: CLO performance is subject to a)
uncertainty about credit conditions in the general economy and b)
the large concentration of upcoming speculative-grade debt
maturities, which could make refinancing difficult for issuers.
2) Collateral Manager: Performance can also be affected positively
or negatively by a) the manager's investment strategy and behavior
and b) differences in the legal interpretation of CLO documentation
by different transactional parties owing to embedded ambiguities.
3) Collateral credit risk: A shift towards collateral of better
credit quality, or better credit performance of assets
collateralizing the transaction than Moody's current expectations,
can lead to positive CLO performance. Conversely, a negative shift
in credit quality or performance of the collateral can have adverse
consequences for CLO performance.
4) Deleveraging: An important source of uncertainty in this
transaction is whether deleveraging from unscheduled principal
proceeds will continue and at what pace. Deleveraging of the CLO
could accelerate owing to high prepayment levels in the loan market
and/or collateral sales by the manager, which could have a
significant impact on the notes' ratings. Note repayments that are
faster than Moody's current expectations will usually have a
positive impact on CLO notes, beginning with those with the highest
payment priority.
5) Long-dated assets: The presence of assets that mature after the
CLO's legal maturity date exposes the deal to liquidation risk on
those assets. This risk is borne first by investors with the lowest
priority in the capital structure. Moody's assumes that the
terminal value of an asset upon liquidation at maturity will 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) or the asset's current market value.
In addition to the base case analysis, Moody's also conducted
sensitivity analyses to test the impact of a number of default
probabilities on the rated notes relative to the base case modeling
results, which may be different from the current public ratings of
the notes. Below is a summary of the impact of different default
probabilities (expressed in terms of WARF) on all of the rated
notes (by the difference in the number of notches versus the
current model output, for which a positive difference corresponds
to lower expected loss):
Moody's Adjusted WARF -- 20% (2090)
Class A: 0
Class D: +2
Class E: +3
Moody's Adjusted WARF + 20% (3136)
Class A: 0
Class D: -2
Class E: -1
Loss and Cash Flow Analysis:
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. In its base case,
Moody's analyzed the collateral pool as having a performing par and
principal proceeds balance of $141.8 million, no defaulted par, a
weighted average default probability of 16.82% (implying a WARF of
2613), a weighted average recovery rate upon default of 50.65%, a
diversity score of 36 and a weighted average spread of 3.25%
(before accounting for LIBOR floors).
Moody's incorporates the default and recovery properties of the
collateral pool in cash flow model analysis where they are subject
to stresses as a function of the target rating on each CLO
liability reviewed. Moody's derives the default probability from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate for future defaults is based primarily on the seniority of the
assets in the collateral pool. In each case, historical and market
performance and the collateral manager's latitude for trading the
collateral are also factors.
TOWD POINT 2017-1: Fitch to Rate $74.7MM Class B2 Notes 'B'
-----------------------------------------------------------
Fitch Ratings expects to rate Towd Point Mortgage Trust 2017-1
(TPMT 2017-1) as follows:
-- $1,367,325,000 class A1 notes 'AAAsf'; Outlook Stable;
-- $116,280,000 class A2 notes 'AAsf'; Outlook Stable;
-- $121,471,000 class M1 notes 'Asf'; Outlook Stable;
-- $101,745,000 class M2 notes 'BBBsf'; Outlook Stable;
-- $95,515,000 class B1 notes 'BBsf'; Outlook Stable;
-- $74,752,000 class B2 notes 'Bsf'; Outlook Stable;
-- $116,280,000 class A2A exchangeable notes 'AAsf'; Outlook
Stable;
-- $116,280,000 class X1 notional exchangeable notes 'AAsf';
Outlook Stable;
-- $116,280,000 class A2B exchangeable notes 'AAsf'; Outlook
Stable;
-- $116,280,000 class X2 notional exchangeable notes 'AAsf';
Outlook Stable;
-- $121,471,000 class M1A exchangeable notes 'Asf'; Outlook
Stable;
-- $121,471,000 class X3 notional exchangeable notes 'Asf';
Outlook Stable;
-- $121,471,000 class M1B exchangeable notes 'Asf'; Outlook
Stable;
-- $121,471,000 class X4 notional exchangeable notes 'Asf';
Outlook Stable;
-- $101,745,000 class M2A exchangeable notes 'BBBsf'; Outlook
Stable;
-- $101,745,000 class X5 notional exchangeable notes 'BBBsf';
Outlook Stable;
-- $101,745,000 class M2B exchangeable notes 'BBBsf'; Outlook
Stable;
-- $101,745,000 class X6 notional exchangeable notes 'BBBsf';
Outlook Stable.
The following classes will not be rated by Fitch:
-- $66,445,000 class B3 notes;
-- $66,446,000 class B4 notes;
-- $66,445,869 class B5 notes.
The notes are supported by one collateral group that consists of
11,459 seasoned performing and re-performing mortgages with a total
balance of approximately $2,076.4 million (which includes $177.2
million, or 8.5%, of the aggregate pool balance in
non-interest-bearing deferred principal amounts) as of the
statistical calculationdate.
The 'AAAsf' rating on the class A1 notes reflects the 34.15%
subordination provided by the 5.60% class A2, 5.85% class M1, 4.90%
class M2, 4.60% class B1, 3.60% class B2, 3.20% class B3, 3.20%
class B4 and 3.20% class B5 notes.
Fitch's ratings on the class notes reflect the credit attributes of
the underlying collateral, the quality of the servicer: Select
Portfolio Servicing, Inc. (SPS),rated 'RPS1-', and the
representation (rep) and warranty framework, minimal due diligence
findings and the sequential pay structure.
KEY RATING DRIVERS
Distressed Performance History (Concern): The collateral pool
consists primarily of peak-vintage seasoned re-performing loans
(RPLs), including loans that have been paying for the past 24
months, which Fitch identifies as "clean current" (79.6%), and
loans that are current but have recent delinquencies or incomplete
paystrings, identified as "dirty current" (20.4%). Of the loans,
84.3% have received modifications. Fitch reduced the pool's
lifetime default expectations by approximately 10.3% to account for
the clean current loans.
Due Diligence Compliance Findings (Concern): The third-party review
(TPR) firm's due diligence review resulted in approximately 8.4%
'C' and 'D' graded loans. For 122 loans, the due diligence results
showed issues regarding high-cost testing - the loans were either
missing the final HUD1, used alternate documentation to test, or
had incomplete loan files - and therefore a slight upward revision
to the model output loss severity (LS) was applied, as further
described in the related Presale report. In addition, timelines
were extended on 520 loans that were missing final modification
documents.
No Servicer P&I Advances (Mixed): The servicer will not be
advancing delinquent monthly payments of P&I, which reduces
liquidity to the trust. However, as P&I advances made on behalf of
loans that become delinquent and eventually liquidate reduce
liquidation proceeds to the trust, loan-level LS are less for this
transaction than for those where the servicer is obligated to
advance P&I. Structural provisions and cash flow priorities,
together with increased subordination, provide for timely payments
of interest to the 'AAAsf' and 'AAsf' rated classes.
Sequential-Pay Structure (Positive): The transaction's cash flow is
based on a sequential-pay structure whereby the subordinate classes
do not receive principal until the senior class is repaid in full.
Losses are allocated in reverse-sequential order. Furthermore, the
provision to re-allocate principal to pay interest on the 'AAAsf'
and 'AAsf' rated notes prior to other principal distributions is
highly supportive of timely interest payments to those classes, in
the absence of servicer advancing.
Limited Life of Rep Provider (Concern): FirstKey Mortgage, LLC
(FirstKey), as rep provider, will only be obligated to repurchase a
loan due to breaches prior to the payment date in March 2018.
Thereafter, a reserve fund will be available to cover amounts due
to noteholders for loans identified as having rep breaches. Amounts
on deposit in the reserve fund, as well as the increased level of
subordination, will be available to cover additional defaults and
losses resulting from rep weaknesses or breaches occurring on or
after the payment date in March 2018. If FirstKey does not fulfill
its obligation to repurchase a mortgage loan due to a breach,
Cerberus Global Residential Mortgage Opportunity Fund, L.P. (the
responsible party) will repurchase the loan.
Tier 2 Representation Framework (Concern): Fitch considers the
representation, warranty, and enforcement (RW&E) mechanism
construct for this transaction to be consistent with what it views
as a Tier 2 framework, due to the inclusion of knowledge qualifiers
and the exclusion of loans from certain reps as a result of
third-party due diligence findings. Thus, Fitch increased its
'AAAsf' loss expectations by roughly 227bps to account for a
potential increase in defaults and losses arising from weaknesses
in the reps.
Timing of Recordation and Document Remediation (Neutral): An
updated title and tax search, as well as a review to confirm that
the mortgage and subsequent assignments were recorded in the
relevant local jurisdiction, was also performed. Per the
representations provided in the transaction documents, all loans
have either all been recorded in the appropriate jurisdiction, are
in the process of being recorded, or will be sent for recordation
within 12 months of the closing date.
While the expected timelines for recordation and remediation are
viewed by Fitch as reasonable, Fitch believes that FirstKey's
oversight for completion of these activities serves as a strong
mitigant to potential delays. In addition, the obligation of
FirstKey or Cerberus Global Residential Mortgage Opportunity Fund,
L.P. to repurchase loans for which assignments are not recorded and
endorsements are not completed by the payment date in March 2018,
aligns the issuer's interests regarding completing the recordation
process with those of noteholders.
Deferred Amounts (Negative): Non-interest-bearing principal
forbearance amounts totaling $177.24 million (8.50%) of the unpaid
principal balance) are outstanding on 4,355 loans. Fitch included
the deferred amounts when calculating the borrower's LTV and sLTV
despite the lower payment and amounts not being owed during the
term of the loan. The inclusion resulted in higher PDs and LS than
if there were no deferrals. Fitch believes that borrower default
behavior for these loans will resemble that of the higher LTVs, as
exit strategies (i.e. sale or refinancing) will be limited relative
to those borrowers with more equity in the property
Solid Alignment of Interest (Positive): A majority-owned affiliate
of FirstKey will acquire and retain a 5% eligible vertical interest
in each class of the securities to be issued.
Servicing Fee Stress (Negative): Fitch determined that the
aggregate servicing fee of 30bps may be insufficient to attract
subsequent servicers under a period of poor performance and high
delinquencies as observed under its 'AAAsf' rating stress. To
account for the potentially higher fee above what is allowed for
under the current transaction documents, Fitch's analysis took into
account a 20bps rate cut to the weighted average coupon of the
pool.
CRITERIA APPLICATION
Fitch's analysis incorporated one criteria variation from the "U.S.
RMBS Seasoned and Re-performing Loan Criteria" as described below.
The variation is non-application of a default penalty to income
documentation for loans with less than full income documentation
that are over five years seasoned. Fitch conducted analysis
comparing the performance between loans that were full
documentation and non-full documentation at origination. The
analysis showed that after five years of seasoning, the performance
was similar. The impact on the loss expectations from application
of this variation resulted in lower loss expectations of roughly
100bps depending on the rating category.
RATING SENSITIVITIES
Fitch's analysis incorporates sensitivity analyses to demonstrate
how the ratings would react to steeper market value declines (MVDs)
than assumed at both the metropolitan statistical area (MSA) and
national levels. The implied rating sensitivities are only an
indication of some of the potential outcomes and do not consider
other risk factors that the transaction may become exposed to or be
considered in the surveillance of the transaction.
Fitch conducted sensitivity analysis determining how the ratings
would react to steeper MVDs at the national level. The analysis
assumes MVDs of 10%, 20%, and 30%, in addition to the
model-projected 38.2% at 'AAAsf'. The analysis indicates there is
some potential rating migration with higher MVDs, compared with the
model projection.
Fitch also conducted sensitivities to determine the stresses to
MVDs that would reduce a rating by one full category, to
non-investment grade, and to 'CCCsf'.
UBS COMMERCIAL 2012-C1: Moody's Affirms B2 Rating on Class F Certs
------------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on ten classes
in UBS Commercial Mortgage Trust 2012-C1, Commercial Mortgage
Pass-Through Certificates, Series 2012-C1:
Cl. A-3, Affirmed Aaa (sf); previously on Mar 17, 2016 Affirmed Aaa
(sf)
Cl. A-AB, Affirmed Aaa (sf); previously on Mar 17, 2016 Affirmed
Aaa (sf)
Cl. A-S, Affirmed Aaa (sf); previously on Mar 17, 2016 Affirmed Aaa
(sf)
Cl. B, Affirmed Aa1 (sf); previously on Mar 17, 2016 Upgraded to
Aa1 (sf)
Cl. C, Affirmed A1 (sf); previously on Mar 17, 2016 Upgraded to A1
(sf)
Cl. D, Affirmed Baa2 (sf); previously on Mar 17, 2016 Upgraded to
Baa2 (sf)
Cl. E, Affirmed Ba2 (sf); previously on Mar 17, 2016 Affirmed Ba2
(sf)
Cl. F, Affirmed B2 (sf); previously on Mar 17, 2016 Affirmed B2
(sf)
Cl. X-A, Affirmed Aaa (sf); previously on Mar 17, 2016 Affirmed Aaa
(sf)
Cl. X-B, Affirmed Ba3 (sf); previously on Mar 17, 2016 Affirmed Ba3
(sf)
RATINGS RATIONALE
The ratings on the P&I classes were affirmed because the
transaction's key metrics, including Moody's loan-to-value (LTV)
ratio, Moody's stressed debt service coverage ratio (DSCR) and the
transaction's Herfindahl Index (Herf), are within acceptable
ranges.
The ratings on the IO classes, Classes X-A and X-B, were affirmed
based on the credit performance (or the weighted average rating
factor or WARF) of the referenced classes.
Moody's rating action reflects a base expected loss of 2.7% of the
current balance, compared to 2.1% at Moody's last review. Moody's
base expected loss plus realized losses is now 2.3% of the original
pooled balance, compared to 1.9% at the 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.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The methodologies used in these ratings were "Approach to Rating US
and Canadian Conduit/Fusion CMBS" published in December 2014, and
"Moody's Approach to Rating Large Loan and Single Asset/Single
Borrower CMBS" published in October 2015.
DESCRIPTION OF MODELS USED
Moody's review used the excel-based CMBS Conduit Model, which it
uses for both conduit and fusion transactions. Credit enhancement
levels for conduit loans are driven by property type, Moody's
actual and stressed DSCR, and Moody's property quality grade (which
reflects the capitalization rate Moody's uses to estimate Moody's
value). Moody's fuses the conduit results with the results of its
analysis of investment grade structured credit assessed loans and
any conduit loan that represents 10% or greater of the current pool
balance.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 19, compared to a Herf of 20 at Moody's last
review.
When the Herf falls below 20, Moody's uses the excel-based Large
Loan Model and then reconciles and weights the results from the
conduit and large loan 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 and property
type. Moody's also further adjusts these aggregated proceeds for
any pooling benefits associated with loan level diversity and other
concentrations and correlations.
DEAL PERFORMANCE
As of the January 12, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by 14% to $1.14 billion
from $1.33 billion at securitization. The certificates are
collateralized by 68 mortgage loans ranging in size from less than
1% to 10.5% of the pool, with the top ten loans constituting 46% of
the pool. Eight loans, constituting 23% of the pool, have defeased
and are secured by US government securities.
Eight loans, constituting 14% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
One loan, constituting less than 1% of the pool, is currently in
special servicing. The specially serviced loan is the Southport and
Sheffield Loan ($6.1 million -- 0.5% of the pool), which is secured
by two mixed-use retail/office buildings totaling 29,894 square
feet (SF) and located in the Lakeview neighborhood of Chicago,
Illinois. The loan was transferred to special servicing in December
2015 due to ongoing litigation. Foreclosure complaints were filed
in August 2016.
Moody's has assumed a high default probability for two poorly
performing loans, constituting less than 1% of the pool, and has
estimated an aggregate loss of $1.6 million (a 15% expected loss
based on a 50% probability default) from these troubled loans.
Moody's received full year 2015 operating results for 90% of the
pool and partial year 2016 operating results for 88% of the pool.
Moody's weighted average conduit LTV is 92%, the same as at Moody's
last review. Moody's conduit component excludes loans with
structured credit assessments, defeased and CTL loans, and
specially serviced and troubled loans. Moody's net cash flow (NCF)
reflects a weighted average haircut of 8% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 9%.
Moody's actual and stressed conduit DSCRs are 1.41X and 1.10X,
respectively, compared to 1.42X and 1.10X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The top three conduit loans represent 24% of the pool balance. The
largest loan is the Dream Hotel Downtown Net Lease Loan ($120
million -- 10.5% of the pool), which is secured by the borrower's
fee simple interest in a parcel of land located at 17th Street and
9th Avenue in Chelsea, Manhattan. The borrower leased its interest
in the collateral to Northquay Properties, LLC (Hotel Tenant) and
Northglen Properties LLC (Banquet/Conference Space Tenant) under
two separate Net Leases. The Net Leases are structured with step
ups in lease payments. Moody's LTV and stressed DSCR are 99% and
0.64X, respectively, the same as at the last review.
The second largest loan is the Poughkeepsie Galleria Loan ($80.7
million -- 7.1% of the pool), which is secured by a 691,000 SF
portion of a 1.2 million SF regional mall located in Poughkeepsie,
New York (approximately 70 miles north of New York City). Mall
anchors include JCPenney, Regal Cinemas and Dick's Sporting Goods
as part of the collateral. Anchors not part of the collateral
include Macy's, Best Buy, Target and Sears. As of September 2016,
the total mall was 96% leased, compared to 95% leased as of
December 2015. The $82 million loan represents a pari passu portion
of a total $147 million first mortgage loan. The collateral is also
encumbered by $21 million of mezzanine debt. Moody's LTV and
stressed DSCR are 93% and 1.07X, respectively, the same as at the
last review.
The third largest loan is the Hartford 21 Loan ($72.2 million --
6.3% of the pool), which is secured by the leasehold interest in a
Class A mixed use multi-family/office/retail development located in
center city Hartford, Connecticut. As of September 2016, the
properties had a combined occupancy of 87%, compared to a combined
occupancy of 86% as of September 2015. Moody's LTV and stressed
DSCR are 94% and 1.01X, respectively, compared to 96% and 1.00X at
the last review.
UNITED AIRLINES 1999-1: Moody's Affirms Ba1 Rating on Cl. B Certs
-----------------------------------------------------------------
Moody's Investors Service updated ratings on three of United
Airlines, Inc.'s enhanced equipment trust certificates: Continental
Airlines (CAL) Series 1999-2 Class B, upgraded to Baa2 from Baa3,
wrapped portion of CAL Series 1999-2 Class A affirmed at Baa1 and
CAL Series 1999-1 Class B affirmed at Ba1. The Ba2 Corporate Family
rating of United's parent, United Continental Holdings, Inc. and
the stable outlook are not affected.
RATINGS RATIONALE
The affirmation of the Baa1 rating on the wrapped portion of Series
1999-2A considers a supportive estimated loan-to-value of about 65%
and Boeing narrow-body and wide-body models that remain core to
United's operations, balanced by the older age of the aircraft
collateral, lack of cross-default or cross-collateralization and no
uplift from the insurance policy given the prior withdrawal of
Moody's insurance financial strength rating of the insurer, Ambac
Assurance Corporation. The upgrade of the Class B of this same
series considers that less than $10,000 remains outstanding. Its
LTV is essentially the same as that of the Class A, for which about
$86 million remains outstanding. The affirmation of the Ba1 rating
assigned to Series 1999-1B considers the same factors as for the
Series 1999-2 transaction. We estimate the loan-to-value at about
85% for this tranche.
Moody's rating actions on EETCs consider its estimates of
loans-to-value (LTVs), its opinions of the probability that United
would affirm a transaction under a reorganization scenario based on
the aircraft type and age, the relative coupon and the relative
attractiveness or demand for particular models and or vintages
under a reorganization scenario. EETC rating actions also consider
that the weight of the corporate credit and of the collateral
attributes shifts over Moody's corporate rating scale; generally,
the higher the corporate rating, the less weight in the
collateral.
Changes in UAL's Corporate Family rating, in Moody's opinion of the
importance of particular aircraft models to its network, or in
Moody's estimates of aircraft market values which will affect
estimates of loan-to-value can result in changes to EETC ratings.
United Continental Holdings, Inc. is the holding company for United
Airlines, Inc. ("United"). United and United Express operate an
average of 4,500 flights a day to 339 airports across five
continents. The company reported $36.5 billion of revenue for
2016.
Upgrades:
Issuer: United Airlines, Inc.
Senior Secured Enhanced Equipment Trust Ser. 1999-2 Cl. B,
Upgraded to Baa2 from Baa3
Affirmations:
Issuer: United Airlines, Inc.
Senior Secured Enhanced Equipment Trust Ser. 1999-1B, Affirmed
Ba1
Senior Secured Enhanced Equipment Trust Ser. 1999-2 Cl. A-1,
Affirmed Baa1
Senior Secured Enhanced Equipment Trust, underlying, Ser. 1999-2
Cl. A-1, Affirmed Baa1
VITALITY RE VIII: S&P Assigns 'BB+' Rating on Class B Notes
-----------------------------------------------------------
S&P Global Ratings said it has assigned ratings of BBB+(sf)' and
'BB+(sf)' to the Class A and B notes, respectively, issued by
Vitality Re VIII Ltd.
The notes will cover claims payments of Health Re Inc. -- and
ultimately, Aetna Life Insurance Co. (ALIC) -- related to the
covered insurance business to the extent the medical benefits ratio
(MBR) exceeds 102% for the class A notes and 96% for the class B
notes. The MBR will be calculated on an annual aggregate
basis.
The ratings are based on the lowest of the following: the MBR risk
factor on the ceded risk ('bbb+' for the class A notes and 'bb+'
for the class B notes), the rating on ALIC (the underlying ceding
insurer), and the rating on the permitted investments (Federated
U.S Treasury Cash Reserves (UTIXX) 'AAAm') that will be held in the
collateral account (there is a separate collateral account for each
class of notes) at closing.
According to the risk analysis provided by Milliman, the primary
driver of historical financial fluctuations has been the volatility
in per-capita claim cost trends and lags in insurers' reactions to
these trend changes in their premium rating increase actions.
Other volatility factors include changes in expenses and target
profit margins. Although these factors cause the majority of
claims volatility, the extreme tail risk is affected by severe
pandemic.
This is the second Vitality Re issuance that permits the
probability of attachment, for the class A notes only, to be reset
higher or lower than at issuance. For each reset of the class A
notes, if any class B notes are outstanding on the applicable reset
calculation date, the updated MBR attachment of the class A notes
will be set so it is equal to the updated MBR exhaustion for the
class B notes.
RATINGS LIST
New Rating
Vitality Re VIII Ltd.
$140 mil Sr. Secured Class A notes due Jan. 8, 2021 BBB+(sf)
$60 mil Sr. Secured Class B notes due Jan. 8, 2021 BB+(sf)
WELLS FARGO 2016-NXS5: Fitch Affirms 'B-sf' Rating on Cl. G Debt
----------------------------------------------------------------
Fitch Ratings has affirmed 20 classes of Wells Fargo Commercial
Mortgage Trust Pass-Through Certificates series 2016-NXS5.
KEY RATING DRIVERS
The affirmations are based on the stable performance of the
underlying collateral. There have been no material changes to the
pool since issuance, therefore the original rating analysis was
considered in affirming the transaction. As of the January 2017
distribution date, the pool's aggregate principal balance has been
reduced by 0.57% to $870.1 million from $875.1 million at issuance.
The pool has experienced no realized losses to date, there are no
loans on the servicer's watchlist and no delinquent or specially
serviced loans, and no loans are defeased.
Stable Performance: All loans in the pool are current as of the
January 2017 remittance with property level performance in line
with issuance expectations. There are no material changes to pool
metrics.
High Fitch Leverage: At issuance, the transaction had higher
leverage than other recent Fitch-rated transactions. The pool's
Fitch debt service coverage ratio (DSCR) of 1.12x was below both
the 2015 and 2014 averages of 1.18x and 1.19x, respectively. The
pool's Fitch loan-to-value (LTV) of 110.6% was above both the 2015
average of 109.3% and the 2014 average of 106.2%.
Pool Concentration Better than Recent Deals: The top 10 loans make
up 48.3% of the pool, which is below the respective 2016 and 2015
averages of 54.3% and 49.3%. Additionally, the loan concentration
index (LCI) was 349, below the 2016 and 2015 averages of 422 and
367.
Single-Tenant Properties: The pool includes seven loans (19.5% of
pool) secured by properties that are exclusively occupied by a
single tenant. However, including all 33 properties with
single-tenant concentration greater than 75%, the exposure
represents 33.4% of the pool. This is significantly higher than the
respective 2015 and 2014 averages of 12.8% and 9.3%. Loans in the
top 10 secured by properties with single-tenant concentration
include One Court Square (8.6% of pool), Walgreens-CVS Portfolio
(5.2%), Torrance Crossroads (5.2%), and Keurig Green Mountain
(3.2%).
RATING SENSITIVITIES
The Rating Outlooks remain Stable for all classes due to stable
performance of the pool since issuance. Fitch does not foresee
positive or negative ratings migration until a material economic or
asset level event changes the transaction's portfolio-level
metrics.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
Fitch was provided with third-party due diligence information from
Deloitte & Touche LLP. The third-party due diligence information
was provided on Form ABS Due Diligence-15E and focused on a
comparison and re-computation of certain characteristics with
respect to each mortgage loan. Fitch considered this information in
its analysis and the findings did not have an impact on Fitch
analysis. A copy of the ABS Due Diligence Form-15E received by
Fitch in connection with this transaction may be obtained through
the link contained on the bottom of the related rating action
commentary.
Fitch has affirmed the following classes:
-- $28.1 million class A-1 at 'AAAsf'; Outlook Stable;
-- $121.9 million class A-2 at 'AAAsf'; Outlook Stable;
-- $35.8 million class A-3 at 'AAAsf'; Outlook Stable;
-- $65 million class A-4 at 'AAAsf'; Outlook Stable;
-- $85 million class A-5 at 'AAAsf'; Outlook Stable;
-- $164.8 million class A-6 at 'AAAsf'; Outlook Stable;
-- $50ac million class A-6FL at 'AAAsf'; Outlook Stable;
-- $0a class A-6FX at 'AAAsf'; Outlook Stable;
-- $57 million class A-SB at 'AAAsf'; Outlook Stable;
-- $50.3 million class A-S at 'AAAsf'; Outlook Stable;
-- $52.5 million class B at 'AA-sf'; Outlook Stable;
-- $39.4 million class C at 'A-sf'; Outlook Stable;
-- $26.3 million class D at 'BBBsf'; Outlook Stable;
-- $20.8a million class E at 'BBB-sf'; Outlook Stable;
-- $22.2a million class F at 'BB-sf'; Outlook Stable;
-- $9.5a million class G at 'B-sf'; Outlook Stable;
-- $657.9b million class X-A at 'AAAsf'; Outlook Stable;
-- $52.5b million class X-B at 'AA-sf'; Outlook Stable;
-- $22.2ab million class X-F at 'BB-sf'; Outlook Stable;
-- $9.5ab million class X-G at 'B-sf'; Outlook Stable.
(a) Privately placed and pursuant to Rule 144A.
(b) Notional amount and interest-only.
(c) Floating rate.
Fitch does not rate the class H and X-H certificates.
WESTWOOD CDO I: Moody's Affirms B1 Rating on Class D Debt
---------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by Westwood CDO I, Ltd.:
US$16,600,000 Class C-1 Senior Secured Deferrable Floating Rate
Notes Due March 25, 2021, Upgraded to A2 (sf); previously on
October 21, 2016 Upgraded to Baa2 (sf)
US$4,400,000 Class C-2 Senior Secured Deferrable Fixed Rate Notes
Due March 25, 2021, Upgraded to A2 (sf); previously on October 21,
2016 Upgraded to Baa2 (sf)
Moody's also affirmed the ratings on the following notes:
US$342,000,000 Class A-1 Senior Secured Floating Rate Notes Due
March 25, 2021 (current outstanding balance of $35,252,454),
Affirmed Aaa (sf); previously on October 21, 2016 Affirmed Aaa
(sf)
US$22,500,000 Class A-2 Senior Secured Floating Rate Notes Due
March 25, 2021, Affirmed Aaa (sf); previously on October 21, 2016
Affirmed Aaa (sf)
US$30,000,000 Class B Senior Secured Deferrable Floating Rate Notes
Due March 25, 2021, Affirmed Aaa (sf); previously on October 21,
2016 Upgraded to Aaa (sf)
US$13,500,000 Class D Secured Deferrable Floating Rate Notes Due
March 25, 2021, Affirmed B1 (sf); previously on October 21, 2016
Affirmed B1 (sf)
Westwood CDO I, Ltd. issued in January 2007, is a collateralized
loan obligation (CLO) backed primarily by a portfolio of senior
secured loans. The transaction's reinvestment period ended in March
2014.
RATINGS RATIONALE
These rating actions are primarily a result of deleveraging of the
senior notes and an increase in the transaction's
over-collateralization (OC) ratios since October 2016. The Class
A-1 notes have been paid down by approximately 58.5% or $49.6
million then. Based on Moody's calculation, the OC ratios for the
Class A, Class B, Class C and Class D notes are currently 229.18%,
150.83%, 121.71% and 108.27%, respectively, versus October 2016
levels of 169.38%, 132.40%, 114.85% and 105.83%, respectively.
The portfolio includes a number of investments in securities that
mature after the notes do. Based on the trustee's December 2016
report, securities that mature after the notes do currently make up
approximately 2.93% of the portfolio. These investments could
expose the notes to market risk in the event of liquidation when
the notes mature.
Methodology Used for the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
October 2016.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
This transaction is subject to a number of factors and
circumstances that could lead to either an upgrade or downgrade of
the ratings:
1) Macroeconomic uncertainty: CLO performance is subject to a)
uncertainty about credit conditions in the general economy and b)
the large concentration of upcoming speculative-grade debt
maturities, which could make refinancing difficult for issuers.
2) Collateral Manager: Performance can also be affected positively
or negatively by a) the manager's investment strategy and behavior
and b) differences in the legal interpretation of CLO documentation
by different transactional parties owing to embedded ambiguities.
3) Collateral credit risk: A shift towards collateral of better
credit quality, or better credit performance of assets
collateralizing the transaction than Moody's current expectations,
can lead to positive CLO performance. Conversely, a negative shift
in credit quality or performance of the collateral can have adverse
consequences for CLO performance.
4) Deleveraging: An important source of uncertainty in this
transaction is whether deleveraging from unscheduled principal
proceeds will continue and at what pace. Deleveraging of the CLO
could accelerate owing to high prepayment levels in the loan market
and/or collateral sales by the manager, which could have a
significant impact on the notes' ratings. Note repayments that are
faster than Moody's current expectations will usually have a
positive impact on CLO notes, beginning with those with the highest
payment priority.
5) Recovery of defaulted assets: Fluctuations in the market value
of defaulted assets reported by the trustee and those that Moody's
assumes as having defaulted could result in volatility in the
deal's OC levels. Further, the timing of recoveries and whether a
manager decides to work out or sell defaulted assets create
additional uncertainty. 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.
Realization of higher than assumed recoveries would positively
impact the CLO.
6) Long-dated assets: The presence of assets that mature after the
CLO's legal maturity date exposes the deal to liquidation risk on
those assets. This risk is borne first by investors with the lowest
priority in the capital structure. Moody's assumes that the
terminal value of an asset upon liquidation at maturity will 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) or the asset's current market value.
In addition to the base case analysis, Moody's also conducted
sensitivity analyses to test the impact of a number of default
probabilities on the rated notes relative to the base case modeling
results, which may be different from the current public ratings of
the notes. Below is a summary of the impact of different default
probabilities (expressed in terms of WARF) on all of the rated
notes (by the difference in the number of notches versus the
current model output, for which a positive difference corresponds
to lower expected loss):
Moody's Adjusted WARF -- 20% (2151)
Class A-1: 0
Class A-2: 0
Class B: 0
Class C-1: +2
Class C-2: +2
Class D: +1
Moody's Adjusted WARF + 20% (3227)
Class A-1: 0
Class A-2: 0
Class B: 0
Class C-1: -2
Class C-2: -2
Class D: -1
Loss and Cash Flow Analysis:
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. In its base case,
Moody's analyzed the collateral pool as having a performing par and
principal proceeds balance of $132.0 million, defaulted par of $1.8
million, a weighted average default probability of 14.42% (implying
a WARF of 2689), a weighted average recovery rate upon default of
50.7%, a diversity score of 31 and a weighted average spread of
3.16 % (before accounting for LIBOR floors).
Moody's incorporates the default and recovery properties of the
collateral pool in cash flow model analysis where they are subject
to stresses as a function of the target rating on each CLO
liability reviewed. Moody's derives the default probability from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate for future defaults is based primarily on the seniority of the
assets in the collateral pool. Moody's generally applies recovery
rates for CLO securities as published in "Moody's Approach to
Rating SF CDOs". In some cases, alternative recovery assumptions
may be considered based on the specifics of the analysis of the CLO
transaction. In each case, historical and market performance and
the collateral manager's latitude for trading the collateral are
also factors.
[*] Moody's Hikes $33MM of Subprime RMBS Issued 2000-2004
---------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 9 tranches,
from 5 transactions issued by various issuers backed by Subprime
mortgage loans.
Complete rating actions are:
Issuer: Fremont Home Loan Trust 2004-4
Cl. M-2, Upgraded to B1 (sf); previously on Mar 18, 2013 Affirmed
Caa2 (sf)
Issuer: GSAMP Trust 2003-HE2
Cl. A-1B, Upgraded to Baa1 (sf); previously on Sep 17, 2013
Downgraded to Baa3 (sf)
Cl. M-1, Upgraded to B1 (sf); previously on Sep 17, 2013 Confirmed
at B3 (sf)
Cl. M-2, Upgraded to Caa3 (sf); previously on Apr 9, 2012
Downgraded to C (sf)
Issuer: IndyMac Home Equity Mortgage Loan Asset-Backed Trust,
Series SPMD 2000-C
Cl. AF-5, Upgraded to Caa2 (sf); previously on Aug 14, 2013
Confirmed at Caa3 (sf)
Cl. AF-6, Upgraded to B2 (sf); previously on Aug 14, 2013 Confirmed
at B3 (sf)
Issuer: Long Beach Mortgage Loan Trust 2004-2
Cl. M-2, Upgraded to B3 (sf); previously on Apr 27, 2015 Upgraded
to Caa1 (sf)
Cl. M-3, Upgraded to Caa1 (sf); previously on Mar 8, 2011
Downgraded to Ca (sf)
Issuer: NovaStar Mortgage Funding Trust, Series 2003-3
Cl. A-3, Upgraded to Baa1 (sf); previously on Jun 26, 2014 Upgraded
to Baa3 (sf)
RATINGS RATIONALE
The upgrades are primarily due to the total credit enhancement
available to the bonds. The actions reflect the recent performance
of the underlying pools and Moody's updated loss expectations on
the pools.
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in November 2013.
Factors that would lead to an upgrade or downgrade of the ratings:
Ratings in the US RMBS sector remain exposed to the high level of
macroeconomic uncertainty, and in particular the unemployment rate.
The unemployment rate fell to 4.7% in December 2016 from 5.0% in
December 2015. Moody's forecasts an unemployment central range of
4.5% to 5.5% for the 2017 year. Deviations from this central
scenario could lead to rating actions in the sector. House prices
are another key driver of US RMBS performance. Moody's expects
house prices to continue to rise in 2017. Lower increases than
Moody's expects or decreases could lead to negative rating actions.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures.
[*] Moody's Raises $145MM of Subprime RMBS Issued 2006
------------------------------------------------------
Moody's Investors Service has upgraded the ratings of seven
tranches issued from two transactions backed by Subprime RMBS
loans.
Complete rating actions are:
Issuer: Asset Backed Funding Corporation Asset-Backed Certificates,
Series 2006-OPT1
Cl. A-1, Upgraded to Baa2 (sf); previously on Feb 29, 2016 Upgraded
to B1 (sf)
Cl. A-2, Upgraded to A2 (sf); previously on Feb 29, 2016 Upgraded
to B1 (sf)
Cl. A-3C1, Upgraded to B1 (sf); previously on Feb 29, 2016 Upgraded
to B3 (sf)
Cl. A-3C2, Upgraded to B1 (sf); previously on Feb 29, 2016 Upgraded
to B3 (sf)
Cl. A-3D, Upgraded to B1 (sf); previously on Feb 29, 2016 Upgraded
to Caa2 (sf)
Issuer: Terwin Mortgage Trust 2006-7
Cl. I-A-1, Upgraded to A3 (sf); previously on Feb 25, 2016 Upgraded
to Ba1 (sf)
Cl. I-A-2b, Upgraded to B1 (sf); previously on Feb 25, 2016
Upgraded to Caa1 (sf)
RATINGS RATIONALE
The upgrades are primarily due to the total credit enhancement
available to the bonds. The actions also reflect the recent
performance of the underlying pools and Moody's updated loss
expectations on the pools.
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in November 2013.
Factors that would lead to an upgrade or downgrade of the ratings:
Ratings in the US RMBS sector remain exposed to the high level of
macroeconomic uncertainty, and in particular the unemployment rate.
The unemployment rate fell to 4.7% in December 2016 from 5.0% in
December 2015. Moody's forecasts an unemployment central range of
4.5% to 5.5% for the 2017 year. Deviations from this central
scenario could lead to rating actions in the sector.
House prices are another key driver of US RMBS performance. Moody's
expects house prices to continue to rise in 2017. Lower increases
than Moody's expects or decreases could lead to negative rating
actions.
Finally, 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.
[*] Moody's Takes Action on $120MM of RMBS Issued 2002-2005
-----------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 19 tranches
and downgraded the rating of one tranche from five transactions
backed by Subprime RMBS loans.
Complete rating actions are as follows:
Issuer: Ameriquest Mortgage Securities Inc., Series 2004-R5
Cl. A-1A Certificate, Upgraded to Aaa (sf); previously on Oct 1,
2015 Upgraded to Aa2 (sf)
Cl. A-1B Certificate, Upgraded to Aaa (sf); previously on May 13,
2016 Upgraded to Aa3 (sf)
Cl. M-1 Certificate, Upgraded to Ba1 (sf); previously on Oct 1,
2015 Upgraded to B1 (sf)
Cl. M-2 Certificate, Upgraded to Ba3 (sf); previously on Oct 1,
2015 Upgraded to Caa2 (sf)
Cl. M-3 Certificate, Upgraded to Caa3 (sf); previously on May 4,
2012 Downgraded to C (sf)
Issuer: Credit Suisse First Boston Mortgage Acceptance Corp. Series
2002-HE4
Cl. M-F-1 Certificate, Downgraded to Ca (sf); previously on Mar 15,
2011 Downgraded to Caa2 (sf)
Issuer: IndyMac Home Equity Mortgage Loan Asset-Backed Trust, SPMD
2004-B
Cl. M-1 Certificate, Upgraded to Ba1 (sf); previously on Apr 4,
2013 Upgraded to Ba2 (sf)
Cl. M-2 Certificate, Upgraded to B1 (sf); previously on Apr 4, 2013
Affirmed Caa2 (sf)
Cl. M-3 Certificate, Upgraded to B3 (sf); previously on Oct 28,
2015 Upgraded to Caa3 (sf)
Cl. M-4 Certificate, Upgraded to Caa2 (sf); previously on Mar 3,
2014 Downgraded to C (sf)
Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-HE1
Cl. M-2 Certificate, Upgraded to Ba3 (sf); previously on Aug 21,
2015 Upgraded to B1 (sf)
Cl. M-3 Certificate, Upgraded to B3 (sf); previously on Aug 21,
2015 Upgraded to Caa1 (sf)
Cl. M-4 Certificate, Upgraded to Caa3 (sf); previously on Jul 15,
2010 Downgraded to Ca (sf)
Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-NC1
Cl. B-1 Certificate, Upgraded to Caa3 (sf); previously on Sep 15,
2015 Upgraded to Ca (sf)
Cl. M-1 Certificate, Upgraded to Baa3 (sf); previously on Sep 12,
2012 Upgraded to Ba2 (sf)
Cl. M-2 Certificate, Upgraded to Baa3 (sf); previously on Sep 15,
2015 Upgraded to Ba3 (sf)
Cl. M-3 Certificate, Upgraded to Ba1 (sf); previously on Sep 15,
2015 Upgraded to B1 (sf)
Cl. M-4 Certificate, Upgraded to Ba2 (sf); previously on Sep 15,
2015 Upgraded to B2 (sf)
Cl. M-5 Certificate, Upgraded to B2 (sf); previously on Sep 15,
2015 Upgraded to Caa1 (sf)
Cl. M-6 Certificate, Upgraded to Caa1 (sf); previously on Sep 15,
2015 Upgraded to Caa3 (sf)
RATINGS RATIONALE
The ratings upgraded are primarily due to the total credit
enhancement available to the bonds. The rating downgrade of Class
M-F-1 of Credit Suisse First Boston 2002-HE4 is primarily due to
decreasing credit enhancement available to the bond. The rating
actions are a result of the recent performance of the underlying
pools and reflects Moody's updated loss expectation on the pools.
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in November 2013.
Factors that would lead to an upgrade or downgrade of the ratings:
Ratings in the US RMBS sector remain exposed to the high level of
macroeconomic uncertainty, and in particular the unemployment rate.
The unemployment rate fell to 4.7% in December 2016 from 5.0% in
December 2015. Moody's forecasts an unemployment central range of
4.5% to 5.5% for the 2017 year. Deviations from this central
scenario could lead to rating actions in the sector.
House prices are another key driver of US RMBS performance. Moody's
expects house prices to continue to rise in 2017. Lower increases
than Moody's expects or decreases could lead to negative rating
actions.
Finally, 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.
[*] Moody's Takes Action on $130.9MM of RMBS Issued 2003-2004
-------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 15 tranches
and downgraded the ratings of nine tranches from eight
transactions, backed by Alt-A RMBS loans, issued by multiple
issuers.
Complete rating actions are as follows:
Issuer: Banc of America Alternative Loan Trust 2004-11
Cl. 3-A-1 Certificate, Downgraded to B2 (sf); previously on Jun 2,
2015 Downgraded to B1 (sf)
Cl. 4-A-1 Certificate, Downgraded to B2 (sf); previously on Jun 2,
2015 Downgraded to B1 (sf)
Cl. 15-PO Certificate, Downgraded to B2 (sf); previously on Aug 21,
2014 Downgraded to B1 (sf)
Cl. 15-IO Certificate, Downgraded to B2 (sf); previously on Jun 2,
2015 Downgraded to B1 (sf)
Issuer: Bear Stearns ALT-A Trust 2004-1
Cl. I-A-1 Certificate, Upgraded to Ba1 (sf); previously on Apr 17,
2012 Downgraded to Ba3 (sf)
Cl. I-A-2 Certificate, Upgraded to Ba1 (sf); previously on Apr 17,
2012 Downgraded to Ba3 (sf)
Cl. V-A-1 Certificate, Upgraded to Ba1 (sf); previously on Apr 17,
2012 Downgraded to Ba3 (sf)
Cl. M Certificate, Upgraded to Caa1 (sf); previously on Mar 21,
2016 Upgraded to Caa3 (sf)
Issuer: Bear Stearns ALT-A Trust 2004-4
Cl. A-1 Certificate, Upgraded to A1 (sf); previously on Mar 21,
2016 Upgraded to Baa1 (sf)
Cl. M-1 Certificate, Upgraded to B1 (sf); previously on Mar 21,
2016 Upgraded to Caa1 (sf)
Issuer: Bear Stearns Asset-Backed Securities Trust 2003-AC3
Cl. B-1 Certificate, Upgraded to Ba3 (sf); previously on Mar 21,
2016 Upgraded to B1 (sf)
Cl. M-2 Certificate, Upgraded to Ba2 (sf); previously on Mar 21,
2016 Upgraded to Ba3 (sf)
Cl. M-3 Certificate, Upgraded to Ba2 (sf); previously on Mar 21,
2016 Upgraded to Ba3 (sf)
Issuer: Deutsche Mortgage Securities, Inc. Mortgage Loan Loan
Trust, Series 2004-2
Cl. A-5 Certificate, Upgraded to A2 (sf); previously on Mar 9, 2016
Upgraded to Baa1 (sf)
Cl. A-6 Certificate, Upgraded to A1 (sf); previously on Mar 9, 2016
Upgraded to A3 (sf)
Issuer: Impac CMB Trust Series 2004-11 Collateralized Asset-Backed
Bonds, Series 2004-11
Cl. 2-A-1 Notes, Upgraded to Caa1 (sf); previously on Aug 12, 2013
Confirmed at Caa2 (sf)
Cl. 2-A-2 Notes, Upgraded to Caa3 (sf); previously on Mar 30, 2011
Downgraded to Ca (sf)
Issuer: Impac CMB Trust Series 2004-9 Collateralized Asset-Backed
Bonds, Series 2004-9
Cl. 1-A-2, Upgraded to B2 (sf); previously on Mar 9, 2016 Upgraded
to Caa1 (sf)
Cl. 2-A, Upgraded to B2 (sf); previously on Sep 19, 2013 Confirmed
at Caa1 (sf)
Underlying Rating: Upgraded to B2 (sf); previously on Sep 19, 2013
Confirmed at Caa1 (sf)
Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
Issuer: RALI Series 2003-QS9 Trust
Cl. A-1 Certificate, Downgraded to B2 (sf); previously on Nov 11,
2013 Downgraded to Ba2 (sf)
Cl. A-2 Certificate, Downgraded to B2 (sf); previously on Nov 11,
2013 Downgraded to Ba2 (sf)
Cl. A-3 Certificate, Downgraded to B2 (sf); previously on Nov 11,
2013 Downgraded to Ba2 (sf)
Cl. A-P Certificate, Downgraded to B2 (sf); previously on Nov 11,
2013 Downgraded to Ba2 (sf)
Cl. A-V Certificate, Downgraded to B2 (sf); previously on Apr 18,
2012 Confirmed at Ba3 (sf)
RATINGS RATIONALE
The rating actions are a result of the recent performance of the
underlying pools and reflect Moody's updated loss expectation on
the pools. The rating upgrades are a result of the improving
performance of the related pools and / or an increase in credit
enhancement available to the bonds. The rating downgrades are due
to the weaker performance of the underlying collateral and / or the
erosion of enhancement available to the bonds.
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in November 2013.
The methodology used in rating the interest-only securities was
"Moody's Approach to Rating Structured Finance Interest-Only
Securities" published in October 2015
Factors that would lead to an upgrade or downgrade of the ratings:
Ratings in the US RMBS sector remain exposed to the high level of
macroeconomic uncertainty, and in particular the unemployment rate.
The unemployment rate fell to 4.7% in December 2016 from 5.0% in
December 2015. Moody's forecasts an unemployment central range of
4.5% to 5.5% for the 2017 year. Deviations from this central
scenario could lead to rating actions in the sector.
House prices are another key driver of US RMBS performance. Moody's
expects house prices to continue to rise in 2017. Lower increases
than Moody's expects or decreases could lead to negative rating
actions.
Finally, 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.
[*] Moody's Takes Action on $18.4MM of RMBS Issued 2004-2005
------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of three
tranches and downgraded the ratings of three tranches from four
transactions backed by Prime Jumbo RMBS loans, issued by
miscellaneous issuers.
Complete rating actions:
Issuer: Citigroup Mortgage Loan Trust, Series 2004-HYB3
Cl. II-A, Upgraded to Baa3 (sf); previously on May 2, 2011
Downgraded to Ba1 (sf)
Issuer: GMACM Mortgage Loan Trust 2004-AR2
Cl. 5-A-I, Upgraded to Ba1 (sf); previously on Dec 4, 2012
Downgraded to Ba2 (sf)
Cl. 5-A-II, Upgraded to B3 (sf); previously on Dec 4, 2012
Downgraded to Caa2 (sf)
Issuer: RFMSI Series 2005-SA1 Trust
Cl. I-A-1, Downgraded to Caa2 (sf); previously on Jul 11, 2013
Upgraded to Caa1 (sf)
Cl. I-A-2, Downgraded to Caa1 (sf); previously on Jun 2, 2016
Upgraded to Ba3 (sf)
Issuer: Wells Fargo Mortgage Backed Securities 2004-A Trust
Cl. B-1, Downgraded to B3 (sf); previously on Apr 10, 2012
Downgraded to B1 (sf)
RATINGS RATIONALE
The upgrade actions on GMACM Mortgage Loan Trust 2004-AR2 Class
5-A-I and Class 5-A-II are primarily a result of an increase in
credit enhancement available to the bonds; Class 5-A-I also
benefits from additional support from Class 5-A-II. The downgrade
action on Wells Fargo Mortgage Backed Securities 2004-A Trust Class
B-1 is primarily due to an increase in Moody's loss expectations on
the pool owing to a rise in the balance of loans delinquent for 60
days or more.
The rating actions on Citigroup Mortgage Loan Trust, Series
2004-HYB3 and RFMSI Series 2005-SA1 Trust reflect corrections to
the cash-flow models used by Moody's in rating these transactions.
In a prior rating action on Citigroup Mortgage Loan Trust, Series
2004-HYB3, the senior prepayment lockout period, which should be 11
years, was modeled as 10 years. The correction of this error had no
impact on the ratings of the transaction. The upgrade rating action
on Class II-A is due to an increase in credit enhancement available
to the bonds.
The downgrade actions on Class 1-A-1 and Class 1-A-2 from RFMSI
Series 2005-SA1 Trust are primarily due to error correction. The
senior classes of under-collateralized groups in this transaction
should not receive available principal distribution amounts
otherwise allocated to subordinate classes of other
over-collateralized groups, but Moody's previous modeling of such
classes mistakenly reflected benefit from transferred principal
amounts. This error has now been corrected, and rating actions
reflect this change as well as erosion of credit enhancement
available to the bonds.
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in November 2013.
Factors that would lead to an upgrade or downgrade of the ratings:
Ratings in the US RMBS sector remain exposed to the high level of
macroeconomic uncertainty, and in particular the unemployment rate.
The unemployment rate fell to 4.7% in December 2016 from 5.0% in
December 2015. Moody's forecasts an unemployment central range of
4.5% to 5.5% for the 2017 year. Deviations from this central
scenario could lead to rating actions in the sector.
House prices are another key driver of US RMBS performance. Moody's
expects house prices to continue to rise in 2017. Lower increases
than Moody's expects or decreases could lead to negative rating
actions.
Finally, 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.
[*] Moody's Ups $116MM of Alt-A & Option ARM RMBS Issued 2003-2005
------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of ten tranches
from four transactions, backed by Alt-A and Option ARM mortgage
loans, issued by Impac and SAMI.
Complete rating actions are:
Issuer: Impac CMB Trust Series 2003-4
Cl. 3-A-1 Bond, Upgraded to A3 (sf); previously on Mar 15, 2016
Upgraded to Baa1 (sf)
Cl. 3-M-1 Bond, Upgraded to Baa2 (sf); previously on Mar 15, 2016
Upgraded to Baa3 (sf)
Cl. 3-M-2 Bond, Upgraded to Ba3 (sf); previously on Mar 15, 2016
Upgraded to B3 (sf)
3-B-1 Bond, Upgraded to B2 (sf); previously on Mar 15, 2016
Upgraded to Caa2 (sf)
Issuer: Impac CMB Trust Series 2004-6 Collateralized Asset-Backed
Bonds, Series 2004-6
Cl. 1-A-1 Notes, Upgraded to Baa1 (sf); previously on Mar 15, 2016
Upgraded to Baa3 (sf)
Cl. 1-A-2 Notes, Upgraded to A2 (sf); previously on Sep 19, 2013
Confirmed at Baa1 (sf)
Cl. 1-A-3 Notes, Upgraded to Ba1 (sf); previously on Sep 19, 2013
Confirmed at Ba3 (sf)
Issuer: Structured Asset Mortgage Investments II Trust 2005-AR1
Cl. A-1 Certificate, Upgraded to Baa3 (sf); previously on Dec 6,
2011 Downgraded to Ba2 (sf)
Cl. M Certificate, Upgraded to Caa1 (sf); previously on Mar 13,
2015 Upgraded to Caa3 (sf)
Issuer: Structured Asset Mortgage Investments II Trust 2005-AR6
Cl. I-A-1 Certificate, Upgraded to Ba1 (sf); previously on Jun 28,
2016 Upgraded to Ba3 (sf)
RATINGS RATIONALE
The actions reflect the recent performance of the underlying pools
and Moody's updated loss expectation on these pools. The rating
upgrades are due to the stable to improved collateral performance
of the related underlying pools and the credit enhancement
available to the bonds.
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in November 2013.
Factors that would lead to an upgrade or downgrade of the ratings:
Ratings in the US RMBS sector remain exposed to the high level of
macroeconomic uncertainty, and in particular the unemployment rate.
The unemployment rate fell to 4.7% in December 2016 from 5.0% in
December 2015. Moody's forecasts an unemployment central range of
4.5% to 5.5% for the 2017 year. Deviations from this central
scenario could lead to rating actions in the sector.
House prices are another key driver of US RMBS performance. Moody's
expects house prices to continue to rise in 2017. Lower increases
than Moody's expects or decreases could lead to negative rating
actions.
Finally, 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.
[*] S&P Completes Review on 118 Classes From 22 RMBS Deals
----------------------------------------------------------
S&P Global Ratings completed its review of 118 classes from 22 U.S.
residential mortgage-backed securities (RMBS) transactions issued
between 2002 and 2005. The review yielded 33 upgrades, 25
downgrades, 54 affirmations, and six discontinuances. The
transactions in this review are backed by a mix of fixed- and
adjustable-rate mixed collateral mortgage loans, which are secured
primarily by first liens on one- to four-family residential
properties.
With respect to insured obligations, where S&P maintains a rating
on the bond insurer that is lower than what it would rate the class
without bond insurance, or where the bond insurer is not rated, we
relied solely on the underlying collateral's credit quality and the
transaction structure to derive the rating on the class. The
rating on a bond-insured obligation will be the higher of the
rating on the bond insurer and the rating of the underlying
obligation, without considering the potential credit enhancement
from the bond insurance.
Classes A-1 and A-NA from Chevy Chase Funding LLC's series 2005-B
were insured by a rated insurance provider, AMBAC Assurance Corp.,
when the deal was originated, but S&P Global Ratings has since
withdrawn its rating on the insurance provider of these classes.
The affirmations on class X from Freddie Mac Securities REMIC Trust
2005-S001 at 'AA+ (sf)' and on class 15-AX from MASTR Alternative
Loan Trust 2004-1 at 'AA (sf)' reflect the application of our
interest-only (IO) criteria. These criteria provide that S&P will
maintain the current ratings on an IO class until all of the
classes that the IO security references are either lowered to below
'AA- (sf)' or have been retired, at which time S&P will withdraw
its ratings on these IO classes. The ratings on these classes have
been affected by recent rating actions on the reference classes,
upon which their notional balances are based.
A criteria interpretation for the above-mentioned criteria was
issued to clarify that when the criteria state "we will maintain
the current ratings," we will maintain active surveillance of these
IO classes using the methodology applied before the release of this
criteria.
ANALYSIS
Analytical Considerations
S&P incorporates various considerations into its decisions to
raise, lower, or affirm ratings when reviewing the indicative
ratings suggested by S&P's projected cash flows. These
considerations are based on transaction-specific performance or
structural characteristics (or both) and their potential
effects on certain classes.
UPGRADES
The upgrades include 11 ratings that were raised three or more
notches and 22 ratings that were raised by one or two notches.
S&P's projected credit support for the affected classes is
sufficient to cover its projected losses for these rating levels.
The upgrades reflect one or more of:
-- Improved collateral performance/severe delinquency trends
(greater than 90 days delinquent, including foreclosures and
real estate-owned assets); and/or
-- Increased credit support (subordination, excess spread, or
overcollateralization, where applicable) relative to S&P's
projected losses.
Of the 11 upgrades that were raised three or more notches, the
raised ratings on classes I-A-1, I-A-2, and I-A-3 from Bear Stearns
ALT-A Trust 2004-2 and class 1-A-1 from Structured Asset Mortgage
Investments II Trust 2005 AR6 reflect a decrease in S&P's projected
losses for the related transactions. S&P has decreased its
projected losses because there have been fewer reported severe
delinquencies during the most recent performance periods compared
with those reported during the previous review dates. Group one
severe delinquencies from Bear Stearns ALT-A Trust 2004-2 decreased
to 0.0% as of November 2016 from 39.1% as of October 2015. Group I
severe delinquencies from Structured Asset Mortgage Investments II
Trust 2005 AR6 decreased to 6.7% as of November 2016 from 19.5% as
of September 2015.
The remaining seven classes that were raised three or more notches
were because the classes experienced increased credit support:
-- S&P raised its rating on class M-2 from GSAA Home Equity
Trust 2004-4 to 'BB+ (sf)' from 'B+ (sf)' because credit
support increased to 17.1% as of November 2016 from 12.0% as
of March 2014;
-- S&P raised its rating on class 1-A-1 from Impac CMB Trust
2004-5 to 'A- (sf)' from 'BBB- (sf)' because credit support
increased to 26.6% as of November 2016 from 22.7% as of
December 2013;
-- S&P raised its rating on class 1-M-1 from Morgan Stanley
Mortgage Loan Trust 2005-5AR to 'A+ (sf)' from 'BB+ (sf)'
because credit support increased to 44.7% as of December
2016 from 34.3% as of August 2015;
-- S&P raised its rating on class 1-M-2 from Morgan Stanley
Mortgage Loan Trust 2005-5AR to 'A (sf)' from 'BB- (sf)'
because credit support increased to 34.6% as of December
2016 from 26.5% as of August 2015;
-- S&P raised its rating on class 1-M-3 from Morgan Stanley
Mortgage Loan Trust 2005-5AR to 'BBB+ (sf)' from 'B+ (sf)'
because credit support increased to 28.3% as of December
2016 from 21.6% as of August 2015;
-- S&P raised its rating on class 1-M-4 from Morgan Stanley
Mortgage Loan Trust 2005-5AR to 'BBB- (sf)' from 'B- (sf)'
because its credit support increased to 23.5% as of December
2016 from 18.0% as of August 2015; and
-- S&P raised its rating on class 1-M-5 from Morgan Stanley
Mortgage Loan Trust 2005-5AR to 'BB (sf)' from 'CCC (sf)'
because credit support increased to 19.3% as of December
2016 from 14.7% as of August 2015.
S&P also raised its ratings on classes 1-M-4, 1-M-5, and 1-M-6 from
Impac CMB Trust 2004-5 to 'B (sf)', 'B- (sf)', and 'B- (sf)',
respectively, from 'CCC (sf)' and on class 1-M-6 from Morgan
Stanley Mortgage Loan Trust 2005-5AR to 'B (sf)' from 'CCC (sf)'
because these classes experienced increased credit support, and S&P
believes these classes are no longer vulnerable to default.
In addition, S&P raised its ratings on class M-3 from GSAA Home
Equity Trust 2004-4, class 1-M-1 from Impac CMB Trust Series
2005-4, and classes 1-B-1 and 1-B-2 from Morgan Stanley Mortgage
Loan Trust 2005-5AR to 'CCC (sf)' from 'CC (sf)' because S&P
believes these classes are no longer virtually certain to default,
primarily owing to the improved performance of the collateral
backing these transactions. However, the 'CCC (sf)' ratings
indicate that S&P believes its projected credit support will remain
insufficient to cover its projected losses for these classes and
that the classes are still vulnerable to defaulting.
DOWNGRADES
Of the 25 downgrades, 15 classes were lowered by three or more
notches. S&P lowered its rating on nine classes to
speculative-grade ('BB+' or lower) from investment-grade ('BBB-' or
higher). All were lowered to the 'BB (sf)' rating category from the
'BBB (sf)' rating category. Another seven ratings remained at an
investment-grade level, while the remaining nine downgraded classes
already had speculative-grade ratings. The downgrades reflect
S&P's belief that its projected credit support for the affected
classes will be insufficient to cover its projected losses for the
related transactions at a higher rating.
The downgrades reflect one or more of:
-- Deteriorated credit performance trends;
-- Eroded credit support;
-- Declining constant prepayment rates;
-- Tail risk; and/or
-- S&P's principal-only criteria.
S&P lowered the ratings on classes 2-A-1 and 2-A-2 from Banc of
America Alternative Loan Trust 2004-7 to 'BBB (sf)' from
'AA- (sf)' after structure delinquency triggers began passing in
July 2016. This has led to an increased portion of unscheduled
principal to be paid to subordinate classes, causing eroded credit
support to the senior classes in this transaction.
The lowered ratings on class II-A from Citigroup Mortgage Loan
Trust Series 2004-HYB2 and class II-B-1 from WaMu Mortgage
Pass-Through Certificates Series 2002-AR9 Trust reflect the
increase in our projected losses because of higher reported
delinquencies during the most recent performance periods compared
with those reported during the previous review dates. Group two
severe delinquencies from Citigroup Mortgage Loan Trust Series
2004-HYB2 increased to 12.4% as of December 2016 from 6.5% as of
February 2016, while group three severe delinquencies from WaMu
Mortgage Pass-Through Certificates Series 2002-AR9 Trust increased
to 12.3% from 10.5%, over the same period.
Tail Risk
Citigroup Mortgage Loan Trust 2003-HYB1 and WaMu Mortgage
Pass-Through Certificates Series 2002-AR9 Trust are backed by a
small remaining pool of mortgage loans. S&P believes that pools
with less than 100 loans remaining create an increased risk of
credit instability because a liquidation and subsequent loss on one
loan, or a small number of loans, at the tail end of a
transaction's life may have a disproportionate impact on a given
RMBS tranche's remaining credit support. S&P refers to this as
"tail risk."
S&P addressed the tail risk on the classes in this review by
conducting a loan-level analysis that assesses this risk, as set
forth in S&P's tail risk criteria. Therefore, S&P lowered its
ratings on class A from Citigroup Mortgage Loan Trust 2003-HYB1 to
'BB+ (sf)' from 'BBB+ (sf)' and on class I-A from WaMu Mortgage
Pass-Through Certificates Series 2002-AR9 Trust to 'BBB+ (sf)' from
'AA- (sf)' by conducting a loan-level analysis that assesses this
risk, as set forth in S&P's tail risk criteria. The rating actions
on these classes reflect the application of S&P's tail risk
criteria.
AFFIRMATIONS
The affirmations of ratings in the 'AAA' through 'B' rating
categories reflect S&P's opinion that its projected credit support
on these classes remained relatively consistent with S&P's prior
projections and is sufficient to cover its projected losses for
those rating scenarios.
The ratings affirmed at 'CCC (sf)' or 'CC (sf)' reflect S&P's
belief that its projected credit support will remain insufficient
to cover S&P's 'B' expected case projected losses for these
classes. Per "Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And
'CC' Ratings," published Oct. 1, 2012, the 'CCC (sf)' affirmations
reflect S&P's view that these classes are still vulnerable to
defaulting, and the 'CC (sf)' affirmations reflect S&P's view that
these classes remain virtually certain to default.
DISCONTINUANCES
S&P discontinued its 'D (sf)' ratings on six classes with zero
balances. These classes have been written down to zero as a result
of realized losses that remain outstanding. S&P discontinued these
ratings according to its surveillance and withdrawal policy because
S&P views a subsequent upgrade to a rating higher than 'D (sf)' to
be unlikely under the relevant criteria.
ECONOMIC OUTLOOK
When determining a U.S. RMBS collateral pool's relative credit
quality, S&P's loss expectations stem, to a certain extent, from
its view of how the loans will behave under various economic
conditions. S&P Global Ratings' baseline macroeconomic outlook
assumptions for variables that it believes could affect residential
mortgage performance are:
-- An overall unemployment rate of 4.9 % in 2016, dipping to
4.6% in 2017;
-- Real GDP growth of 1.6 % for 2016 and 2.4% in 2017;
-- The inflation rate will be 2.2% in both 2016 and 2017; and
-- The 30-year fixed mortgage rate will average about 3.6% in
2016, rising to 4.1% in 2017.
S&P's outlook for RMBS is stable. Although S&P views overall
housing fundamentals positively, it believes RMBS fundamentals
still hinge on additional factors, such as the ultimate fate of
modified loans, the propensity of servicers to advance on
delinquent loans, and liquidation timelines.
Under S&P's baseline economic assumptions, it expects RMBS
collateral quality to improve. However, if the U.S. economy were
to become stressed in line with S&P Global Ratings' downside
forecast, S&P believes that U.S. RMBS credit quality would weaken.
S&P's downside scenario reflects these key assumptions:
-- The unemployment rate will remain at 4.9% for 2016 and inch
up to 5.0% in 2017;
-- Downward pressure causes GDP growth to fall to 1.5% in 2016
and to 1.4% in 2017;
-- Home price momentum slows as potential buyers are not able
to purchase property; and
-- While the 30-year fixed mortgage rate remains a low 3.6% in
2016 and 2017, limited access to credit and pressure on home
prices will largely prevent consumers from capitalizing on
these rates.
[*] S&P Completes Review on 22 Classes From 12 RMBS Deals
---------------------------------------------------------
S&P Global Ratings completed its review of 22 classes from 12 U.S.
residential mortgage-backed securities (RMBS) transactions issued
between 2002 and 2005. The review yielded 15 downgrades and one
affirmation. S&P also removed the one affirmed rating as well as
five of the lowered ratings from CreditWatch with negative
implications, where they were placed on Dec. 14, 2016. The
downgrades stem from applying S&P's interest shortfall criteria.
S&P also placed six ratings on CreditWatch with negative
implications. The CreditWatch placements reflect that the trustee
reports cited interest shortfalls on the affected classes in recent
remittance periods, which could negatively affect S&P's ratings on
those classes. After verifying these possible interest shortfalls,
S&P will adjust the ratings as it considers appropriate pursuant to
our criteria.
All of the transactions in this review are backed by a mix of
fixed- and adjustable-rate mortgage loans secured primarily by one-
to four-family residential properties.
A combination of subordination, overcollateralization (when
available), excess interest, and bond insurance (as applicable)
provide credit enhancement for all of the tranches in this review.
APPLICATION OF INTEREST SHORTFALL CRITERIA
In reviewing these ratings, S&P applied its interest shortfall
criteria "Structured Finance Temporary Interest Shortfall
Methodology," published Dec. 15, 2015, which impose a maximum
rating threshold on classes that have incurred interest shortfalls
resulting from credit or liquidity erosion. In applying the
criteria, S&P looked to see if the applicable class received
additional compensation beyond the imputed interest due as direct
economic compensation for the delay in interest payment. In
instances where the class did not receive additional compensation
for outstanding interest shortfalls, S&P used the maximum length of
time until full interest is reimbursed as part of S&P's analysis to
assign the rating on the class.
In instances where the class received additional compensation for
outstanding interest shortfalls, S&P used its cash flow projections
in determining the likelihood that the shortfall would be
reimbursed under various scenarios.
DOWNGRADES
The downgrades include seven ratings that were lowered three or
more notches. One of the lowered ratings remained at an
investment-grade level, two of the lowered ratings went from
investment-grade to speculative-grade, and the remaining 12
downgraded classes already had speculative-grade ratings. Five of
the ratings lowered three or more notches received additional
compensation for outstanding interest shortfalls. For these
classes S&P projected the transactions' cash flows to assess the
likelihood of the interest shortfalls' reimbursement.
S&P lowered its ratings on class 5-A-1 to 'D (sf)' from
'BBB- (sf)' and class 6-A-1 to 'A- (sf)' from 'AA (sf)' from MASTR
Adjustable Rate Mortgages Trust 2003-6 and removed them from
CreditWatch negative based on the maximum length of time until full
interest is reimbursed, as these classes did not receive additional
compensation for outstanding interest shortfalls. The non de
minimis interest shortfalls have been outstanding for classes 5-A-1
and 6-A-1 for 13 months and four months, respectively.
S&P lowered its ratings on class M4 to 'B- (sf)' from 'BB+ (sf)'
from Asset Backed Securities Corp. Home Equity Loan Trust Series
2005-HE3, on classes M-3 and M-4 to 'CCC (sf)' from 'BB (sf)' and
on class B-1 to 'CCC (sf)' from 'BB- (sf)' from GSAA Home Equity
Trust 2005-5, and on class M-1 to 'BB+ (sf)' from 'AA (sf)' from
Bear Stearns Asset Backed Securities I Trust 2005-FR1 based on
S&P's cash flow projections used in determining the likelihood that
the shortfall would be reimbursed under various scenarios, as these
classes received additional compensation for outstanding interest
shortfalls.
AFFIRMATIONS
S&P affirmed its 'A+ (sf)' rating on class M3 from Asset Backed
Securities Corp. Home Equity Loan Trust Series 2005-HE3 and removed
it from CreditWatch negative after we received information to
assess the impact of interest shortfalls on that class. Based on
S&P's assessment, the current rating on this class reflects the
impact of the interest shortfalls incurred by it.
ECONOMIC OUTLOOK
When determining a U.S. RMBS collateral pool's relative credit
quality, S&P's loss expectations stem, to a certain extent, from
its view of how the loans will behave under various economic
conditions. S&P Global Ratings' baseline macroeconomic outlook
assumptions for variables that it believes could affect residential
mortgage performance are:
-- An overall unemployment rate of 4.9 % in 2016, dipping to
4.6% in 2017;
-- Real GDP growth of 1.6 % for 2016 and 2.4% in 2017;
-- The inflation rate will be 2.2% in both 2016 and 2017; and
-- The 30-year fixed mortgage rate will average about 3.6 % in
2016, rising to 4.1% in 2017.
S&P's outlook for RMBS is stable. Although S&P views overall
housing fundamentals positively, it believes RMBS fundamentals
still hinge on additional factors, such as the ultimate fate of
modified loans, the propensity of servicers to advance on
delinquent loans, and liquidation timelines.
Under S&P's baseline economic assumptions, it expects RMBS
collateral quality to improve. However, if the U.S. economy were
to become stressed in line with S&P Global Ratings' downside
forecast, S&P believes that U.S. RMBS credit quality would weaken.
S&P's downside scenario reflects these key assumptions:
-- The unemployment rate will remain at 4.9% for 2016 and inch
up to 5.0% in 2017;
-- Downward pressure causes GDP growth to fall to 1.5 % in 2016
and to 1.4% in 2017;
-- Home price momentum slows as potential buyers are not able
to purchase property; and
-- While the 30-year fixed mortgage rate remains a low 3.6% in
2016 and 2017, limited access to credit and pressure on home
prices will largely prevent consumers from capitalizing on
these rates.
A list of the Affected Ratings is available at:
http://bit.ly/2kti3Av
*********
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