/raid1/www/Hosts/bankrupt/TCR_Public/170305.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, March 5, 2017, Vol. 21, No. 63
Headlines
ACIS CLO 2017-7: Moody's Assigns (P)Ba3 Rating to Class E Notes
ARES CLO XXXI: Fitch Assigns 'BBsf' Rating to Class D Notes
ARES XXIX: Moody's Affirms B2(sf) Rating on Class E Notes
BABSON CLO 2013-II: S&P Affirms 'B' Rating on Class E Notes
BANK OF AMERICA 2017-BNK3: DBRS Finalizes B Ratings on Class F Debt
BARCLAYS BANK 2017-C1: Fitch Assigns 'B-sf' Rating on 2 Tranches
CAPITAL TRUST 2005-1: Fitch Affirms 'Dsf' Rating on Class C Debt
CARLYLE GLOBAL 2014-4: Moody's Affirms B3 Rating on Cl. F Notes
CITIGROUP 2015-RP2: Moody's Ups Rating on Cl. B-3 Debt to Ba2
CITIGROUP MORTGAGE 2014-A: S&P Affirms 'B' Rating on Class B4 Debt
CMAC 1998-C1: Moody's Affirms C Rating on Class M Debt
COMM 2012-CCRE1: Fitch Affirms 'Bsf' Rating on Cl. G Certs.
DT AUTO 2017-1: DBRS Finalizes Prov. BB Ratings on Class E Debt
FIRST INVESTORS 2017-1: S&P Assigns BB- Rating on Class E Notes
GALAXY XXIII: S&P Assigns Prelim. BB- Rating on Class E Notes
GALTON FUNDING 2017-1: Moody's Gives (P)B2 Rating to Class B5 Debt
GMAC COMMERCIAL 2002-C3: Fitch Affirms CCCsf Rating on Cl. K Debt
GOLDENTREE LOAN VII: Moody's Affirms B2 Rating on Class F Notes
GRAMERCY REAL 2005-1: Moody's Hikes Class H Notes Rating to B2
GRAMERCY REAL 2007-1: Fitch Lowers Ratings on 14 Classes to 'Dsf'
GS MORTGAGE 2017-GS5: Fitch to Rate Class F Notes 'B-sf'
JFIN CLO 2012: S&P Affirms 'BB' Rating on Class D Notes
JFIN CLO 2017: Moody's Assigns Ba3 Rating to Class E Secured Notes
JP MORGAN 2003-ML1: Moody's Affirms C(sf) Rating on Class N Debt
JP MORGAN 2004-C3: Fitch Affirms CCC Rating on Class G Debt
JP MORGAN 2005-LDP5: Fitch Affirms 'B-sf' Rating on Cl. G Debt
JP MORGAN 2007-CIBC19: Moody's Lowers Rating on 2 Tranches to C
JP MORGAN 2017-1: Fitch Assigns 'Bsf' Rating to Cl. B-5 Debt
JP MORGAN 2017-1: Moody's Assigns Ba3 Rating to Cl. B-5 Debt
LCCM TRUST 2014-909: DBRS Confirms BB Rating on Class E Debt
LIMEROCK CLO III: Moody's Affirms Ba3 Rating on $31MM Cl. D Notes
LNR CDO 2002-1: S&P Lowers Rating on 5 Tranches to 'D'
MCF CLO V: S&P Assigns Preliminary BB- Rating on Class E Notes
ML-CFC COMMERCIAL 2007-9: S&P Cuts Rating on 2 Tranches to D
MORGAN STANLEY 2006-IQ11: Fitch Affirms Dsf Rating on 6 Tranches
MORGAN STANLEY 2011-C2: Fitch Affirms 'B-sf' Rating on H Certs
MORGAN STANLEY 2017-PRM: DBRS Finalizes (P)BB Rating on Cl. E Certs
NATIONAL COLLEGIATE 2006-4: Moody's Ups Cl. A-4 Debt Rating to Caa1
NELDER GROVE: Moody's Assigns Ba3 Rating to Class E-R Sr. Notes
OLDENTREE LOAN VII: Moody's Hikes Rating on Class F Notes to B2
ONE MARKET 2017-1MKT: S&P Assigns 'B-' Rating on 2 Tranches
SBL 2016-KIND: Moody's Affirms Caa2 Rating on Class G Debt
SC EQUIPMENT 2017-1: Moody's Assigns B3(sf) Rating to Cl. D Debt
SDART 2017-1: Moody's Assigns Ba3 Rating Class E Notes
SDART 2017-1: S&P Assigns 'BB' Rating on Class E Notes
SLM STUDENT 2003-1: Fitch Corrects Jan. 27 Ratings Release
STACR 2017-HQA1: Fitch Rates 12 Note Classes at 'Bsf'
STACR 2017-HQA1: Moody's Assigns B2(sf) Rating to Class M-2 Notes
STEELE CREEK 2014-1: Moody's Rates Class E-2-R Notes 'Ba3(sf)'
TOWD POINT 2017-1: Fitch Assigns 'Bsf' Rating to Class B2 Notes
TOWD POINT 2017-1: Moody's Assigns Def. Ba2 Rating to Cl. B1 Debt
VENTURE XII CLO: S&P Assigns 'BB' Rating on Cl. E-R Notes
WELLS FARGO 2017-RC1: S&P Gives Prelim. BB- Rating on Cl. X-E Certs
WOODMONT TRUST 2017-1: S&P Assigns BB Rating on Class E Notes
[*] Fitch Takes Various Rating on 15 SF CDOs Issued 2001-2005
[*] Moody's Hikes $20.5MM of Resecuritized RMBS Issued 2004 & 2006
[*] Moody's Hikes $497MM of Subprime RMBS Issued 2003-2006
[*] Moody's Hikes $83.8MM of ARM RMBS Issued from 2002-2005
[*] Moody's Takes Action on $230.7MM of ARM Debt Issued 2005-2007
[*] Moody's Takes Action on $464MM of RMBS Issued From 2005
[*] Moody's Takes Action on $58.7MM of RMBS Issued 2001-2006
[*] S&P Completes Review on 37 Classes From 8 US RMBS Deals
[*] S&P Completes Review on 52 Classes From 9 RMBS Deals
[*] S&P Completes Review on 64 Classes From 10 RMBS Deals
[*] S&P Completes Review on 70 Classes From 18 US RMBS Deals
[*] S&P Discontinues Ratings on 70 Classes From 26 CDO Deals
*********
ACIS CLO 2017-7: 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 ACIS CLO 2017-7 Ltd.
Moody's rating action is:
US$260,750,000 Class A Senior Secured Floating Rate Notes due 2029
(the "Class A Notes"), Assigned (P)Aaa (sf)
US$50,250,000 Class B Senior Secured Floating Rate Notes due 2029
(the "Class B Notes"), Assigned (P)Aa2 (sf)
US$20,250,000 Class C Secured Deferrable Floating Rate Notes due
2029 (the "Class C Notes"), Assigned (P)A2 (sf)
US$26,250,000 Class D Secured Deferrable Floating Rate Notes due
2029 (the "Class D Notes"), Assigned (P)Baa3 (sf)
US$14,500,000 Class E 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.
ACIS 2017-7 is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated first lien senior
secured corporate loans. At least 95% of the portfolio must consist
of senior secured Loans, cash and eligible investments, and up to
5% of the portfolio may consist of second lien loans. Moody's
expects the portfolio to be approximately 100% ramped as of the
closing date.
Acis CLO Management, LLC (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 two year reinvestment period.
Following the end of the reinvestment period, the Manager may not
reinvest any principal proceeds.
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: 65
Weighted Average Rating Factor (WARF): 2650
Weighted Average Spread (WAS): 3.75%
Weighted Average Coupon (WAC): 7.00%
Weighted Average Recovery Rate (WARR): 47.5%
Weighted Average Life (WAL): 6.25 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 2650 to 3048)
Rating Impact in Rating Notches
Class A Notes: 0
Class B Notes: -1
Class C Notes: -2
Class D Notes: -1
Class E Notes: -1
Percentage Change in WARF -- increase of 30% (from 2650 to 3445)
Rating Impact in Rating Notches
Class A Notes: 0
Class B Notes: -3
Class C Notes: -3
Class D Notes: -2
Class E Notes: -1
ARES CLO XXXI: Fitch Assigns 'BBsf' Rating to Class D Notes
-----------------------------------------------------------
Fitch Ratings has assigned the following ratings to the refinancing
notes issued by Ares XXXI CLO Ltd./LLC:
-- $759,900,000 Class A-1-R notes 'AAAsf'; Outlook Stable;
-- $136,900,000 Class A-2-R notes 'AAsf'; Outlook Stable.
Fitch has also affirmed the ratings on the following classes:
-- $75,700,000 Class B notes at 'Asf'; Outlook Stable;
-- $46,250,000 Class C notes at 'BBBsf'; Outlook Stable;
-- $57,500,000 Class D notes at 'BBsf'; Outlook Stable.
The class A-1 and A-2 notes will be marked 'PIF.'
Fitch does not rate the subordinated notes.
TRANSACTION SUMMARY
Ares XXXI CLO Ltd./LLC issued class A-1-R and A-2-R
notes(collectively, the refinancing notes) and applied the net
issuance proceeds thereof to redeem the class A-1 and A-2 notes at
par plus accrued interest on the refinancing date of Feb. 28, 2017.
The class B, C, D and subordinated notes were not refinanced. Fitch
originally rated the class A-1, A-2, B, C and D notes.
The refinancing notes generally have the same terms as the
previously outstanding classes except that the stated coupons have
changed and the refinancing notes may not be subsequently
refinanced. Spreads over LIBOR on the class A-1-R and A-2-R notes
were reduced to 1.18% and 1.55%, respectively, from 1.44% and
1.95%, respectively.
KEY RATING DRIVERS
The reduction in the cost of the liabilities is viewed as credit
positive, and no other material changes were made to the capital
structure as a result of the refinancing. The transaction remains
in its reinvestment period (ending August 2018) and continues to
display stable performance since Fitch's last review in July 2016.
All coverage tests continue to pass; the rating default rate (RDR)
and rating loss rate (RLR) for the current portfolio, plus losses
to date, remain lower than the RDR and RLR modelled for the Fitch
stressed portfolio at close. As a result, the modelled Fitch
stressed portfolio at close continues to serve as a proxy, and an
updated cash flow model analysis was not conducted for this rating
action. Fitch has determined that the ratings on the class A-1-R
and A-2-R notes shall be assigned the same ratings as the original
class A-1 ('AAAsf'/Outlook Stable) and A-2 notes ('AAsf'/Outlook
Stable), and that the class B, C and D notes shall be affirmed at
their current rating levels.
The loan portfolio par amount plus principal cash is approximately
$1.24 billion, as of the January 2017 trustee report. All
collateral quality tests, concentration limitations and coverage
tests are in compliance. The current weighted average spread (WAS)
is 3.77% versus a minimum WAS trigger of 3.75%. Fitch currently
considers 7.3% of the collateral assets (excluding cash) to be
rated in the 'CCC' category, based on Fitch's Issuer Default Rating
(IDR) Equivalency Map. The weighted average Fitch rating factor is
32.8 ('B/B-') compared to 32.2 ('B/B-') in the last review.
Additionally, approximately 84.4% of the portfolio has strong
recovery prospects or a Fitch-assigned Recovery Rating of 'RR2' or
higher.
The Stable Outlooks on the class A-1-R, A-2-R, B, C and D notes
reflect the expectation that each class has sufficient levels of
credit protection to withstand potential deterioration in the
credit quality of the portfolio in stress scenarios commensurate
with such class's rating.
RATING SENSITIVITIES
The ratings of the class A-1-R, A-2-R, B, C and D notes may be
sensitive to the following: asset defaults, significant portfolio
credit migration and lower than historically observed recoveries
for defaulted assets. Fitch conducted rating sensitivity analysis
on the original closing date of Ares XXXI CLO Ltd./LLC,
incorporating increased levels of defaults and reduced levels of
recovery rates, among other sensitivities.
ARES XXIX: Moody's Affirms B2(sf) Rating on Class E Notes
---------------------------------------------------------
Moody's Investors Service has upgraded the rating on the following
notes issued by Ares XXIX CLO Ltd.:
US$27,500,000 Class C Mezzanine Deferrable Floating Rate Notes Due
2026, Upgraded to Baa2 (sf); previously on April 3, 2014 Assigned
Baa3 (sf)
Moody's also affirmed the ratings on the following notes:
US$29,400,000 Class D Mezzanine Deferrable Floating Rate Notes Due
2026, Affirmed Ba3 (sf); previously on Apr 3, 2014 Assigned Ba3
(sf)
US$4,750,000 Class E Mezzanine Deferrable Floating Rate Notes Due
2026, Affirmed B2 (sf); previously on April 3, 2014 Assigned B2
(sf)
Ares XXIX CLO Ltd., issued in April 2014, is a collateralized loan
obligation (CLO) backed primarily by a portfolio of senior secured
loans. The transaction's reinvestment period will end in April
2018.
RATINGS RATIONALE
These rating actions are primarily a result of the recent
refinancing of the Class A-1, A-2 and B notes in February 2017,
which increases excess spread available as credit enhancement to
the rated notes. Additionally, Moody's expects the deal to continue
to benefit from a higher weighted average recovery rate (WARR)
compared to its covenant level.
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 commence 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.
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% (2431)
Class C: 3
Class D: 1
Class E: 2
Moody's Adjusted WARF + 20% (3647)
Class C: -2
Class D: -1
Class E: -2
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 $489.5 million, defaulted par of $4.1
million, a weighted average default probability of 24.69% (implying
a WARF of 3039), a weighted average recovery rate upon default of
49.61%, a diversity score of 80 and a weighted average spread of
3.74% (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.
BABSON CLO 2013-II: S&P Affirms 'B' Rating on Class E Notes
-----------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-1-R, A-2-R, and B-R replacement notes from Babson CLO Ltd.
2013-II, a collateralized loan obligation (CLO) originally issued
in 2013 that is managed by Barings LLC (formerly known as Babson
Capital Management LLC). The class C, D, and E notes are not part
of this refinancing, and S&P expects to affirm the current ratings
on the refinancing date.
The preliminary ratings reflect S&P's opinion that the credit
support available is commensurate with the associated rating
levels.
The preliminary ratings are based on information as of Feb. 21,
2017. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the March 2, 2017, refinancing date, the proceeds from the
issuance of the replacement notes are expected to redeem the class
A-1, A-2, B-1, and B-2 notes. At that time, S&P anticipates
withdrawing the ratings on the class A-1, A-2, B-1, and B-2
original notes and assigning ratings to the class A-1-R, A-2-R, and
B-R replacement notes. The class C, D, and E notes are not part of
this refinancing. However, if the refinancing doesn't occur, S&P
may affirm the ratings on the original notes and withdraw our
preliminary ratings on the replacement notes.
The replacement notes are being issued via a proposed supplemental
indenture. Based on the proposed supplemental indenture and the
information provided to S&P Global Ratings in connection with this
review, the replacement notes are expected to be issued at a lower
spread over LIBOR than the corresponding original notes. There is
no proposed change to the reinvestment period duration, which ends
in January 2018, or the transaction's legal final maturity,
scheduled for January 2025.
The supplemental indenture is not expected to make other
substantive changes
to the transaction.
REPLACEMENT AND ORIGINAL NOTE ISSUANCES
Replacement notes
Class Amount Interest
(mil. $) rate (%)
A-1-R 415.00 LIBOR + 1.13
A-2-R 97.00 LIBOR + 1.55
B-R 48.00 LIBOR + 2.25
Original notes
Class Amount Interest
(mil. $) rate (%)
A-1 415.00 LIBOR + 1.48
A-2 97.00 LIBOR + 1.75
B-1 32.00 LIBOR + 2.65
B-2 16.00 5.00
S&P's 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 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 or ultimate
principal, or both, to each of the rated tranches.
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.
PRELIMINARY RATINGS ASSIGNED
Babson CLO Ltd. 2013-II
Replacement class Rating Amount (mil. $)
A-1-R AAA (sf) 415.00
A-2-R AA (sf) 97.00
B-R A (sf) 48.00
OTHER OUTSTANDING RATINGS
Babson CLO Ltd. 2013-II
Class Rating
C BBB (sf)
D BB (sf)
E B (sf)
Subordinate notes NR
NR--Not rated.
BANK OF AMERICA 2017-BNK3: DBRS Finalizes B Ratings on Class F Debt
-------------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the following
classes of Commercial Mortgage Pass-Through Certificates, Series
2017-BNK3 (the Certificates), issued by Bank of America Merrill
Lynch Commercial Mortgage Trust 2017-BNK3.
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class X-D at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (sf)
-- Class E at BB (high) (sf)
-- Class F at B (high) (sf)
All trends are Stable.
Classes X-D, D, E and F have been privately placed.
The Class X-A, X-B and X-D balances are notional. DBRS ratings on
interest-only (IO) certificates address the likelihood of receiving
interest based on the notional amount outstanding. DBRS considers
the IO certificates' positions within the transaction payment
waterfall when determining the appropriate ratings.
On January 17, 2017, DBRS released a Request for Comment on its
proposed methodology, "Rating North American CMBS Interest-Only
Certificates." If this methodology is adopted without changes, DBRS
indicates that potential rating actions could be either downgrades
or confirmations to IO certificates. Please refer to the January
17, 2017, DBRS press release for further details on the proposed
methodology.
The collateral consists of 63 fixed-rate loans secured by 94
commercial and multifamily properties, comprising a total
transaction balance of $977,092,638. The transaction has a
sequential-pay pass-through structure. The trust assets contributed
from two loans, representing 7.2% of the pool, are shadow-rated
investment grade by DBRS. Proceeds for each shadow-rated loan are
floored at their respective rating within the pool. When 7.2% of
the pool has no proceeds assigned below the rated floor, the
resulting pool subordination is diluted or reduced below that rated
floor. The conduit pool was analyzed to determine the provisional
ratings, reflecting the long-term probability of loan default
within the term and its liquidity at maturity. When the cut-off
loan balances were measured against the DBRS Stabilized net cash
flow (NCF) and their respective actual constants, no loans had a
DBRS Term debt service coverage ratio (DSCR) below 1.15 times (x),
a threshold indicative of a higher likelihood of mid-term default.
Twenty-four loans, representing 49.7% of the pool, have a DBRS
Refinance (Refi) DSCR below 1.00x; however, these credit metrics
are based on whole-loan balances. Two of the pool's loans with DBRS
Refi DSCRs below 0.90x, 85 Tenth Avenue and Potomac Mills, which
total 7.2% of the transaction balance, are shadow-rated and have
large pieces of subordinate mortgage debt outside the trust. Based
on A-note balances only, the deal's weighted-average (WA) DBRS Refi
DSCR improves to 1.06x from 1.03x and the concentration of loans
with DBRS Refi DSCRs below 1.00x reduces to 42.4%.
As previously mentioned, two loans in the top 15, 85 Tenth Avenue
and Potomac Mills, have trust participations that exhibit credit
characteristics consistent with investment-grade shadow ratings. 85
Tenth Avenue has credit characteristics consistent with a BBB
shadow rating while Potomac Mills has credit characteristics
consistent with an A (low) shadow rating. In addition, 44 loans,
representing 83.9% of the pool, have a DBRS Term DSCR in excess of
1.50x. This includes nine of the largest ten loans. Even when
excluding the two shadow-rated loans, both of which have large
pieces of subordinate mortgage debt held outside the trust, the
deal continues to exhibit a favorable DBRS Term DSCR of 1.92x.
Based on A-note balances only, the DBRS Term DSCR is even more
robust at 2.02x.
The transaction has six properties, representing 22.6% of the pool,
located in urban markets. Properties in urban markets benefit from
consistent investor demand, even in times of stress. Urban markets
represented in the deal include Seattle, New York, Atlanta, Culver
City, West Hollywood and Newark. There are only six properties,
representing 5.7% of the pool, located in tertiary markets and no
properties located in rural markets. None of the loans secured by
properties located in tertiary markets are within the top 20 loans
of the pool. Properties located in tertiary and rural markets are
modeled with significantly higher loss severities than those
located in urban and suburban markets. Five loans, comprising 39.9%
of the DBRS sample (28.8% of the pool), were considered to be of
Above Average property quality based on physical attributes and/or
a desirable location within their respective markets. All five of
these loans are within the top 15 (The Summit Birmingham, KOMO
Plaza, JW Marriott Desert Springs, Storbox Self Storage and
Platform).
The transaction has a high concentration of loans that are secured
by assets either fully or primarily used as retail, at 34.9%. The
retail sector has generally underperformed since the Great
Recession because of a general decline in consumer spending power,
store closures, chain bankruptcies and the rapidly growing
popularity of e-commerce. According to the U.S. Census Bureau,
e-commerce is projected to account for 10.0% of total retail sales
in 2018, which is up from 7.8% in 2015. As the e-commerce share of
sales is expected to continue to grow significantly in the coming
years, the retail real estate sector may continue to be relatively
weak. DBRS considers 55.0% of the pool's retail loans to be secured
by either anchored or regional mall properties, which are more
desirable and have shown historically lower rates of default. The
retail outlets are predominantly located in established suburban
markets and the retail loans in the top ten exhibit high sales
figures. The Summit Birmingham featured in-line sales of $603.00
per square foot (psf; excluding Apple at $513.00 psf) as of the
T-12 period ending August 2016. East Market, an anchored retail
center in Fairfax, Virginia, reported sales figures of $1,010 psf
for Whole Foods Market, the anchor tenant, as of YE2015.
Additionally, Potomac Mills is shadow-rated A (low) by DBRS.
The DBRS sample included 25 of the 62 loans in the pool. Site
inspections were performed on 35 of the 94 properties in the
portfolio (69.4% of the pool by allocated loan balance). The DBRS
average sample NCF adjustment for the pool was -7.7% and ranged
from -17.8% to +0.6%. The average DBRS sampled NCF haircut compares
favorably with more recent transactions by DBRS where the average
DBRS sampled haircut has averaged -8.3%.
The rating assigned to Class F differs from the higher rating
implied by the Large Pool Multi-borrower Parameters. DBRS considers
this difference to be a material deviation from the methodology
and, in this case, the ratings reflect the dispersion of loan-level
cash flows expected to occur post-issuance.
The ratings assigned to the Certificates by DBRS are based
exclusively on the credit provided by the transaction structure and
underlying trust assets. All classes will be subject to ongoing
surveillance, which could result in upgrades or downgrades by DBRS
after the date of issuance.
BARCLAYS BANK 2017-C1: Fitch Assigns 'B-sf' Rating on 2 Tranches
----------------------------------------------------------------
Fitch Ratings has assigned the following ratings and Rating
Outlooks to Barclays Bank Commercial Mortgage Securities LLC Trust
2017-C1 commercial mortgage pass-through certificates, series
2017-C1:
-- $22,421,053 class A-1 'AAAsf'; Outlook Stable;
-- $66,989,474 class A-2 'AAAsf'; Outlook Stable;
-- $152,631,581class A-3 'AAAsf'; Outlook Stable;
-- $319,560,000 class A-4 'AAAsf'; Outlook Stable;
-- $37,421,053 class A-SB 'AAAsf'; Outlook Stable;
-- $599,023,161b class X-A 'AAAsf'; Outlook Stable;
-- $110,176,843b class X-B 'AA-sf'; Outlook Stable;
-- $66,320,000 class A-S 'AAAsf'; Outlook Stable;
-- $43,856,843 class B 'AA-sf'; Outlook Stable;
-- $38,509,474 class C 'A-sf'; Outlook Stable;
-- $82,366,320ab class X-D 'BBB-sf'; Outlook Stable;
-- $21,393,690ab class X-E 'BB-sf'; Outlook Stable;
-- $8,556,843ab class X-F 'B-sf'; Outlook Stable;
-- $43,856,846a class D 'BBB-sf'; Outlook Stable;
-- $21,393,690a class E 'BB-sf'; Outlook Stable;
-- $8,556,843a class F 'B-sf'; Outlook Stable.
The following classes are not rated by Fitch:
-- $8,557,895ab class X-G;
-- $25,672,986ab class X-H;
-- $8,557,895a class G;
-- $25,672,986a class H;
-- $42,787,408ac 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).
Since Fitch issued its expected ratings on Feb. 9, 2017, the
following changes have occurred: the class A-3 balance increased
from $105,263,158 to $152,631,581 and the class A-4 balance
decreased from $366,928,423 to $319,560,000. Additionally, the
class X-B notional balance is now equal to the aggregate balance of
the class A-S and class B certificates. As such, Fitch's final
rating for the class X-B has been changed from 'A-sf' to 'AA-sf'.
The class X-D notional balance is now equal to the aggregate
balance of the class C and class D certificates. As such, the class
X-D notional balance increased from $43,856,843 to $82,366,320. The
classes above reflect the final ratings and deal structure.
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 58 loans secured by 75
commercial properties having an aggregate principal balance of
$855,747,738 as of the cut-off date. The loans were contributed to
the trust by Barclays Bank PLC, UBS AG, and Rialto Mortgage
Finance, LLC.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 76.6% of the properties
by balance, cash flow analysis of 81.6%, and asset summary reviews
on 100% of the pool.
KEY RATING DRIVERS
Fitch Leverage Higher than 2016 Average: The pool has higher
leverage than other Fitch-rated multiborrower transactions. The
pool's Fitch debt service coverage ratio (DSCR) of 1.17x is worse
than the 2016 average of 1.21x. The pool's Fitch loan to value
(LTV) of 106.0% is slightly worse than the 2016 average of 105.2%.
Below-Average Amortization: Thirteen loans representing 47.3% of
the pool are full-term interest-only and 18 loans representing
22.6% of the pool are partial interest-only. Fitch-rated
transactions in 2016 had an average full-term interest-only
percentage of 33.3% and a partial interest-only percentage of
33.3%. The pool is scheduled to amortize by 7.4% of the initial
pool balance prior to maturity, below the average of 10.4% for
other Fitch-rated transactions.
Pool Diversity: The pool shows diversity with respect to loan size
and property type. The top 10 loans represent 49.9% of the pool,
and the loan concentration index (LCI) is 342; both metrics are
below the respective 2016 averages of 54.8% and 422.
RATING SENSITIVITIES
For this transaction, Fitch's net cash flow (NCF) was 11.2% 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
BBCMS 2017-C1 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.
CAPITAL TRUST 2005-1: Fitch Affirms 'Dsf' Rating on Class C Debt
----------------------------------------------------------------
Fitch Ratings has affirmed six classes of Capital Trust RE CDO
2005-1 (Capital Trust 2005-1).
KEY RATING DRIVERS
Fitch's actions reflect both the severely undercollateralized notes
as well as the collateralized debt obligations (CDOs) inability to
make timely interest payments to class C. The CDO's liabilities
currently exceed collateral by over $54 million. Since Fitch's last
rating action, the capital structure has paid down by $13.6 million
with no additional realized losses. As of the February 2017 trustee
report, 100% of the remaining portfolio is considered either
defaulted or Fitch assets of concern. The CDO collateral consists
of one B-note (27.8% of the pool), which is defaulted and expected
to have a full loss, and three non-senior CRE CDO classes (72.2%)
from the same obligor, CT CDO IV Ltd 2006-1 (all rated 'Csf' by
Fitch). Total recoveries on the bonds are expected to be de minimis
to none due to the subordinate and/or distressed nature of the
remaining collateral.
On March 3, 2016, the Trustee declared an event of default (EOD)
with respect to class C, as interest proceeds received were
insufficient to pay the full timely interest to the class. No
principal or interest proceeds are currently being received from
any of the assets in the pool.
As of the time of this rating action, the noteholders have not
given direction to accelerate the notes or liquidate the
portfolio.
The 'Csf' ratings for classes D through H reflect the classes'
negative credit enhancement, and expectation of eventual default.
Capital Trust 2005-1 is a commercial real estate CDO managed by CT
Investment Management Co., LLC (CTIMCO).
RATING SENSITIVITIES
Classes D through H are subject to further downgrade to 'Dsf'
should the classes default at legal maturity or earlier.
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:
-- $5.3 million class C at 'Dsf'; RE 0%;
-- $14.4 million class D at 'Csf'; RE 0%;
-- $15.2 million class E at 'Csf'; RE 0%;
-- $6.8 million class F at 'Csf'; RE 0%;
-- $6.8 million class G at 'Csf'; RE 0%;
-- $10.1 million class H at 'Csf'; RE 0%.
Class A paid in full. Class B's rating was previously withdrawn.
Class J, X-J and the preference shares are not rated by Fitch.
CARLYLE GLOBAL 2014-4: Moody's Affirms B3 Rating on Cl. F Notes
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by Carlyle Global Market Strategies CLO 2014-4, Ltd.:
US$34,535,000 Class D Senior Secured Deferrable Floating Rate Notes
due October 15, 2026, Upgraded to Baa2 (sf); previously on
September 30, 2014 rated Baa3 (sf)
Moody's also affirmed the ratings on the following notes:
US$32,865,000 Class E Senior Secured Deferrable Floating Rate Notes
due October 15, 2026, Affirmed Ba3 (sf); previously on September
30, 2014 rated Ba3 (sf)
US$5,570,000 Class F Senior Secured Deferrable Floating Rate Notes
due October 15, 2026, Affirmed B3 (sf); previously on September 30,
2014 rated B3 (sf)
Carlyle Global Market Strategies CLO 2014-4, Ltd., issued in
September 2014, is a collateralized loan obligation (CLO) backed
primarily by a portfolio of senior secured loans. The transaction's
reinvestment period will end in October 2018.
RATINGS RATIONALE
These rating actions are primarily a result of the recent
refinancing of the Class A-1, A-2, B and C notes in February 2017,
which increases excess spread available as credit enhancement to
the rated notes. Additionally, Moody's expects the deal to continue
to benefit from a higher weighted average recovery rate (WARR)
compared to its covenant level.
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. Please see the Rating Methodologies page on
www.moodys.com for a copy of this methodology.
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 commence 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) 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 $3.0 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% (2411)
Class D: +3
Class E: +1
Class F: +1
Moody's Adjusted WARF + 20% (3617)
Class D: -2
Class E: -2
Class F: -3
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 $554.7 million, defaulted par of $4.6
million, a weighted average default probability of 24.64% (implying
a WARF of 3014), a weighted average recovery rate upon default of
49.90%, a diversity score of 65 and a weighted average spread of
3.65%.
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.
CITIGROUP 2015-RP2: Moody's Ups Rating on Cl. B-3 Debt to Ba2
-------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 10 tranches
issued by Citigroup Mortgage Loan Trust 2015-RP2, a transaction
backed by re-performing mortgage loans.
Complete rating actions are as follows:
Issuer: Citigroup Mortgage Loan Trust 2015-RP2
Cl. A, Upgraded to Aa2 (sf); previously on Jun 11, 2015 Definitive
Rating Assigned A1 (sf)
Cl. A-1, Upgraded to Aa2 (sf); previously on Jun 11, 2015
Definitive Rating Assigned A1 (sf)
Cl. A-2, Upgraded to Aa2 (sf); previously on Jun 11, 2015
Definitive Rating Assigned A1 (sf)
Cl. A-2A, Upgraded to Aa1 (sf); previously on Jun 11, 2015
Definitive Rating Assigned Aa2 (sf)
Cl. A-2B, Upgraded to Aa3 (sf); previously on Jun 11, 2015
Definitive Rating Assigned A2 (sf)
Cl. A-1-IO, Upgraded to Aa2 (sf); previously on Jun 11, 2015
Definitive Rating Assigned A1 (sf)
Cl. A-2-IO, Upgraded to Aa2 (sf); previously on Jun 11, 2015
Definitive Rating Assigned A1 (sf)
Cl. B-1, Upgraded to A2 (sf); previously on Jun 11, 2015 Definitive
Rating Assigned Baa1 (sf)
Cl. B-2, Upgraded to Baa1 (sf); previously on Jun 11, 2015
Definitive Rating Assigned Baa3 (sf)
Cl. B-3, Upgraded to Ba2 (sf); previously on Jun 11, 2015
Definitive Rating Assigned B2 (sf)
RATINGS RATIONALE
The actions are primarily due to strong performance of the
underlying loans and increase in the credit enhancement available
to the bonds, and reflect Moody's updated loss expectations on the
pool.
Our expected losses for the pool approximate 7.43% on the
outstanding balance of the pool and 5.61% on the original balance
of the pool. The severity assumption used for the base case
scenario is 40%. The improvement in loss projections since deal
issuance in June 2015 reflects the stronger performance of the
underlying re-performing loans relative to that expected as of
closing. At closing, Moody's used an expected annual delinquency
rate of 9% to calculate the delinquencies on the deal for year one
based on the collateral characteristics of the loans. As of January
2017, loans that are sixty or more days delinquent account for
3.34% of the outstanding pool, and cumulative losses are 0.05% of
the original balance. The current pool factor is 74.9%, and the
twelve month average prepayment rate is 13.6%.
The rating upgrades also reflect the increase in credit enhancement
available to the bonds, owing to the prepayments of the
transaction. Credit enhancement for Class A1 has increased to 33.5%
from 26.4% at closing, for Class B1 to 26.5% from 20.8% at closing,
for Class B2 to 20.7% from 16.2% at closing, and for Class B3 to
15.9% from 12.4% at closing.
The upgrades of the exchangeable and interest-only certificates
reflect the upgraded ratings of their related bonds.
The methodologies used in these ratings were "Moody's Approach to
Rating Securitisations Backed by Non- Performing and Re-Performing
Loans" published in August 2016, and "US RMBS Surveillance
Methodology" published in January 2017.
Additionally, the methodology used in rating Cl. A-1-IO and Cl.
A-2-IO 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 4.8% in January 2017 from 4.9% in
January 2016. 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.
CITIGROUP MORTGAGE 2014-A: S&P Affirms 'B' Rating on Class B4 Debt
------------------------------------------------------------------
S&P Global Ratings raised its ratings on two classes and affirmed
its ratings on four classes from Citigroup Mortgage Loan Trust
2014-A, a U.S. residential mortgage-backed securities (RMBS)
transaction.
This transaction is backed by seasoned first-lien fixed-rate
residential mortgage loans originated primarily between 2003 and
2004 that are secured by residential properties. Although the
majority of borrowers in the pool had low or no documentation at
origination, the majority of the FICO scores (as of securitization)
and overall credit characteristics are consistent with that of
prime collateral. Each class of rated notes in this transaction
receives credit support from subordination of the notes that are
lower in the payment priority.
S&P raised its rating on class A to 'AAA (sf)' from 'AA (sf)'
because it believes its projected credit support for this class is
sufficient to cover S&P's projected loss at the higher rating
level. The upgrade reflects an increase in credit support from
8.30% at origination to 17.69% as of the Jan. 25, 2017, remittance
date. In addition, this class, because it is senior in the
waterfall, benefits from structural features that allow all of the
principal prepayments to be allocated to it over the next two
years. After this lockout period, more principal will be allocated
to the subordinate notes. Although S&P expects the dollar amount
of credit support for this class to decline from that point, the
projected deleveraging of this class is sufficient enough to
warrant an upgrade. The class has paid down to 34% of its original
balance, with approximately $51 million paid to it over the past 12
months, and currently has a balance of approximately $119 million.
S&P also raised its rating on class A-IO to 'AAA (sf)' from
'AA (sf)', which reflects the application of its interest-only (IO)
criteria and follows the upgrade of class A. The notional balance
of this IO class is tied to the balance of class A.
The affirmations reflect S&P's opinion that the projected credit
support for these classes will remain sufficient to cover its
projected losses at the current rating levels.
S&P analyzed the current structural and performance characteristics
and performed a collateral analysis to project the losses and a
cash flow analysis to apply these losses under different rating
scenarios. S&P's collateral analysis entailed an assessment of the
transaction's collateral performance by reviewing historical
delinquency behavior and projecting losses for the remaining loans
in the pool by applying S&P's criteria.
S&P analyzed the surviving loans using original loan
characteristics with updated loan balances and Federal Housing
Finance Agency Index-adjusted property values. S&P also used the
FICO scores provided at the transaction's closing and applied
additional adjustments to S&P's projected defaults for loans that
have exhibited what it considers to be adverse payment performance
(i.e., currently delinquent or delinquent more than once since the
transaction's closing) in accordance with S&P's published
criteria.
The table below lists the highest delinquency status of the loans
remaining that have been delinquent during the transaction's life.
It excludes instances where loans may have been delinquent, but did
not demonstrate adverse performance behavior according to S&P's
criteria (i.e., they were 30 days delinquent no more than once
since the transaction's closing and are current).
DELINQUENCIES
Delinquency No. of Portion of
status loans(i) outstanding pool
30+ days 12 2.98%
60+ days 4 0.94%
90+ days 12 2.72%
FC 3 0.21%
(i)Including prior and current delinquencies. FC--Foreclosure.
Although the current pool has experienced some delinquencies, it is
performing better than S&P's initial base-case loss projections.
The pool's overall characteristics have not varied significantly
since the transaction's closing; however, the pool-level
loan-to-value ratios have decreased because of amortization and
national property price appreciation since closing, which is
driving a reduction in S&P's projected losses.
S&P used its loss projections to apply its cash flow methodology
and assumptions as described in S&P's RMBS rating criteria.
Although S&P's cash flow analysis implied several upward rating
movements, it affirmed its ratings on the subordinate classes
because of a combination of these factors:
-- The transaction is still relatively young and is still
within its unscheduled subordinate principal lockout period,
which phases out beginning in February 2019;
-- The transaction utilizes an amortizing subordination feature
in which it can begin allocating greater principal amounts
to more subordinate classes over time, thus reducing credit
support; and
-- S&P expects prepayment rates for this pool to decline, which
could leave the transaction more prone to back-ended losses.
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.
RATINGS RAISED
Citigroup Mortgage Loan Trust 2014-A
Rating
Class To From
A AAA (sf) AA (sf)
A-IO AAA (sf) AA (sf)
RATINGS AFFIRMED
Citigroup Mortgage Loan Trust 2014-A
Class Rating
B1 A (sf)
B2 BBB (sf)
B3 BB (sf)
B4 B (sf)
CMAC 1998-C1: Moody's Affirms C Rating on Class M Debt
------------------------------------------------------
Moody's Investors Service has affirmed the rating on one class,
upgraded the rating on one class, and downgraded the rating on one
class in Commercial Mortgage Acceptance Corp 1998-C1:
Cl. L, Upgraded to A1 (sf); previously on May 18, 2016 Upgraded to
A2 (sf)
Cl. M, Affirmed C (sf); previously on May 18, 2016 Affirmed C (sf)
Cl. X, Downgraded to Caa3 (sf); previously on May 18, 2016 Affirmed
Caa1 (sf)
RATINGS RATIONALE
The rating on the P&I class M was affirmed because the rating is
consistent with Moody's expected loss.
The rating on the P&I class L was upgraded based primarily on an
increase in credit support resulting from loan paydowns and
amortization. The deal has paid down 50% since Moody's last
review.
The rating on the IO Class (Class 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 0.4% of the
current balance, compared to 0.3% at Moody's last review. Moody's
base expected loss plus realized losses is now 1.2% of the original
pooled balance, the same as 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.
Additionally, the methodology used in rating Cl. X was "Moody's
Approach to Rating Structured Finance Interest-Only Securities"
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 8, compared to 7 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 February 15, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by 99% to $12 million
from $1.19 billion at securitization. The certificates are
collateralized by 19 mortgage loans ranging in size from less than
1% to 27% of the pool, with the top ten loans (excluding
defeasance) constituting 87% of the pool.
Five loans, constituting 15% 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.
Fifteen loans have been liquidated from the pool, resulting in an
aggregate realized loss of $15 million (for an average loss
severity of 33%). There are currently no loans in special
servicing.
Moody's received full year 2015 operating results for 83% of the
pool, and full or partial year 2016 operating results for 38% of
the pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 52%, compared to 43% 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 21% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 10.4%.
Moody's actual and stressed conduit DSCRs are 1.22X and 6.19X,
respectively, compared to 1.32X and 4.34X 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 49% of the pool balance. The
largest loan is the Best Buy Store Loan ($3.3 million -- 27% of the
pool), which is secured by a 45,500 square foot (SF) single-tenant
retail property located in Madison Heights, Michigan. The property
is 100% leased to Best Buy through February 2018. Due to single
tenant exposure, Moody's stressed the value of this property
utilizing a lit/dark analysis. Moody's LTV and stressed DSCR are
94% and 1.27X, respectively.
The second largest loan is the Walgreens Loan ($1.4 million -- 12%
of the pool), which is secured by a 15,900 SF single-tenant retail
property located in Lakeland, Florida. The property is 100% leased
to Walgreens through October 2058. Due to single tenant exposure,
Moody's stressed the value of this property utilizing a lit/dark
analysis. Moody's LTV and stressed DSCR are 58% and 1.85X,
respectively.
The third largest loan is the Walgreen's Drug Loan ($1.1 million --
9% of the pool), which is secured by a 13,900 SF single-tenant
retail property located in Arlington, Texas. The property is 100%
leased to Walgreens through September 2056. Due to single tenant
exposure, Moody's stressed the value of this property utilizing a
lit/dark analysis. Moody's LTV and stressed DSCR are 53% and 2.04X,
respectively.
COMM 2012-CCRE1: Fitch Affirms 'Bsf' Rating on Cl. G Certs.
-----------------------------------------------------------
Fitch Ratings has affirmed 11 classes of COMM 2012-CCRE1 commercial
mortgage pass-through certificates.
KEY RATING DRIVERS
Stable Overall Performance and Increasing Credit Enhancement: No
loans have transferred to special servicing since issuance. Credit
enhancement has increased since issuance due to 17.6% paydown, most
of which is the result of prepayments ahead of 2017 maturity
dates.
Loans of Concern: Fitch's Loans of Concern total 9.3% and include
the second largest loan in the transaction (7.2%). The loan is
collateralized by a 227,707-sf office complex located in San
Leandro, CA which has seen a decline in occupancy and has
significant upcoming rollover.
Property Type: Retail properties represent 50.8% of the pool,
including seven (40%) of the top 15 loans. With the exception
Crossgates Mall and the defeased Crossroads Towne Center, tenant
sales reports were not provided as, per the servicer, they are not
a reporting requirement.
Secondary Markets: Several of the largest loans within the pool are
backed by properties located in secondary markets. Locations such
as Albany, NY, Grandville, MI, and Durham, NC are all represented
by the top 10 loans.
Loan Maturity Schedule: Two loans mature in May 2017 (3.4%) and one
loan in 2021 (6.7%). The remaining 89.9% matures in 2022.
As of the January 2018 distribution date, the pool's aggregate
principal balance has been reduced by 17.6% to $768.6 million from
$1 billion at issuance. Two loans (6.8% of the pool) are defeased.
RATING SENSITIVITIES
Rating Outlooks for all classes remain Stable due to the overall
stable performance of the pool and continued amortization. Fitch's
analysis included higher losses on the second largest loan in the
pool, which limited the potential for upgrades on classes B.
Upgrades may occur with improved pool performance and additional
paydown or defeasance. Downgrades to the classes 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 classes:
-- $7.5 million class A-2 at 'AAAsf'; Outlook Stable;
-- $409.2 million class A-3 at 'AAAsf'; Outlook Stable;
-- $72.1 million class A-SB at 'AAAsf'; Outlook Stable;
-- $584.3 million class X-A* at 'AAAsf'; Outlook Stable;
-- $95.6 million class A-M at 'AAAsf'; Outlook Stable;
-- $43.1 million class B at 'AAsf'; Outlook Stable;
-- $32.6 million class C at 'Asf'; Outlook Stable;
-- $50.1 million class D at 'BBB-sf'; Outlook Stable;
-- $2.3 million class E at 'BBB-sf'; Outlook Stable;
-- $14 million class F at 'BBsf'; Outlook Stable;
-- $15.2 million class G at 'Bsf'; Outlook Stable.
*Interest Only
The class A-1 certificates have paid in full. Fitch does not rate
the $184.2 million interest-only class X-B, or the $26.8 million
class H.
DT AUTO 2017-1: DBRS Finalizes Prov. BB Ratings on Class E Debt
---------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the following
classes of notes issued by DT Auto Owner Trust 2017-1 (DTAOT
2017-1):
-- $187,820,000 Class A at AAA (sf)
-- $55,800,000 Class B at AA (sf)
-- $76,220,000 Class C at A (sf)
-- $68,050,000 Class D at BBB (sf)
-- $47,650,000 Class E at BB (sf)
The ratings are based on DBRS's review of the following analytical
considerations:
-- Transaction capital structure, proposed ratings and form and
sufficiency of available credit enhancement.
-- DTAOT 2017-1 provides for Class A, B, C, D and E coverage
multiples slightly below the DBRS range of multiples set forth
in the criteria for this asset class. DBRS believes that this
is warranted, given the magnitude of expected loss and
structural features of the transaction.
-- The transaction parties' capabilities with regard to
originations, underwriting and servicing.
-- The quality and consistency of provided historical static pool
data for DriveTime Automotive Group, Inc. (DriveTime)
originations and performance of the DriveTime auto loan
portfolio.
-- The November 19, 2014, settlement of the Consumer Financial
Protection Bureau inquiry relating to allegedly unfair trade
practices.
-- Review of the legal structure and presence of legal opinions,
which address the true sale of the assets to the Issuer, the
non-consolidation of the special-purpose vehicle with
DriveTime, that the trust has a valid first-priority security
interest in the assets and the consistency with the DBRS
"Legal Criteria for U.S. Structured Finance" methodology.
The DTAOT 2017-1 transaction represents a securitization of a
portfolio of motor vehicle retail installment sales contracts
originated by DriveTime Car Sales Company, LLC (the Originator).
The Originator is a direct, wholly owned subsidiary of DriveTime.
DriveTime is a leading used vehicle retailer in the United States
that focuses on the sale and financing of vehicles to the subprime
market.
The rating on the Class A Note reflects the 67.00% of initial hard
credit enhancement provided by the subordinated notes in the pool,
the Reserve Account (1.50%) and overcollateralization (20.00%). The
ratings on the Class B, C, D and E Notes reflect 56.75%, 42.75%,
30.25% and 21.50% of initial hard credit enhancement, respectively.
Additional credit support may be provided from excess spread
available in the structure.
FIRST INVESTORS 2017-1: S&P Assigns BB- Rating on Class E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to First Investors Auto
Owner Trust 2017-1's $225 million asset-backed notes.
The note issuance is an asset-backed securities transaction backed
by subprime auto loan receivables.
The ratings reflect:
-- The availability of approximately 36.2%, 31.3%, 24.6%,
19.3%, and 15.7% credit support for the class A, B, C, D,
and E notes, respectively, based on stressed cash flow
scenarios (including excess spread). These credit support
levels provide approximately 3.50x, 3.00x, 2.30x, 1.75x, and
1.40x coverage of our 9.75%-10.25% expected cumulative net
loss (CNL) range for the class A, B, C, D, and E notes,
respectively.
-- The timely interest and principal payments made under
stressed cash flow modeling scenarios that are appropriate
for the ratings.
-- S&P's expectation that under a moderate ('BBB') stress
scenario, the ratings on the class A and B notes would not
drop by more than one rating category, and the ratings on
the class C, D, and E notes would not drop by more than two
rating categories within the first year. These potential
rating movements are consistent with S&P's rating stability
criteria.
-- The collateral characteristics of the pool being securitized
with direct loans accounting for approximately 22% of the
cut-off pool. These loans historically have lower losses
than the indirect-originated loans. Prefunding will be used
in this transaction in the amount of approximately
$25.0 million, which is approximately 11% of the pool. The
subsequent receivables, which amount to approximately 17%-
23% of the 2016 company's quarterly origination volume, are
expected to be transferred into the trust within three
months from the closing date.
-- First Investors Financial Services Inc.'s (First Investors')
26-year history of originating and underwriting auto loans,
and 15-year history of self-servicing auto loans, as well as
its track record of securitizing auto loans since 2000.
-- First Investors' 13 years of origination static pool data,
segmented by direct and indirect loans.
-- Wells Fargo Bank N.A.'s experience as the committed back-up
servicer.
-- The transaction's sequential payment structure, which builds
credit enhancement based on a percentage of receivables as
the pool amortizes.
RATINGS ASSIGNED
First Investors Auto Owner Trust 2017-1
Class Rating Type Interest Amount
rate (mil. $)
A-1 AAA (sf) Senior Fixed 130.00
A-2 AAA (sf) Senior Fixed 38.41
B AA (sf) Subordinate Fixed 13.05
C A (sf) Subordinate Fixed 19.35
D BBB (sf) Subordinate Fixed 15.19
E BB- (sf) Subordinate Fixed 9.00
GALAXY XXIII: S&P Assigns Prelim. BB- Rating on Class E Notes
-------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Galaxy XXIII
CLO Ltd./Galaxy XXIII CLO LLC's $367.50 million floating-rate
notes.
The note issuance is a collateralized loan obligation transaction
backed primarily by broadly syndicated senior secured term loans.
The preliminary ratings are based on information as of Feb. 23,
2017. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The diversified collateral pool, which consists primarily of
broadly syndicated speculative-grade senior secured term
loans that are governed by collateral quality tests. The
credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The collateral manager's experienced team, which can affect
the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading. The
transaction's legal structure, which is expected to be
bankruptcy remote.
PRELIMINARY RATINGS ASSIGNED
Galaxy XXIII CLO Ltd./Galaxy XXIII CLO LLC
Class Rating Amount (mil. $)
A AAA (sf) 254.00
B AA (sf) 46.00
C A (sf) 29.00
D BBB (sf) 21.00
E BB- (sf) 17.50
Subordinated notes NR 40.75
NR--Not rated.
GALTON FUNDING 2017-1: Moody's Gives (P)B2 Rating to Class B5 Debt
------------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to 41
classes of residential mortgage-backed securities (RMBS) issued by
Galton Funding Mortgage Trust 2017-1 (GFMT 2017-1). The ratings
range from (P)Aaa (sf)-(P)B2 (sf).
GFMT 2017-1 is the first residential mortgage backed securities
(RMBS) issuance from the sponsor, GMRF Mortgage Acquisition Company
LLC (Galton). The certificates are backed by 363 prime-quality,
primarily 30-year, fixed-rate residential mortgages with total
unpaid balance of $254,554,479 and a weighted average (WA) mortgage
rate of 4.94%. The loans were originated by multiple originators
and purchased by Galton. Shellpoint Mortgage Servicing will be the
servicer of the loans in the pool. Wells Fargo Bank, N.A. will act
as the Master Servicer. The transaction benefits from the Dodd
Frank Act's risk retention requirements, which requires the sponsor
or its affiliate to hold 5% of the transaction's credit risk, and
improves alignment of interests between the sponsor and investors.
The credit quality of the collateral backing GFMT 2017-1 is strong
with a high overall WA borrower FICO score of 753 and a WA Combined
Loan-To-Value Ratio (CLTV) of 67.6%. Moreover the majority of the
loans are fixed rate (93.4%) and owner-occupied (64.8%). The WA
seasoning is 11 months, with no mortgage delinquency since
origination. 35.1% of the loans are non-Qualified Mortgage (non-QM)
loans. The non-QM designations are attributable to either
debt-to-income ratios above 43%, alternative income documentation
or interest-only periods. 44.6% of the loans were made to
self-employed borrowers. The transaction provides 100% due
diligence of data integrity, credit, property valuation, and
compliance conducted by AMC Diligence, LLC (AMC), an independent
third-party firm.
Distributions of principal and interest and loss allocations to the
bonds will be based on a typical shifting-interest structure that
benefits from a 2.5% subordination floor. The subordination floor
protects against losses that occur late in the life of the pool
when relatively few loans remain (tail risk), by diverting all
principal to the senior bonds when total senior subordination is
less than 2.5% of the original pool balance. The transaction also
has a stop advance feature that benefits the senior classes. There
is no principal or interest advancing for loans that are 120 days
or more delinquent. Any interest shortfall resulting from this
provision will reduce the available distribution amount. Any
interest shortfalls resulting from this feature will be fully
subordinated and result in a principal loss to the most subordinate
classes.
The complete rating actions are:
Issuer: Galton Funding Mortgage Trust 2017-1
Cl. A11, Assigned (P)Aaa (sf)
Cl. AX11, Assigned (P)Aaa (sf)
Cl. A12, Assigned (P)Aaa (sf)
Cl. AX12, Assigned (P)Aaa (sf)
Cl. A13, Assigned (P)Aaa (sf)
Cl. AX13, Assigned (P)Aaa (sf)
Cl. A21, Assigned (P)Aaa (sf)
Cl. AX21, Assigned (P)Aaa (sf)
Cl. A22, Assigned (P)Aaa (sf)
Cl. AX22, Assigned (P)Aaa (sf)
Cl. A23, Assigned (P)Aaa (sf)
Cl. AX23, Assigned (P)Aaa (sf)
Cl. A31, Assigned (P)Aa1 (sf)
Cl. AX31, Assigned (P)Aa1 (sf)
Cl. A32, Assigned (P)Aa1 (sf)
Cl. AX32, Assigned (P)Aa1 (sf)
Cl. A33, Assigned (P)Aa1 (sf)
Cl. AX33, Assigned (P)Aa1 (sf)
Cl. A41, Assigned (P)Aaa (sf)
Cl. AX41, Assigned (P)Aaa (sf)
Cl. A42, Assigned (P)Aaa (sf)
Cl. AX42, Assigned (P)Aaa (sf)
Cl. A43, Assigned (P)Aaa (sf)
Cl. AX43, Assigned (P)Aaa (sf)
Cl. A51, Assigned (P)Aaa (sf)
Cl. AX51, Assigned (P)Aaa (sf)
Cl. A52, Assigned (P)Aaa (sf)
Cl. AX52, Assigned (P)Aaa (sf)
Cl. A53, Assigned (P)Aaa (sf)
Cl. AX53, Assigned (P)Aaa (sf)
Cl. X3, Assigned (P)Aa1 (sf)
Cl. X4, Assigned (P)Aaa (sf)
Cl. X5, Assigned (P)Aaa (sf)
Cl. B1, Assigned (P)Aa2 (sf)
Cl. BX1, Assigned (P)Aa2 (sf)
Cl. B2, Assigned (P)A2 (sf)
Cl. BX2, Assigned (P)A2 (sf)
Cl. B3, Assigned (P)Baa2 (sf)
Cl. BX3, Assigned (P)Baa2 (sf)
Cl. B4, Assigned (P)Ba2 (sf)
Cl. B5, Assigned (P)B2 (sf)
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected cumulative net loss on the pool averages 1.00% in
a base scenario and reaches 13.50% at a stress level consistent
with the Aaa (sf) ratings.
Moody's calculated losses on the pool using Moody's US Moody's
Individual Loan Analysis (MILAN) model based on the loan-level
collateral information as of the Cut-off Date. Loan-level
adjustments to the model results included adjustments to
probability of default for higher and lower borrower DTIs, for
borrowers with multiple mortgaged properties, self-employed
borrowers, potential fees and penalties resulting from legal
challenges on non-QM loans and higher-priced QM loans, and for the
risk owing to super-priority homeownership association (HOA) liens
in certain states. Moody's final loss estimates also incorporate
adjustments for originator quality and the representation &
warranty (R&W) framework.
Moody's base Moody's provisional ratings on the certificates on the
credit quality of the mortgage loans, the structural features of
the transaction, Moody's assessments of the aggregator, originators
and servicers, the strength of the third party due diligence and
the representations and warranties (R&W) framework of the
transaction.
Collateral Description
The loan pool contains 363 prime-quality 30-year (96.88%), 15-year
(1.85%) and 40-year (1.27%) primarily fixed-rate residential
mortgages with total unpaid balance of $254,554,479 and a weighted
average (WA) mortgage rate of 4.94%.
The credit quality of the collateral backing GFMT 2017-1 is strong
with a high WA borrower FICO score of 753 and a WA Combined
Loan-To-Value Ratio (CLTV) of 67.6%. However, compared to recent
prime jumbo transactions Moody's has rated, the pool has a higher
percentage of non-Qualified Mortgage (non-QM) loans (35.1% of the
pool), loans whose borrowers were qualified using alternative
documentation (21.5% of the pool), loans who had prior credit
derogatory events (9.1% of the pool), such as bankruptcies, short
sales and foreclosures and a higher percentage of borrowers with
low FICO scores (11.6% with FICO scores less than 700) or high
CLTVs ( 25.1% of the loans have a CLTV greater than 80%). The
non-QM loans are largely a result of debt-to-income (DTI) ratios
above 43%, alternative borrower income documentation, or
interest-only provisions. The borrowers who were qualified using
alternative documentation mainly provided 12 or 24 months' bank
statements for income verification.
The loans were aggregated by Galton from 27 different originators,
and all of the loans were underwritten to Galton's acquisition
guidelines. Galton's acquisition guidelines differ from those of
other aggregators of prime RMBS that Moody's rates in that they
allow for higher DTIs, prior seasoned credit derogatory events,
alternative income qualification, such as bank statements, and
higher LTVs and CLTVs. The largest four originators, who each
contributed more than 10% of the pool, are BM Real Estate Services
(17.6%), Parkside Lending, LLC (16.2%), RPM Mortgage Inc. (15.3%)
and Oaktree Funding Corp. (14.9%).
The borrowers in this transaction generally have significant liquid
cash reserves, high residual income and, in most cases, sizeable
equity in their properties. Moreover, no loan has had a delinquency
since loan origination and 100% of borrowers with prior mortgages
had a clean 24-month pay history on their prior loans.
A large percentage of the loans in the pool (44.6%) were made to
self-employed borrowers. Self-employed borrowers typically have
less stable incomes than wage earners, although a self-employed
borrower is not always riskier than a wage earner. Furthermore,
approximately 21.5% of the loans, all to self-employed borrowers,
were qualified using alternative income documentation, such as 24
or 12 months of bank statements, rather than tax returns.
Verification of income using banks statements, particularly
short-term bank statements can introduce some risks due to the
subjective underwriting of such loans. Moody's believes that income
verification using 24 months of bank statements is stronger than
partial documentation loans originated prior to 2008, and Moody's
enhancement levels considered model runs assuming these loans were
fully documented. Moody's made model adjustments for self-employed
borrowers that increased credit enhancement levels.
Third-party Review
AMC, an independent third party firm, reviewed 100% of the loans in
this transaction for credit, regulatory compliance, property
valuation, and data accuracy. The due diligence results confirm
compliance with Galton's acquisition guidelines for the vast
majority of loans, with a handful of findings related to minor
variances from the guidelines, with compensating factors. AMC
identified six loans having material compliance violations, mainly
related to technical TRID errors which the lender took efforts to
cure or the reviewer believed error was not curable. Moody's
believes that these errors represent low risk to the trust. The
review did not identify any material valuation issues. AMC
identified a number of discrepancies between the data tape and the
files utilized during the due diligence reviews, mainly related to
DTI. The data discrepancies were corrected on the final loan tape.
The significant amount of DTI discrepancies partially informed
Moody's increase to expected losses owing to originator quality.
Representations & Warranties (R&W) Framework
The originators make comprehensive loan-level R&Ws and an
independent reviewer will perform detailed reviews to determine
whether any R&Ws are breached when loans become 120 days delinquent
or the property is liquidated at a loss above a certain threshold.
These reviews are prescriptive in that the transaction documents
set forth detailed tests for each R&W that the independent reviewer
will perform. The independent reviewer, however, will not be hired
until the first loan becomes 60 days delinquent. Furthermore, an
affiliate of the sponsor will have significant discretion whether
or not to pursue enforcement against an originator, and will have
considerable flexibility to negotiate make-whole amounts instead of
requiring repurchases. The R&W providers' financial strength is
weak, as they are generally unrated and small entities. Finally,
although the sponsor's affiliate will backstop the R&Ws from the
originators, its financial condition is uncertain, as its parent is
an investment fund with a limited life. Moody's increased Moody's
expected losses to account for the weaknesses in the R&W
framework.
Tail Risk & Subordination Floor
This deal has a standard shifting-interest structure, with a
subordination floor to protect against losses that occur late in
the life of the pool when relatively few loans remain (tail risk).
When the total senior subordination is less than 2.50% of the
original pool balance, the subordinate bonds do not receive any
principal and all principal is then paid to the senior bonds. In
addition, if the subordinate percentage drops below 13.50% of
current pool balance, the senior distribution amount will include
all principal collections and the subordinate principal
distribution amount will be zero. The subordinate bonds themselves
benefit from a floor. When the total current balance of a given
subordinate tranche plus the aggregate balance of the subordinate
tranches that are junior to it amount to less than 2.50% of the
original pool balance, those tranches do not receive principal
distributions. Principal those tranches would have received are
directed to pay more senior subordinate bonds pro-rata. There is no
principal or interest advancing for loans that are 120 days or more
delinquent. Any interest shortfall resulting from this provision
will reduce the available distribution amount. Any interest
shortfalls resulting from this feature will be fully subordinated
and result in a principal loss to the most subordinate classes.
Factors that would lead to an upgrade or downgrade of the ratings:
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
Methodology
The principal methodology used in these ratings was "Moody's
Approach to Rating US Prime RMBS," published on February 2015.
Additionally, the methodology used in rating Cl. AX11, Cl. AX12,
Cl. AX13, Cl. AX21, Cl. AX22, Cl. AX23, Cl. AX31, Cl. AX32, Cl.
AX33, Cl. AX41, Cl. AX42, Cl. AX43, Cl. AX51, Cl. AX52, Cl. AX53,
Cl. X3, Cl. X4, and Cl. X5 was "Moody's Approach to Rating
Structured Finance Interest-Only Securities" published in October
2015.
GMAC COMMERCIAL 2002-C3: Fitch Affirms CCCsf Rating on Cl. K Debt
-----------------------------------------------------------------
Fitch Ratings has affirmed six classes of GMAC Commercial Mortgage
Securities, Inc., commercial mortgage pass-through certificates,
series 2002-C3 (GMAC 2002-C3).
KEY RATING DRIVERS
Although credit enhancement for the classes has increased since
Fitch's last rating action, the affirmations are due to pool
concentration and adverse selection of the remaining pool.
Additionally, Fitch requested an update on valuation, workout
strategies and tenancy for the two specially serviced loans/assets
in the pool but has not received a response by the time of this
release.
Fitch modeled losses of 60.9% of the remaining pool; expected
losses on the original pool balance total 4.3%, including $25.1
million (3.2% of the original pool balance) in realized losses to
date. As of the February 2017 distribution date, the pool's
aggregate principal balance has been reduced by 98.3% to $14.2
million from $777.4 million at issuance. Interest shortfalls are
currently affecting classes L through P. The Nashville Business
Center loan, which had been previously modified into A/B notes in
2013 and was the largest contributor to Fitch-modeled losses at the
last rating action, was disposed at better recoveries than
previously modeled.
Pool Concentration and Adverse Selection: The pool is highly
concentrated with only six of the original 109 loans remaining.
Retail properties comprise 64% of the current pool balance,
followed by office properties at 32.5% and industrial properties at
3.5%. The largest loan (52.1% of the pool) and the second largest
asset (32.5%) have both been in special servicing since 2012.
The largest loan, Lake Park Pointe Shopping Center, a
non-performing matured balloon loan which had matured in 2012, is
the second largest contributor to Fitch-modeled losses. The loan,
which is secured by a 78,088 sf retail property located in Chicago,
IL, was transferred to special servicing in April 2012 for monetary
default. The prior largest tenant, Michael's Fresh Markets
(previously 53% of the NRA), filed Chapter 11 bankruptcy and
vacated. A portion of this space was re-tenanted by Ross Dress for
Less (34% of the NRA) in November 2013. The borrower has been
granted multiple extensions of a forbearance agreement since 2012,
with the current forbearance agreement set to expire in March 2017.
The latest reported appraisal valuation is nearly three years old.
The second largest asset, Vista Office Center, which has been
real-estate owned since 2013 after being transferred to special
servicing in 2012 for imminent default, is the largest contributor
to Fitch-modeled losses. The asset, which is a 46,596 sf office
property located in Temecula, CA, has a traditional office space
component totaling 37,537 sf, as well as an executive suites
component totaling 9,059 sf. Servicer commentary indicated a
10-year lease on 24% of the NRA was recently executed, but Fitch
was not provided an updated rent roll to confirm details of the new
leasing. The property competes poorly with other properties in the
area due to a large, vacant and outdated lobby. The latest reported
appraisal valuation is nearly two years old.
The remaining four non-specially serviced loans consist of one
defeased loan (3.5%) maturing in December 2017 and three fully
amortizing retail loans secured by single-tenanted Walgreens
properties located in Savannah, GA; Hattiesburg, MS and Madison, MS
(11.9%) which mature in 2019 (6.6%) and 2021 (5.3%).
RATING SENSITIVITIES
Upgrades were not considered due to the concentration of specially
serviced loans/assets and the uncertainty surrounding their
ultimate resolution and disposition. Upgrades are possible should
recoveries be better than expected on the specially serviced
loans/assets. Classes may be subject to future downgrades as losses
are realized or if realized losses are greater than Fitch's
expectations.
DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation
to this rating action.
Fitch has affirmed the following ratings:
-- $2.6 million class K at 'CCCsf'; RE 100%;
-- $5.8 million class L at 'CCsf'; RE 40%;
-- $4.9 million class M at 'Csf'; RE 0%;
-- $210,439 class N at 'Dsf'; RE 0%;
-- $0 class O-1 at 'Dsf'; RE 0%;
-- $0 class O-2 at 'Dsf'; RE 0%.
The class A-1, A-2, B, C, D, E, F, G, H and J certificates have
paid in full. Fitch does not rate the class P certificates. Fitch
previously withdrew the ratings on the interest-only class X-1 and
X-2 certificates.
GOLDENTREE LOAN VII: Moody's Affirms B2 Rating on Class F Notes
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by GoldenTree Loan Opportunities VII, Limited:
US$78,000,000 Class B Senior Secured Floating Rate Notes due 2025
(the "Class B Notes"), Upgraded to Aa1 (sf); previously on May 3,
2013 Definitive Rating Assigned Aa2 (sf)
US$7,000,000 Class C-1 Mezzanine Deferrable Floating Rate Notes due
2025 (the "Class C-1 Notes"), Upgraded to Aa3 (sf); previously on
May 3, 2013 Definitive Rating Assigned A2 (sf)
US$30,000,000 Class C-2 Mezzanine Deferrable Fixed Rate Notes due
2025 (the "Class C-2 Notes"), Upgraded to Aa3 (sf); previously on
May 3, 2013 Definitive Rating Assigned A2 (sf)
US$45,500,000 Class D Mezzanine Deferrable Floating Rate Notes due
2025 (the "Class D Notes"), Upgraded to Baa2 (sf); previously on
May 3, 2013 Definitive Rating Assigned Baa3 (sf)
Moody's also affirmed the ratings on the following notes:
US$400,000,000 Class A Senior Secured Floating Rate Notes due 2025
(the "Class A Notes"), Affirmed Aaa (sf); previously on May 3, 2013
Definitive Rating Assigned Aaa (sf)
US$32,000,000 Class E Mezzanine Deferrable Floating Rate Notes due
2025 (the "Class E Notes"), Affirmed Ba2 (sf); previously on May 3,
2013 Definitive Rating Assigned Ba2 (sf)
US$15,000,000 Class F Mezzanine Deferrable Floating Rate Notes due
2025 (the "Class F Notes"), Affirmed B2 (sf); previously on May 3,
2013 Definitive Rating Assigned B2 (sf)
GoldenTree Loan Opportunities VII, Limited, issued in May 2013, is
a collateralized loan obligation (CLO) backed primarily by a
portfolio of senior secured loans. The transaction's reinvestment
period will end in April 2017.
RATINGS RATIONALE
These rating actions reflect the benefit of the short period of
time remaining before the end of the deal's reinvestment period in
April 2017. In light of the reinvestment restrictions during the
amortization period, and therefore the limited ability of the
manager to effect significant changes to the current collateral
pool, Moody's analyzed the deal assuming a higher likelihood that
the collateral pool characteristics will maintain a positive buffer
relative to certain covenant requirements. In particular, Moody's
assumed that the deal will benefit from lower WARF and higher
diversity levels compared to the covenant levels. Moody's modeled a
WARF of 3143 and diversity score of 53 compared to covenant levels
of 3337 and 48, respectively. Furthermore, the transaction's
reported OC ratios have been stable.
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 commence 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) 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 $8.7 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% (2514)
Class A: 0
Class B: +1
Class C-1: +2
Class C-2: +2
Class D: +2
Class E: +1
Class F: +1
Moody's Adjusted WARF + 20% (3772)
Class A: 0
Class B: -1
Class C-1: -2
Class C-2: -2
Class D: -2
Class E: -1
Class F: -2
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 $652.4 million, defaulted par of $5.3
million, a weighted average default probability of 24.09% (implying
a WARF of 3143), a weighted average recovery rate upon default of
49.08%, a diversity score of 53 and a weighted average spread of
3.97% (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.
GRAMERCY REAL 2005-1: Moody's Hikes Class H Notes Rating to B2
--------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by Gramercy Real Estate CDO 2005-1, Ltd.:
Cl. C, Upgraded to Aa3 (sf); previously on Apr 21, 2016 Upgraded to
A2 (sf)
Cl. D, Upgraded to Baa2 (sf); previously on Apr 21, 2016 Affirmed
Ba1 (sf)
Cl. E, Upgraded to Baa3 (sf); previously on Apr 21, 2016 Affirmed
Ba2 (sf)
Cl. F, Upgraded to Ba2 (sf); previously on Apr 21, 2016 Affirmed B1
(sf)
Cl. G, Upgraded to B2 (sf); previously on Apr 21, 2016 Affirmed B3
(sf)
Cl. H, Upgraded to Caa1 (sf); previously on Apr 21, 2016 Affirmed
Caa2 (sf)
Moody's has also affirmed the ratings on the following notes:
Cl. J, Affirmed Ca (sf); previously on Apr 21, 2016 Downgraded to
Ca (sf)
Cl. K, Affirmed C (sf); previously on Apr 21, 2016 Downgraded to C
(sf)
RATINGS RATIONALE
Moody's has upgraded the ratings of six classes of notes due to
rapid amortization of the underlying collateral from higher than
anticipated recoveries on high credit risk collateral. Other key
credit parameters of the collateral pool are improved as evidenced
by WARF; along with the amortization more than offsetting the
decrease in WARR. Moody's has also affirmed the ratings of two
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.
Gramercy Real Estate CDO 2005-1, Ltd. is a currently static cash
transaction (reinvestment period ended in July 2010) backed by a
portfolio of: i) commercial mortgage backed securities (CMBS)
(50.0% of collateral pool balance); ii) b-note debt (34.3%); and
iii) whole loans (15.7%). As of the January 31, 2017 trustee
report, the aggregate note balance of the transaction, including
preferred shares, has decreased to $338.6 million from $1.0 billion
at issuance. Previous partial junior notes cancellation to the
class E, class F, class G, and class H notes and principal pay-down
directed to the senior most outstanding classes of notes have
resulted in full amortization of the Class A-1, A-2, and B notes.
The pay-down was the result of a combination of regular
amortization, resolution and sales of defaulted collateral, and the
failing of certain par value tests. Currently, the transaction has
implied under-collateralization of $179.5 million, compared to
$105.9 million at last review, primarily due to implied losses on
the collateral.
In general, holding all key parameters static, junior note
cancellations results in slightly higher expected losses and longer
weighted average lives on the senior notes, while producing
slightly lower expected losses on the mezzanine and junior notes.
However, this does not cause, in and of itself, a downgrade or
upgrade of any outstanding classes of notes.
The collateral pool contains two assets totaling $51.7 million
(32.4% of the collateral pool balance) listed as defaulted
securities as of the January 31, 2017 trustee report. These are one
whole loan (15.7%) and one CMBS securities (16.7%). There have been
over 18.0% of implied losses on the underlying collateral to date
since securitization and Moody's does expect moderate/high severity
of losses on the defaulted 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 4449,
compared to 5229 at last review. The current distribution of
Moody's rated collateral and assessments for non-Moody's rated
collateral is: Aaa-Aa3 and 5.6% compared to 6.6% at last review;
A1-A3 and 18.1 compared to 11.3% at last review; Baa1-Baa3 and 0.4%
compared to 2.1% at last review; Ba1-Ba3 and 8.0% compared to 4.9%
at last review; B1-B3 and 1.1% compared to 1.8% at last review; and
Caa1-Ca/C and 66.8% compared to 73.3% at last review.
Moody's modeled a WAL of 0.7 years, compared to 1.0 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 8.1%, compared to 17.7% at last
review. The decrease in WARR is primarily due to amortization and
resolution of whole loan collateral since last review.
Moody's modeled a MAC of 19.3%, compared to 27.1% at last review.
The low MAC is due to high credit risk collateral concentrated in a
few collateral names.
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. Holding all other key parameters static, reducing the
recovery rate of 100% of the collateral pool to 0% would result in
an average modeled rating movement on the rated notes of zero to
two notches downward (e.g. one notch down implies a rating movement
from 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 four notches 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.
GRAMERCY REAL 2007-1: Fitch Lowers Ratings on 14 Classes to 'Dsf'
-----------------------------------------------------------------
Fitch Ratings has downgraded 14 classes of Gramercy Real Estate CDO
2007-1 Ltd./LLC.
KEY RATING DRIVERS
The downgrades are due to a declared Event of Default related to
class A-2 as well as insufficient proceeds available to pay off the
remaining notes following the recent liquidation of the trust.
The transaction entered into an Event of Default on March 12, 2012
due to the class A/B Par Value Ratio falling below 89%. On March
26, 2012, the trustee notified investors that the Majority
Controlling Class waived the Event of Default. However, as of
October 2016, the waiver was revoked with respect to class A-1 and
A-2. Further, the majority of the controlling class directed the
trustee to declare the principal and accrued and unpaid interest on
all notes to be immediately due and payable, and that the CDO
assets be liquidated.
As of the February trustee report, all assets have now been sold or
paid off. While class A-1 paid off in full, class A-2 received
$117.6 million in total pay down over the last few months from the
asset resolutions. Class A-2 has a remaining balance of $3.4
million.
While approximately $2.5 million remains in a payment account, any
portion of these funds that would be applied towards the A-2 notes
would be insufficient to cover the remaining obligation. Further,
insufficient funds are available to pay the balance of any of the
other subordinate remaining notes.
A financial guarantee policy from MBIA Insurance Corp. reportedly
remains in place for the A-2 class. Further details were requested
from the trustee but have not been provided to date. Fitch withdrew
its ratings on MBIA in June 2008. Since that time, the rating for
class A-2 has reflected the unenhanced credit quality of the note.
RATING SENSITIVITIES
The defaulted ratings will be automatically withdrawn within 11
months from the date of this rating action.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third party due diligence was provided in relation to this
rating action.
Fitch has downgraded the following ratings:
-- $3.4 million class A-2 notes to 'Dsf' from 'Csf';
-- $116.6 million class A-3 notes to 'Dsf' from 'Csf'; RE 0%;
-- $29.5 million class B-FL notes to 'Dsf' from 'Csf'; RE 0%;
-- $20 million class B-FX notes to 'Dsf' from 'Csf'; RE 0%;
-- $23.1 million class C-FL notes to 'Dsf' from 'Csf'; RE 0%;
-- $5.5 million class C-FX notes to 'Dsf' from 'Csf'; RE 0%;
-- $5.2 million class D notes to 'Dsf' from 'Csf'; RE 0%;
-- $6 million class E notes to 'Dsf' from 'Csf'; RE 0%;
-- $11.8 million class F notes to 'Dsf' from 'Csf'; RE 0%;
-- $3.9 million class G-FL notes to 'Dsf' from 'Csf'; RE 0%;
-- $3.2 million class G-FX notes to 'Dsf' from 'Csf'; RE 0%;
-- $2.7 million class H-FL notes to 'Dsf' from 'Csf'; RE 0%;
-- $8.3 million class H-FX notes to 'Dsf' from 'Csf'; RE 0%;
-- $22.2 million class J notes to 'Dsf' from 'Csf'; RE 0%.
Class A-1 has paid in full. Fitch does not rate classes K and
preferred shares.
GS MORTGAGE 2017-GS5: Fitch to Rate Class F Notes 'B-sf'
--------------------------------------------------------
Fitch Ratings has issued a presale report on GS Mortgage Securities
Trust 2017-GS5 commercial mortgage pass-through certificates.
Fitch expects to rate the transaction and assign Rating Outlooks:
-- $13,770,000 class A-1 'AAAsf'; Outlook Stable;
-- $51,316,000 class A-2 'AAAsf'; Outlook Stable;
-- $248,000,000 class A-3 'AAAsf'; Outlook Stable;
-- $381,598,000 class A-4 'AAAsf'; Outlook Stable;
-- $28,604,000 class A-AB 'AAAsf'; Outlook Stable;
-- $803,366,000a class X-A 'AAAsf'; Outlook Stable;
-- $72,329,000a class X-B 'AA-sf'; Outlook Stable;
-- $80,078,000 class A-S 'AAAsf'; Outlook Stable;
-- $72,329,000 class B 'AA-sf'; Outlook Stable;
-- $43,914,000 class C 'A-sf'; Outlook Stable;
-- $46,497,000b class D 'BBB-sf'; Outlook Stable;
-- $46,497,000ab class X-D 'BBB-sf'; Outlook Stable;
-- $21,957,000bd class E 'BB-sf'; Outlook Stable;
-- $10,333,000bd class F 'B-sf'; Outlook Stable.
The following classes are not expected to be rated:
-- $34,873,240bd class G;
-- $28,672,425ac RR Interest.
a) Notional amount and interest only.
b) Privately placed pursuant to Rule 144A.
c) Vertical credit risk retention interest representing 2.7% of the
pool balance (as of the closing date).
d) Horizontal credit risk retention interest representing 6.5% of
the pool balance (as of the closing date).
The expected ratings are based on information provided by the
issuer as of Feb. 28, 2017.
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 32 loans secured by 72
commercial properties having an aggregate principal balance of
$1,061,941,665 as of the cut-off date. The loans were contributed
to the trust by Goldman Sachs Mortgage Company and Goldman Sachs
Commercial Real Estate, LP.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 85.5% of the properties
by balance, asset summary reviews on 100% of the pool, and cash
flow analysis of 93.6% of the pool.
KEY RATING DRIVERS
Better Than Average Leverage: The Fitch leverage for this
transaction is better than that of other recent Fitch-rated
transactions. Excluding credit opinion loans, the conduit-only
Fitch DSCR is 1.26x and the conduit-only Fitch LTV is 103.7%. Both
metrics compare favorably to the YTD 2017 and 2016 average DSCRs of
1.15x and 1.16x, respectively, as well as the YTD 2017 and 2016
average LTV ratios of 110.4% and 109.9%. The fusion pool has a
Fitch DSCR of 1.28x and a Fitch LTV of 98.3%.
High Percentage of Investment-Grade Credit Opinion Loans: Three
loans representing 14.3% of the pool have investment-grade credit
opinions. The proportion of investment-grade credit opinion loans
in this securitization exceeds the 2016 average concentration of
8.4%. The largest loan, 350 Park Avenue (9.42%), has a stand-alone
credit opinion of 'BBB-sf*'. The 14th largest loan, AMA Plaza
(2.83%), has a stand-alone credit opinion of 'BBBsf*'. The 18th
largest loan, 225 Bush Street (2.07%), has a stand-alone credit
opinion of 'BBB+sf*'.
Very Low Amortization: Based on the scheduled balance at maturity,
the pool will pay down just 4.4%, the lowest to date of any
Fitch-rated CMBS transaction. This is below the YTD 2017 average of
6.9% and the 2016 average of 10.4%. Fifteen full-term interest-only
loans compose 63.7% of the pool, and 12 loans representing 21.8% of
the pool are partial interest only.
Highly Concentrated Pool: The top 10 loans in the pool make up
64.2% of the pool. This is above both the YTD 2017 average of 50.7%
and the 2016 average of 54.8%.
RATING SENSITIVITIES
For this transaction, Fitch's net cash flow (NCF) was 10.3% 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 GSMS
2017-GS5 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 'AA-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 'A-sf' could
result.
JFIN CLO 2012: S&P Affirms 'BB' Rating on Class D Notes
-------------------------------------------------------
S&P Global Ratings raised its ratings on the class A-2a, A-2b, B-1,
B-2, and C notes from JFIN CLO 2012 Ltd. and removed them from
CreditWatch, where they were placed with positive implications on
Dec. 6, 2016. At the same time, S&P affirmed its ratings on the
class A-1 and D notes from the same transaction.
The rating actions follow S&P's review of the transaction's
performance using data from the Jan. 9, 2017, trustee report.
The upgrades reflect the transaction's $91.6 million in paydowns to
the class A-1 notes since S&P's March 2016 rating actions. These
paydowns resulted in improved reported overcollateralization (O/C)
ratios since the February 2016 trustee report, which S&P used for
its previous rating actions:
-- The class A O/C ratio improved to 194.91% from 147.05%.
-- The class B O/C ratio improved to 148.29% from 127.34%.
-- The class C O/C ratio improved to 130.67% from 118.39%.
-- The class D O/C ratio improved to 115.05% from 109.60%.
On a standalone basis, the results of the cash flow analysis
indicated higher ratings for the class B-2, C, and D notes than
rating actions suggest. However, S&P's rating actions reflect
additional sensitivity runs that considered the transaction's
exposure to 'CCC' rated collateral, as well as other assets of
companies exposed to industries that are currently undergoing
stress. In addition, the transaction has some concentration risk.
The top 10 largest obligors, four of which are rated in the 'CCC'
category, account for greater than 22% of the underlying portfolio.
Their respective ratings reflect the aforementioned risks.
The affirmations reflect S&P's view 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 Jan. 9,
2017, 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 it deems
necessary.
RATINGS RAISED AND REMOVED FROM CREDITWATCH POSITIVE
JFIN CLO 2012 Ltd.
Rating
Class To From
A-2a AAA (sf) AA+ (sf)/Watch Pos
A-2b AAA (sf) AA (sf)/Watch Pos
B-1 AAA (sf) A+ (sf)/Watch Pos
B-2 AA- (sf) A (sf)/Watch Pos
C BBB+ (sf) BBB (sf)/Watch Pos
RATINGS AFFIRMED
JFIN CLO 2012 Ltd.
Class Rating
A-1 AAA (sf)
D BB (sf)
JFIN CLO 2017: Moody's Assigns Ba3 Rating to Class E Secured Notes
------------------------------------------------------------------
Moody's Investors Service has assigned ratings to six classes of
notes to be issued by JFIN CLO 2017 Ltd.
Moody's rating action is:
US$241,875,000 Class A-1 Senior Secured Floating Rate Notes due
2029 (the "Class A-1 Notes"), Assigned Aaa (sf)
US$45,000,000 Class A-F Senior Secured Fixed Rate Notes due 2029
(the "Class A-F Notes"), Assigned Aaa (sf)
US$50,625,000 Class B Senior Secured Floating Rate Notes due 2029
(the "Class B Notes"), Assigned Aa2 (sf)
US$29,250,000 Class C Secured Deferrable Floating Rate Notes due
2029 (the "Class C Notes"), Assigned A2 (sf)
US$23,625,000 Class D Secured Deferrable Floating Rate Notes due
2029 (the "Class D Notes"), Assigned Baa3 (sf)
US$23,625,000 Class E Secured Deferrable Floating Rate Notes due
2029 (the "Class E Notes"), Assigned Ba3 (sf)
The Class A-1 Notes, the Class A-F 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."
RATINGS RATIONALE
Moody's ratings of the Rated Notes address the expected losses
posed to noteholders. The 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. The portfolio is approximately 93% ramped as of the closing
date.
Apex Credit Partners LLC (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 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 has issued 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: $450,000,000
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): 46.0%
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 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 Notes: -3
Class D Notes: -2
Class E Notes: -1
JP MORGAN 2003-ML1: Moody's Affirms C(sf) Rating on Class N Debt
----------------------------------------------------------------
Moody's Investors Service has upgraded the rating on one class,
downgraded the ratings on two classes and affirmed the ratings on
three classes in J.P. Morgan Chase Commercial Mortgage Securities
Corp., Commercial Pass-Through Certificates, Series 2003-ML1:
Cl. J, Affirmed Aaa (sf); previously on May 26, 2016 Upgraded to
Aaa (sf)
Cl. K, Upgraded to A1 (sf); previously on May 26, 2016 Upgraded to
A3 (sf)
Cl. L, Affirmed B1 (sf); previously on May 26, 2016 Affirmed B1
(sf)
Cl. M, Downgraded to Ca (sf); previously on May 26, 2016 Downgraded
to Caa1 (sf)
Cl. N, Affirmed C (sf); previously on May 26, 2016 Downgraded to C
(sf)
Cl. X-1, Downgraded to Caa2 (sf); previously on May 26, 2016
Affirmed Caa1 (sf)
RATINGS RATIONALE
The rating on Class K was upgraded based primarily on an increase
in credit support resulting from loan paydowns and amortization.
The deal has paid down 19% since Moody's last review.
The ratings on Classes J and L 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 rating on Class N was affirmed because the rating is
consistent with Moody's expected loss.
The rating on Class M was downgraded due to realized and
anticipated losses from specially serviced loans that were higher
than Moody's had previously expected.
The rating on the IO Class (Cl. X-1) 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 26.4% of the
current balance, compared to 15.6% at Moody's last review. Moody's
base expected loss plus realized losses is now 2.6% 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 principal methodology used in these ratings was "Moody's
Approach to Rating Large Loan and Single Asset/Single Borrower
CMBS" published in October 2015.
Additionally, the methodology used in rating Cl. X-1 was "Moody's
Approach to Rating Structured Finance Interest-Only Securities"
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 February 13, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by 97% to $30.4 million
from $929.8 million at securitization. The certificates are
collateralized by 11 mortgage loans ranging in size from less than
1% to 32.8% of the pool. Five loans, constituting 28% of the pool,
have defeased and are secured by US government securities.
One loan, constituting 7.8% of the pool, is 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.
Fifteen loans have been liquidated from the pool, resulting in an
aggregate realized loss of $16.4 million (for an average loss
severity of 27%). One loan, constituting 32.8% of the pool, is
currently in special servicing. The specially serviced loan is the
High Ridge Center loan ($10.0 million), which is secured by a
261,000 square foot (SF) community shopping center located behind
the Regency Mall located in Racine, Wisconsin. The loan transferred
to special servicing in December 2012 and the trust took title in
February 2015. As of October 2016, the property was 76% leased to
two tenants. The two tenants are Home Depot (lease expiration in
April 2018) and Kmart (lease expiration in January 2018).
Moody's received full year 2015 operating results for 100% of the
pool, and full or partial year 2016 operating results for 84% of
the pool. Moody's weighted average conduit LTV is 50%, compared to
53% 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 16% to the most
recently available net operating income (NOI). Moody's value
reflects a weighted average capitalization rate of 9.5%.
Moody's actual and stressed conduit DSCRs are 1.40X and 2.11X,
respectively, compared to 1.37X and 2.17X 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 35% of the pool balance. The
largest loan is the McLearen Shopping Center Loan ($6.3 million --
20.8% of the pool), which is secured by a 74,800 SF grocery
anchored retail center located in Herndon, Virginia, less than five
miles from the Dulles International Airport. The anchor, Food Lion,
lease expires in September 2017. As of September 2016, the property
was 98% leased, compared to 100% in December 2015. A portion of the
original loan was previously defeased. Moody's LTV and stressed
DSCR are 57% and 1.87X, respectively, compared to 59% and 1.78X at
the last review.
The second largest loan is the Eastgate Village Apartments Loan
($2.4 million -- 7.8% of the pool), which is secured by a 182-unit
multifamily property located in Greenville, North Carolina, less
than 2.5 miles from East Carolina University. The loan is on the
watchlist due to a low debt-service-coverage-ratio. The property
serves students and its occupancy can fluctuate throughout the
year. As of September 2016, the property was 97% leased compared to
75% in December 2015. The loan is fully amortizing and has
amortized 56% since securitization. Moody's LTV and stressed DSCR
are 40% and 2.40X, respectively, compared to 46% and 2.08X at the
last review.
The third largest loan is the Walgreens -- Hikes Point Loan ($1.9
million -- 6.4% of the pool), which is secured by a single-tenant
retail property located in Louisville, Kentucky. Walgreen's lease
expires in 2060; however, the tenant has a termination option every
five years starting in 2020. The loan is fully amortizing and has
amortized 56% since securitization. Due to the single-tenant
exposure, Moody's value included a lit/dark analysis. Moody's LTV
and stressed DSCR are 53% and 1.93X, respectively, compared to 54%
and 1.89X at the last review.
JP MORGAN 2004-C3: Fitch Affirms CCC Rating on Class G Debt
-----------------------------------------------------------
Fitch Ratings has affirmed J.P. Morgan Chase Commercial Mortgage
Securities Corp. (JPMCC) commercial mortgage pass-through
certificates series 2004-C3.
KEY RATING DRIVERS
The affirmations of the remaining distressed classes reflect the
continued risks given the increased pool concentration with the
largest loan (45%) in special servicing. Fitch modeled losses of
33.2% of the remaining pool; expected losses on the original pool
balance total 5.5%, including $70.4 million (4.6% of the original
pool balance) in realized losses to date. However, Fitch's analysis
included additional sensitivity tests to address the potential for
more severe losses given the pool's concentration.
As of the February 2017 distribution date, the pool's aggregate
principal balance has been reduced by 97.4% to $39.5 million from
$1.52 billion at issuance. Per the servicer reporting, two loans
(9.1% of the pool) are defeased. Interest shortfalls are currently
affecting classes J and N through NR.
Increased Pool Concentration/Adverse Selection: The transaction is
highly concentrated with only eight loans remaining of the original
150, the largest of which is REO (45%). The REO asset is a 273,275
square foot (sf) medical office property consisting of two
buildings, located in Auburn Hills, MI. The special servicer's
strategy is to hold the asset in order to increase occupancy before
marketing for sale. The leasing team is working on several new and
renewal leases. The property's combined occupancy is currently
56%.
High Percentage of Loans of Concern: Fitch has designated two loans
(66%) as a Fitch Loans of Concern including the largest loan, which
is specially serviced and REO, and the second largest loan, which
has an anticipated repayment date (ARD) of Dec. 1, 2019 that is
co-terminus with the tenant's lease expiration on Oct. 31, 2019.
Defeasance: Two loans, with a total current balance of $3.3
million, are fully defeased. However, this covers only 27% of the
current balance of class G.
Limited Upcoming Maturities: There are no scheduled loan maturities
until 2019 when three loans (33% of the pool) mature. The remaining
loans (22%) will mature during 2022-2025.
Property Type Concentration: 74% of the remaining pool is secured
by office properties, including the largest loan in the pool (45%,
REO asset) with single tenant and GSA exposure located in
secondary/tertiary markets.
RATING SENSITIVITIES
Although the credit enhancement to class G has improved, upgrades
were not considered due to the specially serviced asset (45%) and
the uncertainty surrounding the ultimate resolution and
disposition. Upgrades are possible should recoveries be better than
expected. Classes may be subject to future downgrades as losses are
realized or if realized losses are greater than Fitch's
expectations.
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.
Fitch has affirmed the following ratings and revised Recovery
Estimates as indicated:
-- $12.9 million class G at 'CCCsf'; RE 100%;
-- $15.2 million class H at 'CCCsf'; RE revised to 90% from 80%;
-- $11.4 million class J at 'Dsf'; RE 0%;
-- $0 class K at 'Dsf'; RE 0%;
-- $0 class L at 'Dsf'; RE 0%;
-- $0 class M at 'Dsf'; RE 0%;
-- $0 class N at 'Dsf'; RE 0%;
-- $0 class P at 'Dsf'; RE 0%;
-- $0 class Q at 'Dsf'; RE 0%.
The class A-1, A-1A, A-2, A-3, A-4, A-5, A-J, B, C, D, E and F
certificates have paid in full. Fitch does not rate the class NR
certificates. Fitch previously withdrew the ratings on the
interest-only class X-1 and X-2 certificates.
JP MORGAN 2005-LDP5: Fitch Affirms 'B-sf' Rating on Cl. G Debt
--------------------------------------------------------------
Fitch Ratings has upgraded two, downgraded two, and affirmed eight
classes of J.P. Morgan Chase Commercial Mortgage Securities Corp.
commercial mortgage pass-through certificates, series 2005-LDP5.
KEY RATING DRIVERS
Upgrades to classes E and F were due to each class' high current
credit enhancement, which increased with the full repayment of
seven loans since Fitch's last rating action, and their relative
position at the top of the credit stack. The downgrades to classes
H and J were based off an increase in modeled losses associated
with the pool's four specially serviced loans. Affirmations to the
remaining classes were the result of the relatively stable
performance of the pool since Fitch's last rating action. Interest
shortfalls are currently affecting classes G through K and N
through NR.
Fitch modeled losses of 43.55% of the remaining pool; expected
losses on the original pool balance total 6.28%, including $175.3
million (4.18% of the original pool balance) in realized losses
incurred to date.
Concentrated Pool with Lower Collateral Quality: The pool contains
17 loans, with high percentages of both office (56%) and retail
(33%) loans. The properties serving as collateral for the remaining
pool are of low quality, with 39.2% of the current balance secured
by assets in tertiary markets that exhibit substantial performance
volatility. Additionally, two loans (26.6%) did not repay upon
their anticipated repayment date (ARD) and are currently being cash
managed.
High Percentage of Specially Serviced Loans: The pool contains four
specially serviced loans, including the largest loan in the pool
(39.7%). Collectively, the specially serviced loans represent 56.6%
of the pool's current balance. While the special servicer has
indicated that they plan to dispose of three of the properties in
the second quarter of 2017, previous attempts at marketing the same
properties have not been successful. All of the specially serviced
loans are located within submarkets with high vacancy rates and low
asking rents, which place downward pressure on recovery rates. Due
to the concentrated nature of the remaining pool and high
percentage of specially serviced loans, Fitch ran a stressed
scenario in which the largest specially serviced loan was modeled
with a full loss. The results of this stress scenario were used to
make the rating recommendation for class G.
RATING SENSITIVITIES
Rating Outlooks for all classes remain Stable due to the overall
stable performance of the pool and continued amortization. Further
upgrades are unlikely given the concentrated nature of the pool.
Downgrades are possible should any of the non-defeased loans
experience a material decline in performance or if losses from
specially serviced loans are more severe.
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 ratings:
-- $20,367 class E to 'AAAsf' from 'BBsf'; Outlook Stable;
-- $52.5 million class F to 'BBsf' from 'Bsf'; Outlook Stable.
Fitch has downgraded the following ratings:
-- $52.5 million class H to 'CCsf' from 'CCCsf'; RE 50%;
-- $41.9 million class J to 'Csf' from 'CCCsf'; RE 0%.
Fitch has affirmed the following ratings:
-- $36.7 million class G at 'B-sf'; Outlook Stable;
-- $18.8 million class K at 'Dsf'; RE 0%;
-- $0 million class L at 'Dsf'; RE 0%;
-- $0 million class M at 'Dsf'; RE 0%;
-- $0 million class N at 'Dsf'; RE 0%;
-- $0 million class O at 'Dsf'; RE 0%;
-- $0 million class P at 'Dsf'; RE 0%;
-- $0 million class Q at 'Dsf'; RE 0%;
The class A-1, A-2FL, A-2, A-3, A-4, A-SB, A-1A, A-M, A-J, B, C,
and D certificates have paid in full. Fitch does not rate the class
NR, HG-1, HG-2, HG-3, HG-4, and HG-5 certificates. Fitch previously
withdrew the rating on the interest-only class X-1 and X-2
certificates.
JP MORGAN 2007-CIBC19: Moody's Lowers Rating on 2 Tranches to C
---------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on five classes
and downgraded the rating on three classes in J.P. Morgan Chase
Commercial Mortgage Securities Corp. Series 2007-CIBC19:
Cl. A-1A, Affirmed Aaa (sf); previously on Feb 18, 2016 Affirmed
Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Feb 18, 2016 Affirmed Aaa
(sf)
Cl. A-M, Affirmed Baa3 (sf); previously on Feb 18, 2016 Affirmed
Baa3 (sf)
Cl. A-J, Downgraded to Caa2 (sf); previously on Feb 18, 2016
Downgraded to Caa1 (sf)
Cl. B, Downgraded to C (sf); previously on Feb 18, 2016 Downgraded
to Caa3 (sf)
Cl. C, Affirmed C (sf); previously on Feb 18, 2016 Affirmed C (sf)
Cl. D, Affirmed C (sf); previously on Feb 18, 2016 Affirmed C (sf)
Cl. X, Downgraded to C (sf); previously on Feb 18, 2016 Downgraded
to B1 (sf)
RATINGS RATIONALE
The ratings on Classes A-1A, A-4 and A-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
transaction's Herfindahl Index (Herf), are within acceptable
ranges. The ratings on Classes C and D were affirmed because the
rating is consistent with Moody's expected loss.
The ratings on Classes A-J and B were downgraded due to higher
realized and anticipated losses from specially serviced and
troubled loans.
The rating on the IO Class, Cl. X, was downgraded because it
currently does not, nor is it expected to receive interest
payments.
Moody's rating action reflects a base expected loss of 14.7% of the
current balance, compared to 7.6% at Moody's last review. Moody's
base expected loss plus realized losses is now 15.5% of the
original pooled balance, compared to 14.9% 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 principal methodology used in these ratings was "Approach to
Rating US and Canadian Conduit/Fusion CMBS" published in December
2014.
Additionally, the methodology used in rating Cl. X was "Moody's
Approach to Rating Structured Finance Interest-Only Securities"
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 51, compared to 48 at Moody's last review.
DEAL PERFORMANCE
As of the February 13, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by 59% to $1.33 billion
from $3.27 billion at securitization. The certificates are
collateralized by 116 mortgage loans ranging in size from less than
1% to 12% of the pool. Three loans, constituting 15% of the pool,
have defeased and are secured by US government securities.
Seventy loans, constituting 62% 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.
Fifty loans have been liquidated from the pool with a loss,
resulting in an aggregate realized loss of approximately $312
million (for an average loss severity of 53.1%). As per the
February distribution statement, fifteen loans (constituting 16% of
the pool) are currently in special servicing. The largest specially
serviced loan is Marriott -- Farmington Loan ($37.3 million -- 2.8%
of the pool), which is secured by a 381-room full service Marriott
hotel located in Farmington, CT approximately 9 miles southwest of
Hartford, CT. The loan recently transferred to special servicing
due to imminent maturity default, and has a scheduled maturity date
in March 2017.
The remaining fourteen specially serviced loans are secured by a
mix of property types. Moody's estimates an aggregate $100 million
loss for the specially serviced loans (47% expected loss on
average).
Moody's has assumed a high default probability for 20 poorly
performing loans, constituting 22.4% of the pool, and has estimated
an aggregate loss of $68.9 million (a 23% expected loss on average)
from these troubled loans.
Moody's received full year 2015 operating results for 87% of the
pool and full or partial year 2016 operating results for 74% of the
pool. Moody's weighted average conduit LTV is 95% compared to 104%
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 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 1.45X and 1.16X,
respectively, compared to 1.29X and 0.99X 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 11.6% of the pool balance.
The largest loan is the Sabre Headquarters Loan ($79.5 million --
6.0% of the pool), which is secured by two single tenant office
buildings that service as the Worldwide HQ for Sabre Holdings
located in Southlake, TX approximately 30 miles northwest of Dallas
and 15 miles from Dallas-Ft. Worth Airport. The property is 100%
occupied by Sabre with a triple net lease through March 2022. The
property received Silver LEED Certification in 2003. The loan is on
the master servicer's watchlist due to its upcoming maturity date
in April 2017.
The second largest loan is the St. Julien Hotel & Spa Loan ($39.7
million -- 3.0% of the pool), which is secured by a 201 room luxury
hotel and spa which was built in 2005 and is located in Boulder,
Colorado approximately 4 miles southwest of the airport. The loan
is on the master servicer's watchlist due to its upcoming maturity
date in April 2017.
The third largest loan is the Temple U Health System Headquarters
Loan ($35.5 million -- 2.7% of the pool), which is secured by a
265,634 square foot office building located in North Philadelphia,
PA. The property was built in 1920 and later renovated in 2006. The
largest tenant Temple University Health Systems, leases
approximately 90% of the NRA through April 2023. The property is
currently 100% leased and remains unchanged since Moody's last
review. The loan is on the master servicer's watchlist due to its
upcoming maturity date in May 2017.
JP MORGAN 2017-1: Fitch Assigns 'Bsf' Rating to Cl. B-5 Debt
------------------------------------------------------------
Fitch Ratings has assigned ratings to J.P. Morgan Mortgage Trust
2017-1 (JPMMT 2017-1):
-- $626,778,000 class A-1 exchangeable certificates 'AA+sf';
Outlook Stable;
-- $586,771,000 class A-2 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $440,078,000 class A-3 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $195,000,000 class A-4 certificates 'AAAsf'; Outlook Stable;
-- $359,104,000 class A-5 certificates 'AAAsf'; Outlook Stable;
-- $124,945,000 class A-6 certificates 'AAAsf'; Outlook Stable;
-- $351,294,000 class A-7 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $226,349,000 class A-8 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $183,549,000 class A-9 certificates 'AAAsf'; Outlook Stable;
-- $42,800,000 class A-10 certificates 'AAAsf'; Outlook Stable;
-- $61,732,000 class A-11 certificates 'AA+sf'; Outlook Stable;
-- $967,130,000 class A-12 exchangeable certificates 'AA+sf';
Outlook Stable;
-- $905,398,000 class A-13 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $679,049,000 class A-14 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $340,352,000 class A-15 exchangeable certificates 'AA+sf';
Outlook Stable;
-- $318,627,000 class A-16 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $238,971,000 class A-17 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $554,104,000 class A-18 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $967,130,000 class A-X-1 notional certificates 'AAAsf';
Outlook Stable;
-- $11,833,000 class B-1 certificates 'AAsf'; Outlook Stable;
-- $21,091,000 class B-2 certificates 'Asf'; Outlook Stable;
-- $11,318,000 class B-3 certificates 'BBBsf'; Outlook Stable;
-- $6,687,000 class B-4 certificates 'BBsf'; Outlook Stable;
-- $3,601,000 class B-5 certificates 'Bsf'; Outlook Stable.
Fitch will not be rating the following certificates:
-- $967,130,000 class A-X-2 notional exchangeable certificates;
-- $7,202,422 class B-6 certificates;
-- $655,504,661 class A-IO-S certificates.
KEY RATING DRIVERS
High-Quality Mortgage Pool (Positive): The collateral pool consists
of high-quality 30-year, fully amortizing conforming and
non-conforming loans to borrowers with strong credit profiles and
low leverage. The pool has a weighted average (WA) FICO score of
770 and an original combined loan-to-value (CLTV) ratio of 69.7%.
The collateral attributes of the pool are generally consistent with
recent JPMMT transactions, with some notable differences in liquid
reserves and seasoning.
ADDITIONAL RATING DRIVERS
Tier 3 Representation and Warranty Framework (Concern): Fitch
believes the value of the rep and warranty framework is diluted by
the presence of qualifying and conditional language in conjunction
with sunset provisions, which reduces lender breach liability.
While Fitch believes the high credit-quality pool and clean
diligence results mitigate these risks, it considered the weaker
framework in its analysis.
Strong Due Diligence Results (Positive): Loan-level due diligence
was performed on 100% of the non-conforming loans and a statistical
sample of the conforming loans. The diligence sample size and scope
for the agency loans are consistent with those of other Fitch-rated
transactions that include Chase-originated collateral. All the
reviewed loans received a third-party 'A' or 'B' grade, indicating
strong underwriting practices and sound quality control
procedures.
Above-Average Originator (Positive): Based on its review of Chase's
origination platform for agency loans, Fitch believes the bank has
strong processes and procedures in place, and views Chase's ability
to originate and acquire agency loans as above average. Fitch
reduced its PD by 50bps at the 'AAAsf' stress scenario to account
for the strong operational quality of the Chase agency collateral.
Roughly 59% of the agency loans were originated by correspondent
sellers that have been approved by Chase. Most of these sellers are
approved to deliver loans on a delegated basis. Chase has a strong
approval and monitoring process in place for correspondent
counterparties, which includes strict approval criteria for new
correspondents.
Geographically Diverse Pool (Concern): The pool's primary
concentration is in California, representing approximately 49% of
the pool. However, no California MSA has a concentration of over
15%. The New York and Washington, D.C. MSAs account for 8.6% and
6.1% of the pool, respectively. The increased geographic
distribution resulted in a minor probability of default (PD)
penalty of 1%, which is lower than Fitch has observed in previous
JPMMT deals.
Straightforward Deal Structure (Positive): The mortgage cash flow
and loss allocation are based on a senior-subordinate,
shifting-interest structure, whereby the subordinate classes
receive only scheduled principal and are locked out from receiving
unscheduled principal or prepayments for five years. The lockout
feature helps maintain subordination for a longer period should
losses occur later in the life of the deal. The applicable credit
support percentage feature redirects subordinate principal to
classes of higher seniority if specified credit enhancement (CE)
levels are not maintained.
To mitigate tail risk, which arises as the pool seasons and fewer
loans are outstanding, a subordination floor of 0.50% of the
original balance will be maintained for the certificates.
Leakage from Reviewer Expenses (Concern): The trust is obligated
to reimburse the breach reviewer, Pentalpha Surveillance LLC
(Pentalpha), each month for any reasonable out-of-pocket expenses
incurred if the company is requested to participate in any
arbitration, legal or regulatory actions, proceedings or hearings.
These expenses include Pentalpha's legal fees and other expenses
incurred outside its annual fee schedule and are not subject to a
cap or certificateholder approval.
While Fitch accounted for the potential additional costs by
upwardly adjusting its loss estimation for the pool, Fitch views
this construct as adding potentially more ratings volatility than
those that do not have this type of provision.
Extraordinary Expense Adjustment (Concern): Extraordinary expenses,
which include loan file review costs, arbitration expenses for
enforcement of the reps and additional fees of Pentalpha, will be
taken out of available funds and not accounted for in the
contractual interest owed to the bondholders. This can result in
principal and interest shortfalls to the bonds, starting from the
bottom of the capital structure. To account for the risk of these
noncredit events reducing subordination, Fitch adjusted its loss
expectations upward by 35bps at the 'AAAsf' level and 30bps at the
'AA+sf' level.
RATING SENSITIVITIES
Fitch's analysis incorporates a sensitivity analysis to demonstrate
how the ratings would react to steeper market value declines (MVDs)
than assumed at the MSA level. 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 may be considered in the surveillance of the transaction.
Three sets of sensitivity analyses were conducted at the state and
national levels to assess the effect of higher MVDs for the subject
pool.
This defined stress sensitivity analysis demonstrates how the
ratings would react to steeper market value declines at the
national level. The analysis assumes market value declines of 10%,
20% and 30%, in addition to the model-projected 5.1%. The analysis
indicates that 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'.
JP MORGAN 2017-1: Moody's Assigns Ba3 Rating to Cl. B-5 Debt
------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to 24
classes of residential mortgage-backed securities (RMBS) issued by
J.P. Morgan Mortgage Trust 2017-1. The ratings range from Aaa (sf)-
Ba3 (sf).
The certificates are supported by 1,645 30-year, fully-amortizing
fixed rate mortgage loans with a total balance of $1,028,862,422 as
of the Feb 1, 2017 Cut-off date. Unlike previous JPMMT deals, the
pool consists of a large percentage (36.3% by loan balance, 724
loans) of high-balance conforming fixed-rate mortgages originated
by JPMorgan Chase Bank, N.A. (Chase) and underwritten to the
government-sponsored enterprise (GSE) guidelines in addition to 921
prime jumbo non-conforming mortgages purchased by J.P. Morgan
Mortgage Acquisition Corp. (JPMMAC) from various originators and
aggregators. Chase will be the servicer on the conforming loans,
while Shellpoint Mortgage Servicing will be the servicer on the
prime jumbo loans. Wells Fargo Bank, N.A. will be the master
servicer and securities administrator. U.S. Bank Trust National
Association will be the trustee. Pentalpha Surveillance LLC will be
the representations and warranties breach reviewer. Distributions
of principal and interest and loss allocations are based on a
typical shifting-interest 'I' structure that benefits from a
subordination floor.
The complete rating actions are as follows:
Issuer: J.P. Morgan Mortgage Trust 2017-1
Cl. A-1, Definitive Rating Assigned Aaa (sf)
Cl. A-2, Definitive Rating Assigned Aaa (sf)
Cl. A-3, Definitive Rating Assigned Aaa (sf)
Cl. A-4, Definitive Rating Assigned Aaa (sf)
Cl. A-5, Definitive Rating Assigned Aaa (sf)
Cl. A-6, Definitive Rating Assigned Aaa (sf)
Cl. A-7, Definitive Rating Assigned Aaa (sf)
Cl. A-8, Definitive Rating Assigned Aaa (sf)
Cl. A-9, Definitive Rating Assigned Aaa (sf)
Cl. A-10, Definitive Rating Assigned Aaa (sf)
Cl. A-11, Definitive Rating Assigned Aa1 (sf)
Cl. A-12, Definitive Rating Assigned Aaa (sf)
Cl. A-13, Definitive Rating Assigned Aaa (sf)
Cl. A-14, Definitive Rating Assigned Aaa (sf)
Cl. A-15, Definitive Rating Assigned Aaa (sf)
Cl. A-16, Definitive Rating Assigned Aaa (sf)
Cl. A-17, Definitive Rating Assigned Aaa (sf)
Cl. A-18, Definitive Rating Assigned Aaa (sf)
Cl. A-X-1, Definitive Rating Assigned Aaa (sf)
Cl. B-1, Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Definitive Rating Assigned A2 (sf)
Cl. B-3, Definitive Rating Assigned Baa2 (sf)
Cl. B-4, Definitive Rating Assigned Ba1 (sf)
Cl. B-5, Definitive Rating Assigned Ba3 (sf)
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected cumulative net loss on the aggregate pool average
0.40% in a base scenario and reaches 5.05% at a stress level
consistent with the Aaa ratings.
We calculated losses on the pool using Moody's US Moody's
Individual Loan Analysis (MILAN) model based on the loan-level
collateral information as of the Cut-off Date. Loan-level
adjustments to the model results included adjustments to
probability of default for higher and lower borrower debt-to-income
ratios (DTIs), for borrowers with multiple mortgaged properties,
self-employed borrowers, and for the default risk of Homeownership
association (HOA) properties in super lien states. Moody's final
loss estimates also incorporate adjustments for originator
assessments, the financial strength of Representation & Warranty
(R&W) providers, and extraordinary expenses. For the conforming
loans, Moody's modeled Moody's severity estimate using conforming
loan-specific severity data published by Freddie Mac.
Moody's base its definitive ratings on the certificates on the
credit quality of the mortgage loans, the structural features of
the transaction, Moody's assessments of the aggregators,
originators and servicers, the strength of the third party due
diligence and the representations and warranties (R&W) framework of
the transaction.
Collateral Description
JPMMT 2017-1 is a securitization of a pool of 1,645 30-year,
fully-amortizing mortgage loans with a total balance of
$1,028,862,422 as of the cutoff date, with a weighted average (WA)
remaining term to maturity of 355 months, and a WA seasoning of
five months. The borrowers in this transaction have high FICO
scores and sizeable equity in their properties. The WA FICO score
is 775 and the WA original combined loan-to-value ratio (CLTV) is
69.7%. The characteristics of the loans underlying the pool are
generally comparable to other JPMMT transactions backed by 30-year
fixed mortgage loans that Moody's has recently rated.
In this transaction, 36.3% of the pool by loan balance was
underwritten by Chase to Fannie Mae's and Freddie Mac's guidelines
(conforming loans). Moreover, the conforming loans in this
transaction have a high average current loan balance at $515,687.
The higher conforming loan balance of loans in JPMMT 2017-1 is
attributable to the greater amount of properties located in
high-cost areas, such as the metro areas of New York City and San
Francisco.
Approximately 26% (by loan balance) of the pool consists of loans
acquired by JPMMAC either directly or indirectly from TH TRS Corp.
(Two Harbors). These loans were acquired by JPMMAC either directly
from TH TRS Corp. (7.3% by loan balance) or indirectly through
MAXEX, LLC, (MAXEX) (18.8% by loan balance), a financial services
technology company which operates a mortgage loan exchange for the
purchase and sale of mortgage loans called LNEX. MAXEX acts a
central clearinghouse and single counterparty to exchange
participants. As an independent market utility, MAXEX can provide
consistency through standardized guidelines and procedures
including a pre-settlement independent loan audit on all loans.
Moreover, all Two Harbors loans were reviewed by an independent
third-party due diligence firm, who checked the loans for adherence
to Two Harbors guidelines, regulatory compliance and valuation.
Among the originators contributing more than 10% to the pool,
Quicken Loans Inc. represents 14.8% of the outstanding principal
balance of the mortgage loans and United Shore Financial Services,
LLC represents 14.8% of the outstanding principal balance of the
mortgage loans. The remaining originators each account for less
than 10% of the principal balance of the loans in the pool and
provide R&W to the transaction.
Self-employed borrowers constitute 18.3% (by loan balance) of the
prime jumbo portion of the pool. For self-employed borrowers, the
variable nature of self-employed income presents a greater risk
than the fixed income typically derived from salaried employment.
To address this risk, originators have verified self-employed
income by reviewing two years of tax returns as well as requiring a
greater number of reserves than those required of salaried
borrowers. On average, the self-employed borrowers have
approximately $282,000 in reserves compared to $217,000 for
salaried borrowers.
More than 50% of the mortgage loans in JPMMT 2017-1 were originated
through correspondent and broker channels, which is in contrast to
recent prime jumbo transactions where on average 70% are originated
through the retail channel. Typically, loans originated through a
broker or correspondent channel do not perform as well as loans
originated through a retail channel, although performance is likely
to vary by originator.
Third-party Review
The transaction benefits from third-party review on 100% of the
prime jumbo loans, 100% of the conforming loans for regulatory
compliance, and 36% of the conforming loans for credit and
valuation. Opus Capital Markets Consultants LLC (Opus) reviewed 238
loans in the initial pool, AMC Diligence, LLC (AMC) reviewed 358
loans in the initial pool and Clayton Services LLC (Clayton)
reviewed 340 loans in the initial pool. AMC reviewed a sample of
the conforming loans for credit and property representing 36% of
the conforming pool (271 loans randomly selected by AMC from an
initial pool of 743 conforming loans). AMC reviewed 100% of the
conforming loans for compliance. The due diligence results confirm
compliance with the originators' underwriting guidelines for the
vast majority of loans, no material compliance issues, and no
material valuation issues. The loans that had exceptions to the
originators' underwriting guidelines had significant compensating
factors that were documented.
Representations & Warranties (R&W) Framework
The sellers have provided clear R&Ws, including an unqualified
fraud R&W. There is a provision for binding arbitration in the
event of a dispute between the trust and the R&W provider
concerning R&W breaches. Further, R&W breaches are evaluated by an
independent third party using a set of objective criteria. The R&W
providers vary in financial strength. JPMorgan Chase Bank, N. A.
(rated Aa2), who is the R&W provider for approximately 36.3% (by
loan balance) of the loans, is the strongest R&W provider. For
loans that JPMMAC acquired via the MAXEX platform, Central Clearing
and Settlement LLC, (CCS) MAXEX's subsidiary and seller under the
Assignment, Assumption and Recognition agreement (AAR), will make
the R&Ws. The loans where CCS is the R&W provider represent 18.8%
by loan balance of the pool. Under the AAR, JPMMAC will assign to
the trust a backstop made by Five Oaks Acquisition Corp. (Five
Oaks) where Five Oaks backstops CCS in the event that CCS is
insolvent.
Tail Risk & Subordination Floor
This deal has a standard shifting-interest structure, with a
subordination floor to protect against losses that occur late in
the life of the pool when relatively few loans remain (tail risk).
When the total senior subordination is less than 0.50% of the
original pool balance ($5,144,312), the subordinate bonds do not
receive any principal and all principal is then paid to the senior
bonds. In addition, if the subordinate percentage drops below 6.00%
of current pool balance, the senior distribution amount will
include all principal collections and the subordinate principal
distribution amount will be zero. The subordinate bonds themselves
benefit from a floor. When the total current balance of a given
subordinate tranche plus the aggregate balance of the subordinate
tranches that are junior to it amount to less than 0.70% of the
original pool balance ($7,202,422), those tranches do not receive
principal distributions. Principal those tranches would have
received are directed to pay more senior subordinate bonds
pro-rata.
Net WAC
The net WAC definition is the greater of (1) (a) the weighted
average of the net mortgage rates of the mortgage loans in that
group as of the first day of the related due period, weighted on
the basis of their stated principal balances, minus (b) the
reviewer annual fee rate for such distribution date and (2) zero.
The certificates that are at risk are the lockout classes,
especially Class B-6, which has the longest weighted average life.
Extraordinary Trust Expenses
Extraordinary expenses, which include expenses to be reimbursed to
the trustee, securities administrator and to the reviewer, as well
as expenses related to enforcement for breach of R&Ws and others,
will be taken out of the available distribution amount, which
decreases funds available for payment of the certificates.
Factors that would lead to an upgrade or downgrade of the ratings:
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
LCCM TRUST 2014-909: DBRS Confirms BB Rating on Class E Debt
------------------------------------------------------------
DBRS Limited confirmed the ratings on the following classes of
Commercial Mortgage Pass-Through Certificates (the Certificates)
issued by LCCM 2014-909 Mortgage Trust as follows:
-- Class A at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
All trends are Stable.
The rating confirmations reflect the stable performance of the
transaction. The collateral consists of the leasehold interest in a
32-storey, 1.3 million-square foot (sf) Class A LEED
Silver-certified office building located in the Plaza District
submarket in Midtown Manhattan. Built in 1968, the property is
currently under a ground lease through May 31, 2041, with a flat
annual payment of $1.6 million. The loan is sponsored by Vornado
Realty Trust, which has an ownership or management interest in over
20 million sf of office space in Manhattan.
As of the October 2016 rent roll, the collateral was 99.8%
occupied, remaining in line with the October 2015 rent roll and
issuance occupancy rates reported at 99.9% and 99.8%, respectively.
The largest tenant continues to be the United States Postal Service
(USPS), which occupies 36.7% of the net rentable area (NRA) through
October 2018. The tenant leases space from the sub-basement through
the fourth floor of the subject. Inclusive of four five-year
extension options, the USPS lease extends into October 2038. USPS
pays below-market rent of $2.23 per square foot (psf), providing a
source of long-term future upside potential. DBRS estimates the
market rent for the USPS space to be $30 psf gross.
Since February 2016, Allegheny Energy Services (3.5% of the NRA,
paid an average rental rate of $72 psf) and Citibank (4.3% of the
NRA, paid an average rental rate of $53 psf) have both vacated the
property. DBRS is currently awaiting a response from the servicer
regarding the replacement tenants and lease details.
Comparing the October 2016 and October 2015 rent rolls, it appears
as though CMGRP Inc., Morrison Cohen LLP and Geller & Company have
all increased their footprints at the property by 31,323 sf (2.3%
of the NRA at $50 psf), 65,068 sf (4.8% of the NRA at $70 psf) and
31,323 sf (2.3% of the NRA at $61 psf), respectively. The average
gross rental rate for the collateral excluding the USPS space is
$57.12 psf. According to CoStar, the Plaza District submarket
reports a 9.4% vacancy rate with an average gross rental rate of
$71.11 psf.
The annualized Q3 2016 OSAR reported a 1.97 times (x) debt service
coverage ratio, a decline from 2.13x at YE2015 and 2.11x at YE2014.
The DBRS original analyzed figure was 2.03x.
The ratings assigned to Class B through Class E materially deviate
from the lower ratings implied by the Large Loan Single-borrower
Parameters. DBRS considers it to be a methodology deviation when
there is a rating differential of three or more notches between the
assigned rating and the rating implied by the Large Loan
Single-borrower Parameters; in this case, the assigned ratings
reflect the qualitative loan-level factors that are not precisely
captured in the quantitative results.
LIMEROCK CLO III: Moody's Affirms Ba3 Rating on $31MM Cl. D Notes
-----------------------------------------------------------------
Moody's Investors Service has upgraded the rating on the following
note issued by Limerock CLO III, Ltd.:
US$33,000,000 Class C Deferrable Mezzanine Secured Floating Rate
Notes due 2026 (the "Class C Notes"), Upgraded to Baa2 (sf);
previously on November 14, 2014 Definitive Rating Assigned Baa3
(sf)
Moody's also affirmed the ratings on the following notes:
US$31,500,000 Class D Deferrable Junior Secured Floating Rate Notes
due 2026 (the "Class D Notes"), Affirmed Ba3 (sf); previously on
November 14, 2014 Definitive Rating Assigned Ba3 (sf)
US$12,500,000 Class E Deferrable Junior Secured Floating Rate Notes
due 2026 (the "Class E Notes"), Affirmed B3 (sf); previously on
November 14, 2014 Definitive Rating Assigned B3 (sf)
Limerock CLO III, Ltd., issued in November 2014, is a
collateralized loan obligation (CLO) backed primarily by a
portfolio of senior secured loans. The transaction's reinvestment
period will end in October 2018.
RATINGS RATIONALE
These rating actions are primarily a result of the refinancing of
the Class A-1, A-2a, A-2b, and B notes. In particular, Moody's
expects the deal to benefit from an increase in excess spread
resulting from the recent refinancing. Additionally, the deal will
continue to benefit from higher weighted average recovery rate
(WARR) level compared to its covenant level. Moody's also notes
that the transaction's reported overcollateralization ratios are
stable.
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 commence 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.
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% (2266)
Class C: +3
Class D: +1
Class E: +2
Moody's Adjusted WARF + 20% (3398)
Class C: -2
Class D: -1
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 $491.0 million, defaulted par of $1.7
million, a weighted average default probability of 23.60% (implying
a WARF of 2832), a weighted average recovery rate upon default of
49.20%, a diversity score of 75 and a weighted average spread of
3.5%.
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.
LNR CDO 2002-1: S&P Lowers Rating on 5 Tranches to 'D'
------------------------------------------------------
S&P Global Ratings lowered its ratings on five classes from LNR CDO
2002-1 Ltd., a U.S. collateralized debt obligation (CDO)
transaction primarily backed by commercial mortgage-backed
securities. At the same time, S&P discontinued the ratings on the
two remaining classes in the transaction.
The discontinuances of the ratings on the class D-FL and D-FX notes
follow their full paydown on the Feb. 24, 2017, payment date.
Though the paydowns resulted in classes E-FL, E-FX, and E-FXD (all
pari passu, collectively the class E notes) becoming the
senior-most notes, both classes E and F (which has two pari passu
classes, F-FX and F-FL) have been deferring their interest and have
an accumulated deferred interest balance. Since the balance of the
assets remaining in the transaction (as of the January and February
2017 monthly trustee reports) is significantly lower than the
balance due on the two classes, S&P lowered their ratings to 'D
(sf)' to reflect its view that the classes are unlikely to be
repaid in full.
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 further rating actions as
it deems necessary.
RATINGS LOWERED
LNR CDO 2002-1 Ltd.
Class Rating
To From
E-FL D (sf) CC (sf)
E-FX D (sf) CC (sf)
E-FXD D (sf) CC (sf)
F-FL D (sf) CC (sf)
F-FX D (sf) CC (sf)
RATINGS DISCONTINUED
LNR CDO 2002-1 Ltd.
Class Rating
To From
D-FL NR CCC- (sf)
D-FX NR CCC- (sf)
NR--Not rated.
MCF CLO V: S&P Assigns Preliminary BB- Rating on Class E Notes
--------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to MCF CLO V
LLC's $262.25 million floating-notes.
The note issuance is a collateralized loan obligation transaction
backed by middle market speculative-grade senior secured term
loans.
The preliminary ratings are based on information as of Feb. 22,
2017. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The diversified collateral pool, which consists primarily of
middle market speculative-grade senior secured term loans
that are governed by collateral quality tests. The credit
enhancement provided through the subordination of cash
flows, excess spread, and overcollateralization.
-- The collateral manager's experienced team, which can affect
the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading. The
transaction's legal structure, which is expected to be
bankruptcy remote.
PRELIMINARY RATINGS ASSIGNED
MCF CLO V LLC
Class Rating Amount
(mil. $)
A AAA (sf) 173.50
B AA (sf) 25.00
C A (sf) 23.50
D BBB- (sf) 18.00
E BB- (sf) 22.25
Subordinate notes NR 40.595
NR--Not rated.
ML-CFC COMMERCIAL 2007-9: S&P Cuts Rating on 2 Tranches to D
------------------------------------------------------------
S&P Global Ratings raised its ratings on the class AM and AM-A
commercial mortgage pass-through certificates from ML-CFC
Commercial Mortgage Trust 2007-9, a U.S. commercial mortgage-backed
securities (CMBS) transaction. In addition, S&P lowered its
ratings to 'D (sf)' on the class AJ and AJ-A certificates and
affirmed its ratings on the class A-4 and XC certificates from the
same transaction.
S&P's rating actions on the principal- and interest-paying
certificates follow its analysis of the transaction, primarily
using its criteria for rating U.S. and Canadian CMBS transactions,
which included a review of the credit characteristics and
performance of the remaining assets in the pool, the transaction's
structure, and the liquidity available to the trust.
S&P raised its ratings on classes AM and AM-A to reflect its
expectation of the available credit enhancement for these classes,
which S&P believes is greater than its most recent estimate of
necessary credit enhancement for the rating levels.
S&P lowered its ratings on classes AJ and AJ-A to 'D (sf)' because
S&P expects the accumulated interest shortfalls to remain
outstanding for the foreseeable future.
According to the Feb. 14, 2017, trustee remittance report, the
current monthly interest shortfalls totaled $402,111 and resulted
primarily from:
-- Appraisal subordinate entitlement reduction amounts totaling
$210,101;
-- Other shortfalls totaling $56,682;
-- Shortfalls due to loan interest rate modifications totaling
$46,638;
-- Interest adjustments totaling $46,553; and
-- Special servicing fees totaling $42,243.
The current interest shortfalls affected classes subordinate to and
including classes AJ and AJ-A.
The affirmation on the class A-4 certificates reflect S&P's
expectation that the available credit enhancement for the class
will be within its estimate of the necessary credit enhancement
required for the current rating.
S&P affirmed its 'AAA (sf)' rating on the class XC interest-only
(IO) certificates based on its criteria for rating IO securities.
TRANSACTION SUMMARY
As of the Feb. 14, 2017, trustee remittance report, the collateral
pool balance was $1.24 billion, which is 44.1% of the pool balance
at issuance. The pool currently includes 155 loans (reflecting
cross-collateralized and cross-defaulted loans) and two real
estate-owned assets, down from 245 loans at issuance. Six of these
assets ($94.8 million, 7.6%) are with the special servicer
(reflecting the 534 Broad Hollow Road A Note and B Note as one
loan), 23 ($285.0 million, 23%) are defeased, and 47 ($250.8
million, 20.2%) are on the master servicers' combined watchlist.
The master servicers, Wells Fargo Bank N.A. and Midland Loan
Services reported financial information for 96.9% of the
nondefeased loans in the pool, of which 53.1% was partial year or
year-end 2016 data, and 46.9% was year-end 2015 data.
S&P calculated an S&P Global Ratings weighted average debt service
coverage (DSC) of 1.22x and loan-to-value (LTV) ratio of 90% using
an S&P Global Ratings weighted average capitalization rate of
7.86%. The DSC, LTV, and capitalization rate calculations exclude
five of the six specially serviced assets, 23 defeased loans, and
one subordinate B note ($9.1 million, 0.7%). The top 10
nondefeased loans have an aggregate outstanding pool trust balance
of $299.0 million, or 24.1%. Using servicer-reported numbers, S&P
calculated an S&P Global Ratings weighted average DSC and LTV of
1.17x and 90.2%, respectively, for nine of the top 10 nondefeased
performing loans. The remaining loan is specially serviced and
discussed below.
To date, the transaction has experienced $286.8 million in
principal losses, or 10.2% of the original pool trust balance. S&P
expects losses to reach approximately 11.9% of the original pool
trust balance in the near term, based on losses incurred to date
and additional losses we expect upon the eventual resolution of
five of the six specially serviced assets. One of the assets, 534
Broad Hollow Road has recently been modified into A note ($11.8
million, 1.0%) and B note ($9.1 million, 0.7%).
CREDIT CONSIDERATIONS
As of the Feb. 14, 2017, trustee remittance report, six assets in
the pool were with the special servicer, LNR Partners LLC (LNR).
Details of the three largest specially serviced assets, one of
which is a top 10 nondefeased loan, are:
The Northwood Centre loan ($46.2 million, 3.7%) is the largest
nondefeased loan in the trust and has a total reported exposure of
$48.8 million. The loan is secured by a mixed-use property
totaling 491,086 sq. ft. located in Tallahassee, Fla. The loan was
transferred to the special servicer on March 9, 2016, due to
imminent default because Florida, which occupies about 81.0% of net
rentable area, voted on March 6, 2016, to prohibit any rent payment
on the property due to environmental issues at the property. Per
LNR, it is dual tracking foreclosure while discussing a potential
workout with the borrower. An appraisal reduction amount (ARA) of
$38.2 million is in effect against the loan. S&P expects a
significant loss upon the loan's eventual resolution.
534 Broad Hollow Road A Note and B Note (aggregate balance of $20.9
million) is the second-largest loan with the special servicer and
has a total reported exposure of $20.9 million. The loan is
secured by an office property totaling 113,904 sq. ft. located in
Melville, NY. The loan was transferred to the special servicer on
July 21, 2015, due to imminent default. The loan has been modified
as of December 2016, resulting in the bifurcation of A and B notes
and an extension of the maturity date to July 2019 with an option
to extend until July 2020.
The 3M Building Fairview loan ($14.5 million, 1.2%) is the
third-largest loan with the special servicer and has a total
reported exposure of $14.5 million. The loan is secured by an
industrial property totaling 410,400 sq. ft. located in DeKalb,
Ill. The loan was transferred to the special servicer on Aug. 29,
2016, due to imminent default because of borrower ownership
transfers without lender consent. In addition, the borrower failed
to cooperate in setting up the cash flow sweep, which was supposed
to have been triggered upon 3M, the sole tenant at the property,
failing to renew its lease 18 months before its lease expiration in
July 2017. The loan remains current and is due for the March 5,
2017, payment. The reported DSC and occupancy as of year-end 2015
were 1.90x and 100%, respectively. S&P expects a minimal loss upon
the loan's eventual resolution.
The three remaining assets with the special servicer have
individual balances that represent less than 0.7% of the total pool
trust balance. S&P estimated losses for five of the six specially
serviced assets, arriving at a weighted average loss severity of
65.5%.
With respect to the specially serviced assets noted above, a
minimal loss is less than 25%, a moderate loss is 26%-59%, and a
significant loss is 60% or greater.
RATINGS RAISED
ML-CFC Commercial Mortgage Trust 2007-9
Commercial mortgage pass-through certificates
Rating
Class To From
AM AA- (sf) BBB+ (sf)
AM-A AA- (sf) BBB+ (sf)
RATINGS LOWERED
ML-CFC Commercial Mortgage Trust 2007-9
Commercial mortgage pass-through certificates
Rating
Class To From
AJ D (sf) CCC (sf)
AJ-A D (sf) CCC (sf)
RATINGS AFFIRMED
ML-CFC Commercial Mortgage Trust 2007-9
Commercial mortgage pass-through certificates
Class Rating
A-4 AAA (sf)
XC AAA (sf)
MORGAN STANLEY 2006-IQ11: Fitch Affirms Dsf Rating on 6 Tranches
----------------------------------------------------------------
Fitch Ratings has upgraded three and affirmed eight classes of
Morgan Stanley Capital I Trust, commercial mortgage pass-through
certificates, series 2006-IQ11. A detailed list of rating actions
follows at the end of this press release.
KEY RATING DRIVERS
The upgrades reflect increased credit enhancement from loan
payoffs, scheduled amortization and resolution of specially
serviced loans/assets at better recoveries than previously modeled.
Upgrades were limited as Fitch's analysis included additional
sensitivity tests to address the potential for more severe losses
given the pool's concentration.
Fitch modeled losses of 16.6% of the remaining pool; expected
losses on the original pool balance total 7.9%, including $111.9
million (6.9% of the original pool balance) in realized losses to
date. As of the February 2017 distribution date, the pool's
aggregate principal balance has been reduced by 94.4% to $90.1
million from $1.62 billion at issuance. The pool paid down by
$292.7 million since the last rating action (76.5% of the
outstanding pool balance at the last rating action). Interest
shortfalls are currently affecting classes D through P.
Pool Concentrations and Adverse Selection: The pool is concentrated
with only 30 of the original 234 loans remaining. Multifamily loans
comprise 36.8% of the current pool. With the exception of the
co-operative properties (23.6%) located in the New York
metropolitan statistical area, the majority of the remaining
properties in the pool are located in secondary and tertiary
markets.
Loans of Concern: Fitch has designated six loans (19.1%) as Fitch
Loans of Concern (LOCs), which includes the largest (9.5%) and
fifth largest (6.4%) loans, both of which are recent transfers to
special servicing since Fitch's last rating action. The largest
specially serviced loan, which is secured by a retail property in
Lewistown, PA, transferred in April 2016 for maturity default. The
other specially serviced loan, which is secured by an office
property in Mariottsville, MD, transferred in April 2016 for
imminent default, whereby the largest tenant, which accounts for
56% of the square footage has since vacated at the end of 2016. The
four other non-specially serviced LOCs include two retail and two
industrial properties with declines in debt service coverage ratio
and/or tenant rollover concerns.
Strong Amortization: Eleven loans in the pool (21%) are fully
amortizing.
Upcoming Loan Maturities: The loan maturities for the non-specially
serviced loans include 11.4% of the pool in 2018, 16.5% in 2019,
26.9% in 2021 and 17.4% in 2026.
RATING SENSITIVITIES
The Rating Outlook on classes A-J and B is Stable due to increasing
credit enhancement, continued amortization and overall stable
performance of the pool. The class A-J balance is covered by a
combination of co-operative loans and fully amortizing loans. The
class B balance is covered by a combination of fully amortizing
loans and lowly leveraged balloon loans. Further upgrades are
possible with continued increase in credit enhancement or should
loan performance improve significantly. Downgrades, although
unlikely, could occur if losses are greater than expected from the
specially serviced loans, pool performance deteriorates, or loans
default at maturity. Distressed classes may be subject to further
downgrades as additional losses are realized or if losses exceed
Fitch's expectations.
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 revised Outlooks as
indicated:
-- $26.3 million class A-J to 'Asf' from 'BBsf'; Outlook to Stable
from Negative;
-- $30.3 million class B to 'BBsf' from 'CCCsf'; Outlook Stable
assigned;
-- $12.1 million class C to 'CCCsf' from 'Csf'; RE 100%.
In addition, Fitch has affirmed the following classes as
indicated:
-- $21.2 million class D at 'Dsf'; RE 45%;
-- $198,515 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%;
-- $0 class L at 'Dsf'; RE 0%.
Classes A-1, A-1A, A-2, A-3, A-4, and A-M have paid in full. Fitch
does not rate the class M, N, O, P and EI certificates. Fitch
previously withdrew the ratings on the interest-only class X and
X-Y certificates.
MORGAN STANLEY 2011-C2: Fitch Affirms 'B-sf' Rating on H Certs
--------------------------------------------------------------
Fitch Ratings has affirmed 10 classes of Morgan Stanley Capital I
Trust (MSCI) commercial mortgage pass-through certificates series
2011-C2.
KEY RATING DRIVERS
The affirmations reflect the continued expected pay down and
increasing credit enhancement to the senior classes and stable
performance of the majority of the underlying loans.
As of the February 2017 distribution date, 36.3% of the transaction
had been paid down resulting in significantly improved credit
enhancement to the senior classes. There have been no realized
losses to date. Approximately 2.7% of the pool is currently
defeased. Interest shortfalls are currently impacting the non-rated
class J.
The Negative Outlooks on the junior classes, F through H, reflect
concern over potential losses related to the specially serviced,
Towne West Square Mall (6.1% of the pool). There are two additional
Fitch Loans of Concern (3.4%), which have occupancy issues that
Fitch continues to monitor.
Specially Serviced Loan: Towne West Square Mall recently
transferred to special servicing due to imminent monetary default.
Per the most recent servicer reporting, the amortizing loan
remained current. The YTD Sept 2016 servicer-reported NOI DSCR for
the property was 1.30x.
The loan is secured by a 448,760 sf portion of a 945,000 sf
regional mall located in Wichita, KS. Collateral occupancy dropped
after Sear's vacated its anchor space (27.4% of NRA) prior to its
April 2015 lease expiration. Per the September 2016 rent roll,
collateral occupancy had increased to 81.2%. Among new tenants,
Convergys took over a portion of the vacant Sear's space (7.2% of
NRA) in August 2015 to operate as a local call center. However,
Convergys recently announced significant layoffs would be occurring
at this location.
The mall also includes four non-collateral anchors currently
occupied by JC Penney, Dick's Sporting Goods, Dillard's Women's &
Home, and Dillard's Men's & Children's. However, recent local news
articles reported that Dillard's will be closing one of its spaces
and converting the other to a clearance center. Further, the Kmart
located adjacent to the mall is reported to be closing its doors
this March.
Amortization: Approximately 95% of the loans in the pool are
amortizing.
Loan Concentration: The largest loan comprises 18.5% of the pool.
The two largest loans comprise 35.4% of the pool; both of which are
collateralized by portions of regional malls located in Texas.
Property Type and Geographic Concentrations: The transaction has a
high retail property concentration (57.9%). Additionally, there is
a significant percentage of Texas properties at 46.3% with
approximately 27% of the pool located in the Houston metropolitan
area.
Largest Loan: The Deerbrook Mall loan (18.2% of the pool) is
secured by a 554,461 sf portion of a 1.2 million sf super-regional
mall located in Humble, TX, approximately 15 miles northeast of
Houston, TX. The mall features five non-collateral anchors,
including Dillard's, Macy's, Sears, JC Penney and Dick's Sporting
Goods. As of the Sept. 30, 2016 rent roll, the collateral was
approximately 84.1% occupied while the entire mall was reported at
92.4% occupied. Per the servicer, the YTD Sept 2016 NOI DSCR was
1.98x.
RATING SENSITIVITIES
The Negative Outlooks assigned to classes F through H primarily
reflect concern over the specially serviced, Towne West Square
Mall; should performance continue to decline realized losses could
be substantial, and these classes would be subject to downgrade.
Due to the loan's recent transfer to special servicing on Feb. 21,
2017, limited information is currently available on workout plans;
however, resolution is likely to take a significant amount of
time.
Rating Outlooks for classes A-3 through E remain Stable due to the
pool's otherwise overall stable performance and the increasing
credit enhancement related to prior paydowns and scheduled
amortization. There are minimal scheduled loan maturities prior to
2021. Upgrades to classes B through E are unlikely prior to any
resolution of Towne West Square Mall, but may occur with improved
pool performance and additional class pay down or defeasance.
Fitch expects to publish a U.S. CMBS Focus Report providing a
detailed and up-to-date perspective on key credit characteristics
of the transaction and property-level performance of the related
trust loans in the next two weeks.
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:
-- $78.9 million class A-3 at 'AAAsf'; Outlook Stable;
-- $439.5 million class A-4 at 'AAAsf'; Outlook Stable;
-- $518.4 million* class X-A at 'AAAsf'; Outlook Stable;
-- $45.5 million class B at 'AAsf'; Outlook Stable;
-- $50.1 million class C to 'Asf'; Outlook Stable;
-- $31.9 million class D at 'BBB+sf'; Outlook Stable;
-- $50.1 million class E at 'BBB-sf'; Outlook Stable;
-- $15.2 million class F at 'BB+sf'; Outlook to Negative from
Stable;
-- $12.1 million class G at 'BBsf'; Outlook to Negative from
Stable;
-- $15.2 million class H at 'B-sf'; Outlook to Negative from
Stable.
*Notional amount and interest-only
The class A-1 and A-2 certificates have paid in full. Fitch does
not rate the class J or X-B certificates.
MORGAN STANLEY 2017-PRM: DBRS Finalizes (P)BB Rating on Cl. E Certs
-------------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the following
classes of Commercial Mortgage Pass-Through Certificates, Series
MSC 2017-PRME issued by Morgan Stanley Capital I Trust 2017-PRME.
The trends are Stable. The provisional ratings have been finalized
based on information available to DBRS as of February 9, 2017.
-- Class A at AAA (sf)
-- Class X-CP at AAA (sf)
-- Class X-NCP at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
All classes have been privately placed.
The Class X-CP and Class X-NCP balances are notional, and interest
accrual will be calculated based on the balance of the Class A
certificate. DBRS ratings on interest-only (IO) certificates
address the likelihood of receiving interest based on the notional
amounts outstanding. DBRS considers the IO certificates' position
within the transaction payment waterfall when determining the
appropriate rating.
On January 17, 2017, DBRS released a Request for Comment on its
proposed methodology "Rating North American CMBS Interest-Only
Certificates." If this methodology is adopted without changes, DBRS
indicates that potential rating actions could be either downgrades
or confirmations to IO certificates.
The collateral for the transaction consists of five Marriott
brand-managed hotels operating under three different flags in five
different states across the United States. Combined, the hotels
have a total room count of 1,959 keys. DBRS considers three of the
assets, totaling a significant 72.4% of the total loan amount, to
be located in core urban markets. The remaining two properties,
representing 27.6% of the total loan amount, are well located in
established suburban areas with stable demand sources. All five of
the hotels have been owned by the sponsor since 2007, and the
current reported cost basis equates to approximately $559.0 million
($285,350 per key), well in excess of the subject's loan amount.
Furthermore, the sponsor has displayed consistent commitment to the
subject properties, investing roughly $51.7 million ($26,366 per
key) since 2011, with additional funds budgeted for renovations and
upgrades over the next few years.
As with the overall hotel market, ADR and occupancy levels at the
subject properties have been posting strong gains over the past few
years, but more recent periods have been increasing at a declining
rate. DBRS capped underwritten occupancies at levels below recent
historicals to account for new supply coming online over the near
term in each market, as well as the fact that the current
environment could represent a very late phase of the lodging cycle.
The occupancy caps vary by property and market and in each instance
are in line with or below each hotel's five-year historical
average.
As a whole, the portfolio's trailing 12-month (T-12) October 2016
revenue per available room (RevPAR) represented growth of 2.9% over
the YE2015 level. Such increase represents a decline from recent
year-over-year increases of 8.3% at YE2015 and 10.0% at YE2014. The
resulting DBRS underwritten portfolio RevPAR of $173.49 is
approximately 3.4% below the T-12 October 2016 level, 1.2% below
the YE2015 level and 2.1% below the borrower's budget.
Independently, each hotel performs toward the top of its STR
competitive set, as evidenced by the portfolio-wide October T-12
2016 RevPAR index of 119.3%.
Loan proceeds refinanced prior existing debt of $335.5 million that
was securitized across three loans in three separate 2007 CMBS
conduit transactions (WBCMT 2007-C31, WBCMT 2007-C32 and WBCMT
2007-C33) and provided only minimal cash out to the sponsor. As of
Q1 2007, the portfolio had an appraised value of $528.6 million
($269,831 per key), and YE2007 net cash flow (NCF) totaled $38.3
million. Nearly ten years later, the subject's most recent NCF was
reported at $51.4 million as of the T-12 ending October 31, 2016,
representing a 34.1% increase from 2007, and is nearly double the
portfolio's depressed YE2009 NCF of $26.0 million that occurred in
the midst of the Great Recession. HVS Consulting & Valuation
determined the as-is value of the portfolio to be $656.7 million
($335,222 per key), using cap rates ranging from 7.5% to 9.0%. The
DBRS concluded value of $506.0 million ($258,286 per key)
represents a significant 23.0% and a notable 30.9% discount to the
as-is and stabilized appraised values, respectively, and is also
well below the sponsor's total cost basis previously highlighted.
The resulting DBRS loan-to-value of 72.1% is indicative of leverage
that is considered to be very favorable and is further supported by
the loan's strong 13.1% DBRS Debt Yield. The loan has an initial
five-year term followed by two one-year extension options and is IO
throughout.
The ratings assigned to the Certificates by DBRS are based
exclusively on the credit provided by the transaction structure and
underlying trust assets. All classes will be subject to ongoing
surveillance, which could result in upgrades or downgrades by DBRS
after the date of issuance.
NATIONAL COLLEGIATE 2006-4: Moody's Ups Cl. A-4 Debt Rating to Caa1
-------------------------------------------------------------------
Moody's Investors Service upgraded the ratings of 14 classes of
notes and confirmed the ratings of 2 classes of notes in 9 National
Collegiate Student Loan Trust (NCSLT) securitizations backed by
private (i.e. not government-guaranteed) student loans. The loans
are serviced primarily by the Pennsylvania Higher Education
Assistance Agency (PHEAA) with U.S. Bank, N.A. acting as the
special servicer. The administrator for all securitizations is GSS
Data Services, Inc., a wholly owned subsidiary of Goal Structured
Solutions, Inc.
Complete rating actions are:
Issuer: The National Collegiate Master Student Loan Trust I (2001
Indenture)
NCT-2003AR-11, Upgraded to Aaa (sf); previously on Dec 1, 2016 B1
(sf) Placed Under Review for Possible Upgrade
NCT-2003AR-12, Upgraded to Caa3 (sf); previously on Jun 3, 2013
Confirmed at Ca (sf)
Issuer: National Collegiate Student Loan Trust 2006-1
Cl. A-4, Upgraded to Aaa (sf); previously on Dec 1, 2016 A2 (sf)
Placed Under Review for Possible Upgrade
Cl. A-5, Upgraded to B1 (sf); previously on Jun 3, 2013 Downgraded
to Caa3 (sf)
Issuer: National Collegiate Student Loan Trust 2006-2
Cl. A-3, Upgraded to Aaa (sf); previously on Dec 1, 2016 Baa2 (sf)
Placed Under Review for Possible Upgrade
Issuer: National Collegiate Student Loan Trust 2006-3
Cl. A-4, Upgraded to Aaa (sf); previously on Dec 1, 2016 Baa1 (sf)
Placed Under Review for Possible Upgrade
Cl. A-5, Upgraded to Ba1 (sf); previously on Jun 3, 2013 Downgraded
to B1 (sf)
Issuer: National Collegiate Student Loan Trust 2006-4
Cl. A-3, Upgraded to Aa1 (sf); previously on Dec 1, 2016 Baa1 (sf)
Placed Under Review for Possible Upgrade
Cl. A-4, Upgraded to B1 (sf); previously on Jun 20, 2014 Downgraded
to Caa2 (sf)
Issuer: National Collegiate Student Loan Trust 2007-1
Cl. A-3, Upgraded to A2 (sf); previously on Dec 1, 2016 Baa3 (sf)
Placed Under Review for Possible Upgrade
Cl. A-4, Upgraded to Caa1 (sf); previously on Jun 20, 2014
Downgraded to Caa3 (sf)
Issuer: National Collegiate Student Loan Trust 2007-2
Cl. A-2, Upgraded to Aaa (sf); previously on Dec 1, 2016 A2 (sf)
Placed Under Review for Possible Upgrade
Cl. A-3, Upgraded to Aa3 (sf); previously on Dec 1, 2016 Baa3 (sf)
Placed Under Review for Possible Upgrade
Cl. A-4, Upgraded to Caa1 (sf); previously on Jun 20, 2014
Downgraded to Caa3 (sf)
Issuer: National Collegiate Student Loan Trust 2007-3
Cl. A-3-AR-1, Confirmed at B1 (sf); previously on Dec 1, 2016 B1
(sf) Placed Under Review for Possible Upgrade
Issuer: National Collegiate Student Loan Trust 2007-4
Cl. A-3-AR-1, Confirmed at B1 (sf); previously on Dec 1, 2016 B1
(sf) Placed Under Review for Possible Upgrade
RATINGS RATIONALE
The primary rationale for the upgrades in the 6 discrete trusts
(NCSLT 2006-1 to NCSLT 2007-2) is the continued build-up in credit
enhancement supporting the A-Class notes as a result of the rapid
pay down of senior notes in sequential pay structures. Although the
ratios of total assets to total liabilities have declined to a
range of 65%-74% as of January 2017 from a range of 68%-76% as of
January 2016, the senior class A-tranches have benefitted from
rapid deleveraging. Subordination and overcollateralization
supporting senior A-classes increased to a range of 85%-103% from a
range of 85%-101%. Moody's expected lifetime net collateral losses
has decreased to a range of 36%-47% from a range of 38%-51%. The
rating actions also reflect Moody's view that the probability of an
occurrence of an event of default (EOD) is low. Therefore, the
ratings on the A-class bonds continue to reflect sequential
principal payments and the resulting differentiation in credit
support amongst the senior tranches.
The rationale for the upgrades of Classes 2003AR-11 and 2003AR-12
in The National Collegiate Master Student Loan Trust I (2001
Indenture) follows a similar rationale to the upgrades noted above.
Although the Master Trust has a single A-Class structure, the top
pay Class 2003AR-11 and the next in line 2003AR-12 notes continue
to build credit enhancement due to the sequential pay down of the
2003AR-11 note. Since January 2016, the 2003AR-11 has paid down 88%
of its principal.
In contrast, the pro-rata treatment between the Class A-3-L and the
auction rate securities in NCSLT 2007-3 and 2007-4 has prevented
the top pay auction rate note (ie, the Class A-3-AR-1 notes in both
transactions) from significantly deleveraging. Since January 2016,
the Class A-3-AR-1 notes have only paid down 48% of its principal.
Under Moody's current cash flow models, the notes are not able to
withstand stress levels greater than the B1 rating category. Thus,
the ratings for the A-3AR-1 notes have been confirmed. Moody's
expected lifetime net collateral losses for the Master Trust, NCSLT
2007-3, and NCSLT 2007-4 transactions has decreased to a range of
25%-43% from a range of 25%-46%.
The transactions in rating actions are not subject to the
operational risk concerns outlined in Moody's January 2017 rating
action. In that rating action, Moody's considered the increase in
operational risk brought on by a disputed servicing agreement with
Odyssey Education Resources, LLC. (See, Moody's upgrades 6 classes
of notes and confirms 6 classes of notes in 4 National Collegiate
Student Loan Trust securitizations). Since the transactions in
rating actions are not subject to a similar disputed servicing
arrangement with Odyssey, the operational risk concerns arising
from that disputed arrangement do not affect these deals. These
transactions, however, are subject to a Notice of Servicer Default
claiming that PHEAA failed to comply with the terms of its
servicing agreement applicable to all 15 NCSLT transactions (which
includes the 9 transactions affected by rating action) and to a
lawsuit brought by the 15 trusts against PHEAA. The lawsuit gives
rise to extraordinary fees and expenses that are currently being
paid by trust cash flows to cover legal costs sustained by the
trustees in the NCSLT securitizations. In rating actions, Moody's
considered the potential negative impact from extraordinary fees
charged to the trusts and modeled the expenses up to the capped
amount for the life of the transactions. The cap is specified in
transaction documents, limiting all trustee expenses to a maximum
of $250,000 per annum.
The principal methodology used in these ratings was "Moody's
Approach to Rating U.S. Private Student Loan-Backed Securities"
published in January 2010.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does performance
within expectations preclude such actions. The decision to take (or
not take) a rating action is dependent on an assessment of a range
of factors including, but not exclusively, the performance
metrics.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Among the factors that could drive the ratings up are a decrease in
basis risk and lower net losses on the underlying assets than
Moody's expects
Down
Among the factors that could drive the ratings down are an increase
in basis risk and higher net losses on the underlying assets than
Moody's expects
NELDER GROVE: Moody's Assigns Ba3 Rating to Class E-R Sr. Notes
---------------------------------------------------------------
Moody's Investors Service has assigned ratings to seven classes of
notes issued by Nelder Grove CLO, Ltd.:
US$218,000,000 Class A-1-R Senior Secured Floating Rate Notes Due
2026 (the "Class A-1-R Notes"), Assigned Aaa (sf)
US$40,000,000 Class A-F-R Senior Secured Fixed Rate Notes Due 2026
(the "Class A-F-R Notes"), Assigned Aaa (sf)
US$2,500,000 Class A-X-R Senior Secured Floating Rate Notes Due
2026 (the "Class A-X-R Notes"), Assigned Aaa (sf)
US$41,000,000 Class B-R Senior Secured Floating Rate Notes Due 2026
(the "Class B-R Notes"), Assigned Aa1 (sf)
US$22,000,000 Class C-R Senior Secured Floating Rate Notes Due 2026
(the "Class C-R Notes"), Assigned A1 (sf)
US$15,000,000 Class D-1-R Senior Secured Floating Rate Notes Due
2026 (the "Class D-1-R Notes"), Assigned Baa3 (sf)
US$25,000,000 Class E-R Senior Secured Floating Rate Notes Due 2026
(the "Class E-R Notes"), Assigned Ba3 (sf)
The Class A-1-R Notes, the Class A-F-R Notes, the Class A-X-R
Notes, the Class B-R Notes, the Class C-R Notes, the Class D-1-R
Notes and the Class E-R Notes are referred to herein, collectively,
as the "Rated Notes."
RATINGS RATIONALE
Moody's ratings of the Rated Notes address the expected losses
posed to noteholders. The 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.
The Issuer has issued the Rated Notes in connection with a
refinancing of seven classes of notes (together, the "Original
Notes") originally issued on August 28, 2014 (the "Original Closing
Date"). The Issuer used the proceeds from the issuance of the Rated
Notes to redeem in full the Original Notes that were refinanced.
On the Original Closing Date, the Issuer also issued one class of
subordinated notes, which, along with one other class of notes not
subject to this refinancing, will remain outstanding.
Nelder Grove is a managed cash flow CLO. The issued notes are
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. The underlying portfolio is 100% ramped as of the
refinancing closing date.
Tall Tree Investment Management, LLC (the "Manager") manages the
CLO. It directs the selection, acquisition, and disposition of
collateral on behalf of the Issuer and may engage in trading
activity, including discretionary trading, during the transaction's
remaining reinvestment period. After the reinvestment period, which
ends in August 2018, the Manager may reinvest unscheduled principal
payments and proceeds from sales of credit risk obligations,
subject to certain restrictions.
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.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. For modeling
purposes, Moody's used the following base-case assumptions:
Performing par and principal proceeds balance: $393,256,790
Defaulted par: $4,821,658
Diversity Score: 73
Weighted Average Rating Factor (WARF): 2951
Weighted Average Spread (WAS): 3.91%
Weighted Average Recovery Rate (WARR): 49.06%
Weighted Average Life (WAL): 5.53 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 rating 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 2951 to 3394)
Rating Impact in Rating Notches
Class A-1-R Notes: 0
Class A-F-R Notes: 0
Class A-X-R Notes: 0
Class B-R Notes: 0
Class C-R Notes: -1
Class D-1-R Notes: 0
Class E-R Notes: -1
Percentage Change in WARF -- increase of 30% (from 2951 to 3836)
Rating Impact in Rating Notches
Class A-1-R Notes: 0
Class A-F-R Notes: 0
Class A-X-R Notes: 0
Class B-R Notes: -2
Class C-R Notes: - 3
Class D-1-R Notes: -1
Class E-R Notes: -1
OLDENTREE LOAN VII: Moody's Hikes Rating on Class F Notes to B2
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by GoldenTree Loan Opportunities VIII, Limited:
US$41,700,000 Class E Mezzanine Deferrable Floating Rate Notes due
2026, Upgraded to Ba2 (sf); previously on April 16, 2014 Definitive
Rating Assigned Ba3 (sf)
US$6,000,000 Class F Mezzanine Deferrable Floating Rate Notes due
2026, Upgraded to B2 (sf); previously on April 16, 2014 Definitive
Rating Assigned B3 (sf)
GoldenTree Loan Opportunities VIII, issued in April 2014, is a
collateralized loan obligation (CLO) backed primarily by a
portfolio of senior secured loans. The transaction's reinvestment
period will end in April 2018.
RATINGS RATIONALE
These rating actions are primarily a result of the recent
refinancing of the Class A, B-1, B-2, C and D notes in February
2017, which increases excess spread available as credit enhancement
to the rated notes. Additionally, Moody's expects the deal to
continue to benefit from a higher weighted average recovery rate
(WARR) compared to its covenant level. Moody's also notes that the
transaction's reported overcollateralization ratios are stable.
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.
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.
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% (2501)
Class E: +1
Class F: +2
Moody's Adjusted WARF + 20% (3751)
Class E: -1
Class F: 0
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 $594.9 million, defaulted par of $7.7
million, a weighted average default probability of 24.56% (implying
a WARF of 3126), a weighted average recovery rate upon default of
49.5%, a diversity score of 50 and a weighted average spread of
3.80%.
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.
ONE MARKET 2017-1MKT: S&P Assigns 'B-' Rating on 2 Tranches
-----------------------------------------------------------
S&P Global Ratings assigned its ratings to One Market Plaza Trust
2017-1MKT's $975.0 million commercial mortgage pass-through
certificates series 2017-1MKT.
The issuance is a commercial mortgage-backed securities transaction
backed by a $975.0 million commercial mortgage loan encumbering the
borrower's fee-simple interest in One Market Plaza, an
approximately 1.6 million-sq.-ft. two-tower class A office
building, a six-story adjoining office building, a subterranean
parking garage, and the leasehold interest in approximately 19,533
sq. ft. of ground floor lobby and retail space in the adjacent
Landmark Building, located in San Francisco's South Financial
District.
The ratings reflect S&P's view of the collateral's historical and
projected performance, the sponsor's experience, the
trustee-provided liquidity, the loan's terms, and the transaction's
structure.
RATINGS ASSIGNED
One Market Plaza Trust 2017-1MKT
Class Rating Amount
(mil. $)
A AAA (sf) 463,732,000
B AA- (sf) 103,051,000
C A- (sf) 77,289,000
D BBB- (sf) 94,807,000
E BB- (sf) 128,815,000
F B (sf) 55,406,000(ii)
HRR B- (sf) 51,900,000(ii)
X-CP BBB- (sf) 738,879,000(i)
X-NCP BBB- (sf) 738,879,000(i)
X-E B- (sf) 236,121,000(i)
SBL 2016-KIND: Moody's Affirms Caa2 Rating on Class G Debt
----------------------------------------------------------
Moody's Investors Service has affirmed the ratings on eight classes
in SBL Commercial Mortgage Trust 2016-KIND, Commercial Mortgage
Pass-Through Certificates, Series 2016-KIND:
Cl. A, Affirmed Aaa (sf); previously on Apr 5, 2016 Definitive
Rating Assigned Aaa (sf)
Cl. B, Affirmed Aa3 (sf); previously on Apr 5, 2016 Definitive
Rating Assigned Aa3 (sf)
Cl. C, Affirmed A3 (sf); previously on Apr 5, 2016 Definitive
Rating Assigned A3 (sf)
Cl. D, Affirmed Baa3 (sf); previously on Apr 5, 2016 Definitive
Rating Assigned Baa3 (sf)
Cl. E, Affirmed Ba3 (sf); previously on Apr 5, 2016 Definitive
Rating Assigned Ba3 (sf)
Cl. F, Affirmed B3 (sf); previously on Apr 5, 2016 Definitive
Rating Assigned B3 (sf)
Cl. G, Affirmed Caa2 (sf); previously on Apr 5, 2016 Definitive
Rating Assigned Caa2 (sf)
Cl. X, Affirmed Aa3 (sf); previously on Apr 5, 2016 Definitive
Rating Assigned Aa3 (sf)
RATINGS RATIONALE
The ratings on seven principal and interest (P&I) classes were
affirmed because the transaction's key metrics, including Moody's
loan-to-value (LTV) ratio and Moody's stressed debt service
coverage ratio (DSCR) are within acceptable ranges.
The rating on the IO class was affirmed based on the credit
performance (or the weighted average rating factor or WARF) of the
referenced classes.
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.
Additionally, the methodology used in rating Cl. X was "Moody's
Approach to Rating Structured Finance Interest-Only Securities"
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, property type and sponsorship.
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 February 10, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by 0.2% to $548.6
million from $550 million due to schedule loan amortization. The
certificates are collateralized by a single loan backed by a first
lien commercial mortgage related to a portfolio of 550 early
childhood education centers operated by KinderCare, a leading
operator of for-profit early childhood education centers.
The loan collateral is comprised of the borrower's fee interest in
550 childcare centers located across 37 states. Three states make
up 30.3% of the portfolio's total square footage including Illinois
(60 properties; 12.7% of the allocated loan amount; 10.9% of total
square footage), California (49 properties; 12.7% of the allocated
loan amount; 10.1% of total square footage), and Texas (50
properties; 6.6% of the allocated loan amount; 9.3% of total square
footage). As of yearend 2016, the portfolio's weighted average
enrollment rate was 66.6%, compared to 64.6% at yearend 2015.
The original first mortgage loan amount represents $549 million of
non-recourse first mortgage financing to a single borrower that
owns interests in 550 early childhood education centers. The
mortgage loan was originated on November 13, 2015 and is secured by
first priority mortgages/deeds of trust on the fee simple interest
in the 550-property portfolio. The loan has a term of ten years and
calls for amortization equal to 0.25% annually during years 1-3;
0.50% annually during years 4-5; 1.0% annually during years 6-8 and
2.0% annually thereafter. Principal payments are based on the
initial Loan amount and is to be paid in quarterly installments
concurrently with interest payments. The Borrower may prepay the
loan, in whole or in part, at any time without penalty or premium.
All 550 properties are subject to a 15-year absolute triple net
Master Lease with a fixed base rent for the first five years with
rent bumps in the fifth and tenth lease years equal to the lesser
of (i) 10% of the prior year's rent and (ii) the All Urban
Consumers, All Items, Not Seasonally Adjusted CPI increase. The
Master Lease includes two, five-year extensions for all of the
sites with at least twelve months prior notice. The tenant is
permitted to (i) permanently discontinue operations in up to
fifteen properties, (ii) sublease up to forty properties and (iii)
temporarily discontinue operations in up to five sites for up to
180 days for purposes of remodeling or making alterations or
improvements to a site or 120 days for the purposes of correcting
or curing any health, safety or regulatory issues or violations at
such site. However, the sum of subleased and dark centers may not
exceed forty properties.
The first mortgage balance of $548.6 million represents a Moody's
LTV of 117.3%. Inclusive of the $90.0 million mezzanine loan held
outside of the trust, the Moody's LTV is 136.5%. Moody's first
mortgage stressed debt service coverage ratio (DSCR) is 1.20X and
Moody's total stressed DSCR is 1.03X.
SC EQUIPMENT 2017-1: Moody's Assigns B3(sf) Rating to Cl. D Debt
----------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to the
Equipment Contract Backed Notes, Series 2017-1, Class A, Class B,
Class C and Class D (Series 2017-1 notes or the notes) issued by
SCF Equipment Leasing 2017-1 LLC. The transaction is a
securitization of equipment loans and leases sponsored by
Stonebriar Commercial Finance LLC (unrated; Stonebriar), which will
also act as the servicer. The issuer is a wholly-owned, limited
purpose subsidiary of Stonebriar. The equipment loans and leases
were originated or purchased by Stonebriar, and are backed
primarily by railcars and corporate aircraft.
The complete rating action is:
Issuer: SCF Equipment Leasing 2017-1 LLC
$254,915,000, Equipment Contract Backed Notes, Series 2017-1, Class
A, Definitive Rating Assigned A1 (sf)
$15,784,000, Equipment Contract Backed Notes, Series 2017-1, Class
B, Definitive Rating Assigned Baa3 (sf)
$15,614,000, Equipment Contract Backed Notes, Series 2017-1, Class
C, Definitive Rating Assigned Ba1 (sf)
$25,118,000, Equipment Contract Backed Notes, Series 2017-1, Class
D, Definitive Rating Assigned B3 (sf)
RATINGS RATIONALE
The Series 2017-1 transaction is the second securitization
sponsored by Stonebriar, which was founded in 2015 and is led by a
management team with an average of 25 years of experience in
equipment financing.
The definitive ratings that Moody's assigned to the notes are
primarily based on:
(1) the experience of Stonebriar's management team;
(2) the weak credit quality and small number of obligors backing
the loans and leases in the pool;
(3) the assessed value of the collateral backing the loans and
leases in the pool;
(4) the credit enhancement, including overcollateralization, excess
spread and a non-declining reserve account;
(5) the sequential pay structure;
(6) the experience and expertise of Stonebriar as the servicer;
and
(7) U.S. Bank National Association (rated long-term deposits Aa1/
long-term CR assessment Aa2(cr), short-term deposit P-1, BCA aa3)
as backup servicer for contracts.
Credit enhancement for the notes includes (i) initial
overcollateralization of 8.25%, which is expected to grow to a
target of 10.25%, (ii) excess spread, (iii) a non-declining reserve
account funded at 1.5% of the initial collateral balance, and (iv)
subordination in the case of the Class A, Class B and Class C notes
(16.65%, 12.00% and 7.40%, respectively).
The equipment loans and leases backing the notes were extended
primarily to middle market obligors and are secured by various
types of equipment including railcars (30.8% of securitization
value), corporate aircraft (25.8%), water treatment facilities
(6.8%), manufacturing and assembly equipment (6.4%) and marine
vessels (6.4%).
The pool consists of 64 contracts with 30 unique obligors and an
initial securitization value of $339,434,545. The average
securitization value per contract is $5,303,665. The weighted
average original and remaining terms to maturity are 71 and 65
months, respectively. The largest obligor accounts for 7.5% of the
initial securitization value and the top five obligors account for
32.5%. Nearly all of the contracts in this deal are fixed interest
rate and monthly pay.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's
Approach to Rating ABS Backed by Equipment Leases and Loans"
published in December 2015.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the ratings on the notes if levels of credit
protection are greater than necessary to protect investors against
current expectations of loss. Moody's updated 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 equipment that secure the obligor's promise of
payment. As the primary drivers of performance, positive changes in
the US macro economy and the performance of various sectors where
the lessees operate could also affect the ratings.
Down
Moody's could downgrade the ratings of the notes if levels of
credit protection are insufficient to protect investors against
current expectations of loss. Moody's updated expectations of loss
may be worse than its original expectations because of higher
frequency of default by the underlying obligors of the contracts or
a greater than expected deterioration in the value of the equipment
that secure the obligor's promise of payment. As the primary
drivers of performance, negative changes in the US macro economy
could also affect Moody's ratings. Other reasons for worse
performance than Moody's expectations could include poor servicing,
error on the part of transaction parties, lack of transactional
governance and fraud.
SDART 2017-1: Moody's Assigns Ba3 Rating Class E Notes
------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to the
notes issued by Santander Drive Auto Receivables Trust 2017-1
(SDART 2017-1). This is the first SDART auto loan transaction of
the year for Santander Consumer USA Inc. (SC; unrated). The notes
are backed by a pool of retail automobile loan contracts originated
by SC, who is also the servicer and administrator for the
transaction.
The complete rating actions are as follows:
Issuer: Santander Drive Auto Receivables Trust 2017-1
$194,000,000, 0.95000%, Class A-1 Notes, Definitive Rating Assigned
P-1 (sf)
$310,000,000, 1.49%, Class A-2 Notes, Definitive Rating Assigned
Aaa (sf)
$111,670,000, 1.77%, Class A-3 Notes, Definitive Rating Assigned
Aaa (sf)
$129,750,000, 2.10%, Class B Notes, Definitive Rating Assigned Aa1
(sf)
$156,670,000, 2.58%, Class C Notes, Definitive Rating Assigned Aa3
(sf)
$126,080,000, 3.17%, Class D Notes, Definitive Rating Assigned Baa2
(sf)
$48,960,000, 5.05%, Class E Notes, Definitive Rating Assigned Ba3
(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 SC as the servicer.
Moody's median cumulative net loss expectation for the 2017-1 pool
is 17.0% and the Aaa level is 49.0%. The Aaa level is the level of
credit enhancement consistent with a Aaa (sf) rating. Moody's based
its cumulative net loss expectation and Aaa level 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 SC 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 notes, and Class E notes are expected to benefit from 50.70%,
40.10%, 27.30%, 17.00% and 13.00% 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 subordinate 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. Additionally, Moody's
could downgrade the Class A-1 short-term rating following a
significant slowdown in principal collections that could result
from, among other things, high delinquencies or a servicer
disruption that impacts obligor's payments.
SDART 2017-1: S&P Assigns 'BB' Rating on Class E Notes
------------------------------------------------------
S&P Global Ratings assigned its ratings to Santander Drive Auto
Receivables Trust 2017-1's $1.077 billion automobile
receivables-backed notes series 2017-1.
The note issuance is an asset-backed securities transaction backed
by subprime auto loan receivables.
The ratings reflect:
-- The availability of 53.09%, 46.34%, 37.18%, 29.8%, and
25.28% of credit support for the class A (A-1, A-2, A-3), B,
C, D, and E notes, respectively, based on stress cash flow
scenarios (including excess spread), which provide coverage
of approximately 3.30x, 2.85x, 2.25x, 1.70x, and 1.50x S&P's
15.50%-16.25% expected cumulative net loss.
-- The timely interest and principal payments made under
stressed cash flow modeling scenarios appropriate to the
assigned ratings.
-- S&P's expectation that under a moderate ('BBB') stress
scenario (1.7x S&P's expected loss level), all else being
equal, its ratings on the class A and B notes ('AAA (sf)'
and 'AA (sf)', respectively) will remain within one rating
category and S&P's ratings on the class C and D notes
('A (sf)' and 'BBB (sf)', respectively) will remain within
two rating categories of the assigned ratings while they are
outstanding. These rating movements are within the outer
bounds specified by our credit stability criteria. These
criteria indicate that S&P would not assign 'AAA (sf)' and
'AA (sf)' ratings if, under moderate stress conditions, the
ratings would be lowered by more than one rating category
within the first year and by more than three rating
categories over a three-year period. The criteria also
specify that S&P would not assign 'A (sf)' and 'BBB (sf)'
ratings if such ratings would fall by more than two
categories in one year or three categories over three years.
The class E 'BB (sf)' rated notes will remain within two
rating categories of the assigned rating during the first
year but will eventually default under the 'BBB' stress
scenario, after having received 61%-78% of their principal.
Santander Consumer USA Inc. (SC; originator/servicer's) long
history of originating and servicing subprime auto loan
receivables. S&P's analysis of nine years of origination
static pool data on SC's lending programs.
-- Six years of performance on SC's securitizations since it
re-entered the asset-backed securities market in 2010. The
transaction's payment/credit enhancement and legal
structures.
RATINGS ASSIGNED
Santander Drive Auto Receivables Trust 2017-1
Class Rating Type Interest Amount
rate (mil. $)
A-1 A-1+ (sf) Senior Fixed 194.00
A-2 AAA (sf) Senior Fixed 310.00
A-3 AAA (sf) Senior Fixed 111.67
B AA (sf) Subordinate Fixed 129.75
C A (sf) Subordinate Fixed 156.67
D BBB (sf) Subordinate Fixed 126.08
E BB (sf) Subordinate Fixed 48.96
SLM STUDENT 2003-1: Fitch Corrects Jan. 27 Ratings Release
----------------------------------------------------------
Fitch Rating issued a correction to a release on SLM Student Loan
Trust 2003-1 published Jan. 27, 2017. It includes a variation from
Fitch's criteria that was omitted from the original release.
The corrected ratings release dated Feb. 22, 2017, is as follows:
Fitch Ratings has taken the following rating actions on SLM Student
Loan Trust 2003-1 (SLM 2003-1):
-- Class A-5A downgraded to 'Asf' from 'AAAsf';
Removed from Rating Watch Negative and assigned
Outlook Stable;
-- Class A-5B downgraded to 'Asf' from 'AAAsf';
Removed from Rating Watch Negative and assigned
Outlook Stable;
-- Class A-5C downgraded to 'Asf' from 'AAAsf';
Removed from Rating Watch Negative and assigned
Outlook Stable;
-- Class B affirmed at 'Asf'; Removed from Rating
Watch Negative and assigned Outlook Stable.
The class A notes pay in full before their maturity date up to the
'BBsf' maturity stresses, and fail all higher rating categories.
This technical default would result in interest payments being
diverted away from class B, which would cause that note to default
as well. Because their maturity date of December 2032 is greater
than seven years away, and the notes are currently rated 'AAAsf',
they are eligible for the rating tolerance of two rating
categories. This results in the downgrade to 'Asf'.
The technical default of class A notes would result in interest
payments being diverted away from class B, which would cause those
notes to default in rating scenarios above 'BBBsf'. Because their
maturity date of June 2037 is greater than seven years away, and
the notes are currently rated 'Asf', they are eligible for the
rating tolerance of two rating categories but will not be upgraded
higher than the senior notes' ratings. This results in the
affirmation at 'Asf'.
KEY RATING DRIVERS
U.S. Sovereign Risk: The trust collateral comprises 100% Federal
Family Education Loan Program (FFELP) loans, with guaranties
provided by eligible guarantors and reinsurance provided by the
U.S. Department of Education (ED) for at least 97% of principal and
accrued interest. The U.S. sovereign rating is currently
'AAA'/Outlook Stable.
Collateral Performance: Fitch assumes a base case default rate of
14.75% and a 44.00% default rate under the 'AAA' credit stress
scenario, which is based on recent actual trust performance. The
claim reject rate is assumed to be 0.50% in the base case and 3% in
the 'AAA' case. Fitch applies the standard default timing curve in
its credit stress cash flow analysis. The trailing 12-month (TTM)
average constant default rate, utilized in the maturity stresses,
is 2.9%. TTM levels of deferment, forbearance, income-based
repayment (prior to adjustment) and constant prepayment rate
(voluntary and involuntary) are 5.6%, 9.9%, 20.9%, and 9.3%,
respectively, and are used as the starting point in cash flow
modelling. Subsequent declines or increases are modelled as per
criteria. The borrower benefit is assumed to be approximately
0.04%, based on information provided by the sponsor.
Basis and Interest Rate Risk: Fitch applies its standard basis and
interest rate stresses to this transaction as per criteria.
Payment Structure: Credit enhancement (CE) is provided by excess
spread, and, for the class A notes, subordination provided by the
class B notes. As of November 2016, total and senior parity ratios
(including the reserve account) are 100.49% (0.49% CE) and 105.44%
(5.15% CE), respectively. Cash is being released from the trust
given that the 100% total parity ratio (excluding the reserve
account, as pool factor is below 40%) is maintained. Liquidity
support is provided by a reserve account currently sized at its
floor of $3,083,057.
Maturity Risk: Fitch's student loan ABS cash flow model indicates
that the notes are paid in full on or prior to the legal final
maturity dates under the commensurate rating scenario, subject to
the downgrade tolerance described above.
Operational Capabilities: Day-today servicing is provided by
Navient Solutions, Inc. (formerly known as Sallie Mae, Inc.). Fitch
believes Navient to be an acceptable servicer due to its extensive
track record as the largest servicer of FFELP student loans.
Criteria Variation
Under the 'Counterparty Criteria for Structured Finance and Covered
Bonds', dated Sept. 1, 2016, Fitch looks to its own ratings in
analyzing counterparty risk and assessing a counterparty's
creditworthiness. The definition of permitted investments for this
deal allows for the possibility of using investments not rated by
Fitch, which represents a criteria variation. Since funds can only
be invested for a short duration given the payment frequency of the
notes, Fitch does not believe such variation has a measurable
impact upon the ratings assigned.
RATING SENSITIVITIES
'AAAsf' rated tranches of most FFELP securitizations will likely
move in tandem with the U.S. sovereign rating, given the strong
linkage to the U.S. sovereign by nature of the reinsurance and SAP
provided by ED. Sovereign risks are not addressed in Fitch's
sensitivity analysis.
Fitch conducted a CE sensitivity analysis by stressing both the
related lifetime default rate and basis spread assumptions. In
addition, Fitch conducted a maturity sensitivity analysis by
running different assumptions for the IBR usage and prepayment
rate. The results below should only be considered as one potential
model implied outcome as the transaction is exposed to multiple
risk factors that are all dynamic variables.
Credit Stress Rating Sensitivity
-- Default increase 25%: class A 'AAsf'; class B 'Asf';
-- Default increase 50%: class A 'AAAsf'; class B 'Asf';
-- Basis Spread increase 0.25%: class A 'AAAsf'; class B 'AAsf';
-- Basis Spread increase 0.50%: class A 'AAAsf'; class B 'AAsf';
Maturity Stress Rating Sensitivity
-- CPR decrease 50%: class A 'CCCsf'; class B 'CCCsf';
-- CPR increase 100%: class A 'AAsf'; class B 'AAsf';
-- IBR Usage increase 100%: class A 'CCCsf'; class B 'CCCsf';
-- IBR Usage decrease 50%: class A 'BBBsf'; class B 'BBBsf';
Stresses are intended to provide an indication of the rating
sensitivity of the notes to unexpected deterioration in trust
performance. Rating sensitivity should not be used as an indicator
of future rating performance.
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.
STACR 2017-HQA1: Fitch Rates 12 Note Classes at 'Bsf'
-----------------------------------------------------
Fitch Ratings has assigned ratings to Freddie Mac's risk-transfer
transaction, Structured Agency Credit Risk Debt Notes Series
2017-HQA1 (STACR 2017-HQA1):
-- $210,000,000 class M-1 notes 'BBB-sf'; Outlook Stable;
-- $236,250,000 class M-2A notes 'BBsf'; Outlook Stable;
-- $236,250,000 class M-2B notes 'Bsf'; Outlook Stable;
-- $472,500,000 class M-2 exchangeable notes 'Bsf'; Outlook
Stable;
-- $472,500,000 class M-2R exchangeable notes 'Bsf'; Outlook
Stable;
-- $472,500,000 class M-2S exchangeable notes 'Bsf'; Outlook
Stable;
-- $472,500,000 class M-2T exchangeable notes 'Bsf'; Outlook
Stable;
-- $472,500,000 class M-2U exchangeable notes 'Bsf'; Outlook
Stable;
-- $472,500,000 class M-2I notional exchangeable notes 'Bsf';
Outlook Stable;
-- $236,250,000 class M-2AR exchangeable notes 'BBsf'; Outlook
Stable;
-- $236,250,000 class M-2AS exchangeable notes 'BBsf'; Outlook
Stable;
-- $236,250,000 class M-2AT exchangeable notes 'BBsf'; Outlook
Stable;
-- $236,250,000 class M-2AU exchangeable notes 'BBsf'; Outlook
Stable;
-- $236,250,000 class M-2AI notional exchangeable notes 'BBsf';
Outlook Stable;
-- $236,250,000 class M-2BR exchangeable notes 'Bsf'; Outlook
Stable;
-- $236,250,000 class M-2BS exchangeable notes 'Bsf'; Outlook
Stable;
-- $236,250,000 class M-2BT exchangeable notes 'Bsf'; Outlook
Stable;
-- $236,250,000 class M-2BU exchangeable notes 'Bsf'; Outlook
Stable;
-- $236,250,000 class M-2BI notional exchangeable notes 'Bsf';
Outlook Stable.
The following classes will not be rated by Fitch:
-- $55,000,000 class B-1 notes;
-- $15,000,000 class B-2 notes;
-- $28,398,372,780 class A-H reference tranche;
-- $86,588,751 class M-1H reference tranche;
-- $97,412,343 class M-2AH reference tranche;
-- $97,412,343 class M-2BH reference tranche;
-- $93,294,374 class B-1H reference tranche;
-- $133,294,374 class B-2H reference tranche.
The 'BBB-sf' rating for the M-1 notes reflects the 3.25%
subordination provided by the 1.125% class M-2A notes, the 1.125%
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 2.125%
subordination provided by the 1.125% class M-2B notes, the 0.50%
class B-1 notes and the 0.50% class B-2 notes. The 'Bsf' rating for
the M-2B notes reflects the 1.00% subordination provided by the
0.50% class B-1 notes and 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-HQA1 represents Freddie Mac's 15th risk transfer
transaction applying actual loan loss severity (LS) issued as part
of the Federal Housing Finance Agency's Conservatorship Strategic
Plan for 2013 to 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 $29.65 billion
pool of mortgage loans currently held and 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 DRIVER
High-Quality Mortgage Pool (Positive): The reference pool consists
of 123,472 fixed-rate fully amortizing loans with terms of 241 to
360 months, totaling $29.65 billion, acquired by Freddie Mac
between April 1, 2016 and July 31, 2016. The pool has a weighted
average (WA) credit score of 747 and WA debt-to-income (DTI) ratio
of 35.4% and consists primarily of owner occupied purchase loans.
The WA loan-to-value ratio (LTV) for this pool is 91.8%.
ADDITIONAL RATING DRIVERS
Higher LTV Loans (Concern): Starting with the previous Fitch-rated
transaction (STACR 2016-HQA4), Freddie Mac increased its LTV
parameter on its high LTV transactions to include loans with LTVs
up to 97% from 95%. Fitch believes the increased risk associated
with these loans is modest due to the relatively small number of
loans represented (2.3%).
Mortgage Insurance Guaranteed by Freddie Mac (Positive): 99.9% of
the loans are covered either by borrower paid mortgage insurance
(BPMI) or lender paid MI (LPMI). Loans without MI coverage are
either originated in New York, where the appraised value was used
to determine that the LTV was below 81%, or the loans were part of
the HomeSteps Financing program.
Freddie Mac will guarantee the MI coverage amount, which will
typically be the MI coverage percentage multiplied by the sum of
the unpaid principal balance as of the date of the default, up to
36 months of delinquent interest, taxes and maintenance expenses.
While the Freddie Mac guarantee allows for credit to be given to
MI, Fitch applied a haircut to the amount of BPMI available due to
the automatic termination provision as required by the Homeowners
Protection Act, when the loan balance is first scheduled to reach
78%. LPMI does not automatically terminate and remains for the life
of the loan.
Actual Loss Severities (Neutral): This will be Freddie Mac's 15th
actual loss risk transfer transaction in which losses borne by the
noteholders are based on loan-level 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, M-2B, B-1 and
B-2 notes benefit from a 12.5-year legal final maturity. Thus, any
losses on the reference pool that occur beyond year 12.5 are borne
by Freddie Mac and do not affect the transaction. In addition, if a
credit event occurs prior to maturity, but the losses from
liquidations or loan modifications are not realized until after the
final maturity date, the losses 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 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 the junior
classes, together with the sequential pay structure, the class M-1
will de-lever and CE as a percentage of the outstanding pool will
build faster than in a pro rata structure.
Solid Alignment of Interests (Positive): While the transaction is
designed to transfer credit risk to private investors, Fitch
believes the transaction benefits from solid alignment of
interests. Freddie Mac will retain credit risk in the transaction
by holding the senior reference tranche A-H, which has 4.25% 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 29.2%
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 the GSE'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%, 20% and 30%, in addition to the model
projected 23.26% at the 'BBBsf' level and 18.46% 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 35% would potentially move the
'BBBsf' rated class down one rating category, to non-investment
grade, to 'CCCsf', respectively.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
Fitch was provided with due diligence information from the
third-party diligence provider. The due diligence focused on credit
and compliance reviews, desktop valuation reviews and data
integrity. The third-party diligence provider 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 Fitch analysis.
STACR 2017-HQA1: Moody's Assigns B2(sf) Rating to Class M-2 Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to
thirteen classes of notes on STACR 2017-HQA1, a securitization
designed to provide credit protection to the Federal Home Loan
Mortgage Corporation (Freddie Mac) against the performance of
approximately $29.7 billion reference pool of mortgages. All of the
Notes in the transaction are direct, unsecured obligations of
Freddie Mac and as such investors are exposed to the credit risk of
Freddie Mac (currently Aaa Stable).
The complete rating action is:
$210.00 million of Class M-1 notes, Assigned Baa3 (sf)
$472.50 million of Class M-2 notes, Assigned B2 (sf)
The Class M-2 noteholders can exchange their notes for the
following notes:
$236.25 million of Class M-2A exchangeable notes, Assigned Ba2
(sf)
$236.25 million of Class M-2B exchangeable notes, not rated
$472.50 million of Class M-2R exchangeable notes, Assigned B2 (sf)
$472.50 million of Class M-2S exchangeable notes, Assigned B2 (sf)
$472.50 million of Class M-2T exchangeable notes, Assigned B2 (sf)
$472.50 million of Class M-2U exchangeable notes, Assigned B2 (sf)
$472.50 million of Class M-2I exchangeable notes, Assigned B2 (sf)
The Class M-2A noteholders can exchange their notes for the
following notes:
$236.25 million of Class M-2AR exchangeable notes, Assigned Ba2
(sf)
$236.25 million of Class M-2AS exchangeable notes, Assigned Ba2
(sf)
$236.25 million of Class M-2AT exchangeable notes, Assigned Ba2
(sf)
$236.25 million of Class M-2AU exchangeable notes, Assigned Ba2
(sf)
$236.25 million of Class M-2AI exchangeable notes, Assigned Ba2
(sf)
STACR 2017-HQA1 is the seventh transaction in the HQA series issued
by Freddie Mac. Similar to STACR 2016-HQA2, STACR 2017-HQA1's note
write-downs are determined by actual realized losses and
modification losses on the loans in the reference pool, and not
tied to a pre-set tiered severity schedule. In addition, the
interest amount paid to the notes can be reduced by the amount of
modification loss incurred on the mortgage loans. STACR 2017-HQA1
is also the fifteenth transaction in the STACR series (including
STACR-DNA) to have a legal final maturity of 12.5 years, as
compared to 10 years in STACR-DN and STACR-HQ securitizations.
Unlike typical RMBS transactions, STACR 2017-HQA1 note holders are
not entitled to receive any cash from the mortgage loans in the
reference pool. Instead, the timing and amount of principal and
interest that Freddie Mac is obligated to pay on the notes are
linked to the performance of the mortgage loans in the reference
pool. Each of the mortgages in the reference pool had a
loan-to-value (LTV) ratio at origination that was greater than 80%
and equal to or less than 97%.
Moody's rating on the transaction is based on both quantitative and
qualitative analyses. This included a quantitative evaluation of
the credit quality of the reference pool and the impact of the
structural mechanisms on credit enhancement, as well as qualitative
assessments regarding the operational strength of Freddie Mac to
oversee its sellers and servicers.
Moody's base-case expected loss on for the reference pool is 1.25%
and is expected to reach 11.30% at a stress level consistent with a
Aaa rating.
Below is a summary description of the transaction and Moody's
rating rationale. More details on this transaction can be found in
Moody's presale report.
The Notes
The M-1 notes are adjustable rate P&I notes with an interest rate
that adjusts relative to LIBOR.
The M-2A and M-2B notes are adjustable rate P&I notes with an
interest rate that adjusts relative to LIBOR. The holders of the
M-2A and M-2B notes can exchange those notes for the M-2
exchangeable notes. M-2 notes can also be exchanged for M-2R, M-2S,
M-2T, M-2U and M-2I exchangeable notes. The M-2I exchangeable notes
are fixed rate interest only notes that have a notional balance
that equals the M-2 note balance. The M-2R, M-2S, M-2T and M-2U
notes are adjustable rate P&I notes that have a balance that equals
the M-2 note balance and an interest rate that adjusts relative to
LIBOR.
The M-2A notes are adjustable rate P&I notes with an interest rate
that adjusts relative to LIBOR. The holders of the M-2A notes can
exchange those notes for M-2AR, M-2AS, M-2AT, M-2AU and M-2AI
exchangeable notes. The M-2AI exchangeable notes are fixed rate
interest only notes that have a notional balance that equals the
M-2A note balance. The M-2AR, M-2AS, M-2AT and M-2AU notes are
adjustable rate P&I notes that have a balance that equals the M-2A
note balance and an interest rate that adjusts relative to LIBOR.
The M-2B notes are adjustable rate P&I notes with an interest rate
that adjusts relative to LIBOR. The holders of the M-2B notes can
exchange those notes for M-2BR, M-2BS, M-2BT, M-2BU and M-2BI
exchangeable notes. The M-2BI exchangeable notes are fixed rate
interest only notes that have a notional balance that equals the
M-2B note balance. The M-2BR, M-2BS, M-2BT and M-2BU notes are
adjustable rate P&I notes that have a balance that equals the M-2B
note balance and an interest rate that adjusts relative to LIBOR.
The B-1 and B-2 notes are adjustable rate P&I notes with an
interest rate that adjusts relative to LIBOR.
Freddie Mac will only make principal payments on the notes based on
the scheduled and unscheduled principal payments that are actually
collected on the reference pool mortgages. Losses on the notes
occur as a result of credit events and modifications, and are
determined by actual realized and modification losses on loans in
the reference pool, and not tied to a pre-set loss severity
schedule. Freddie Mac is obligated to retire the notes in August
2029 if balances remain outstanding.
Credit events in STACR 2017-HQA1 occur when a short sale is
settled, when a seriously delinquent mortgage note is sold prior to
foreclosure, when the mortgaged property that secured the related
mortgage note is sold to a third party at a foreclosure sale, when
an REO disposition occurs, or when the related mortgage note is
charged-off. This differs from STACR-DN and STACR-HQ
securitizations, where credit events occur as early as when a
reference obligation is 180 or more days delinquent.
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
As part of its analysis, Moody's considered historic Freddie Mac
performance and severity data, the eligibility criteria of loans in
the reference pool, and the high credit quality of the underlying
collateral. The reference pool consists of loans that Freddie Mac
acquired between April 1, 2016 and July 31, 2016, and have no
previous 30-day delinquencies since purchase. The loans in the
reference pool are to strong borrowers, as the weighted average
credit score of 747 indicates. The weighted average CLTV of 91.8%
is far higher than that of recent private label prime jumbo deals,
which typically have CLTVs in the high 60's range, but is similar
to the weighted average CLTV of other STACR-HQA and STACR-HQ
transactions. 99.9% of loans in the pool were covered by mortgage
insurance at origination with 78.8% covered by borrower provided
mortgage insurance (BPMI) and 21.1% covered by lender provided
mortgage insurance (LPMI). Freddie Mac will backstop the mortgage
insurance in this transaction.
Structural considerations
Moody's took structural features such as the principal payment
waterfall of the notes, a 12.5-year bullet maturity, performance
triggers, as well as the allocation of realized losses and
modification losses into consideration in Moody's cash flow
analysis. The final structure for the transaction reflects
consistent credit enhancement levels available to the notes per the
term sheet provided for the provisional ratings.
For modification losses, Moody's has taken into consideration the
level of rate modifications based on the projected defaults, the
weighted average coupon of the reference pool (3.96%), and compared
that with the available credit enhancement on the notes, the coupon
and the accrued interest amount of the most junior bonds. Class B-2
and Class B-2H reference tranches represent 0.50% of the pool. The
final coupons on the notes will have an impact on the amount of
interest available to absorb modification losses from the reference
pool.
The ratings are linked to Freddie Mac's rating. As an unsecured
general obligation of Freddie Mac, the rating on the notes will be
capped by the rating of Freddie Mac, which Moody's currently rates
Aaa (stable).
Collateral Analysis
The reference pool consists of 123,472 loans that meet specific
eligibility criteria, which limits the pool to first lien, fixed
rate, fully amortizing loans with 241-360 month terms and original
LTV ratios that range between 80% and equal to or less than 97% on
one to four unit properties. The credit positive aspects of the
pool include borrower, loan and geographic diversification, and a
high weighted average FICO of 747. There are no interest-only (IO)
loans in the reference pool and all of the loans are underwritten
to full documentation standards.
Methodology
The principal methodology used in these ratings was "Moody's
Approach to Rating US Prime RMBS," published in February 2015.
Additionally, the methodology used in rating Cl. M-2AI, Cl. M-2BI,
and Cl. M-2I was "Moody's Approach to Rating Structured Finance
Interest-Only Securities" published in October 2015.
While assessing the ratings on this transaction, Moody's did not
deviate from its published methodology. The severities for this
transaction were estimated using the data on Freddie Mac's actual
loss severities.
Moody's made loan-level adjustments to loss severities to account
for the presence of mortgage insurance backed by Freddie Mac. For
loans with LPMI, Moody's reduced loss severities by the mortgage
insurance coverage percentage. For loans with BPMI, Moody's reduced
loss severities by only a fraction of the mortgage insurance
coverage percentage because BPMI can be cancelled in certain
situations such as when the LTV ratio (based on the original sales
price or appraisal value) falls below 80%. To determine the
appropriate coverage haircut for each loan with BPMI, Moody's
estimated the percentage of each loan's life that mortgage
insurance would likely be in effect. Given that Freddie Mac's (Aaa
stable) is backing the mortgage insurance in this transaction,
Moody's did not adjust the mortgage insurance benefit to account
for the risk of a mortgage insurer bankruptcy.
Reps and Warranties
Freddie Mac is not providing loan level reps and warranties (RWs)
for this transaction because the notes are a direct obligation of
Freddie Mac. Freddie Mac commands robust RWs from its
seller/servicers pertaining to all facets of the loan, including
but not limited to compliance with laws, compliance with all
underwriting guidelines, enforceability, good property condition
and appraisal procedures. To the extent that Freddie Mac discovers
a confirmed underwriting defect or a major servicing defect, in the
reference pool prior months' credit events will be reversed.
Moody's expected credit event rate takes into consideration
historic repurchase rates.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud. As an unsecured general obligation of Freddie Mac, the
ratings on the notes depend on the rating of Freddie Mac, which
Moody's currently rates Aaa.
STEELE CREEK 2014-1: Moody's Rates Class E-2-R Notes 'Ba3(sf)'
--------------------------------------------------------------
Moody's Investors Service has assigned ratings to five classes of
notes issued by Steele Creek CLO 2014-1, Ltd.:
US$213,800,000 Class A-1-R Senior Secured Floating Rate Notes due
2026 (the "Class A-1-R Notes"), Assigned Aaa (sf)
US$40,000,000 Class A-2-R Senior Secured Floating Rate Notes due
2026 (the "Class A-2-R Notes"), Assigned Aaa (sf)
US$46,200,000 Class B-R Senior Secured Floating Rate Notes due 2026
(the "Class B-R Notes"), Assigned Aa1 (sf)
US$24,000,000 Class C-R Mezzanine Secured Deferrable Floating Rate
Notes due 2026 (the "Class C-R Notes"), Assigned A1 (sf)
US$12,500,000 Class E-2-R Mezzanine Secured Deferrable Floating
Rate Notes due 2026 (the "Class E-2-R Notes"), Assigned Ba3 (sf)
The Class A-1-R Notes, the Class A-2-R Notes, the Class B-R Notes,
the Class C-R Notes and the Class E-2-R Notes are referred to
herein, collectively, as the "Rated Notes."
RATINGS RATIONALE
Moody's ratings of the Rated Notes address the expected losses
posed to noteholders. The 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.
The Issuer has issued the Rated Notes in connection with the
refinancing of the Class A-1 Senior Secured Floating Rate Notes due
2026, Class A-2 Senior Secured Floating Rate Notes due 2026, Class
B Senior Secured Floating Rate Notes due 2026, Class C Mezzanine
Secured Deferrable Floating Rate Notes due 2026 and Class E-2
Mezzanine Secured Deferrable Floating Rate Notes due 2026
(collectively, the "Refinanced Notes"), issued on August 21, 2014
(the "Original Closing Date"). The Issuer used the proceeds from
the issuance of the Rated Notes to redeem in full the Refinanced
Notes. On the Original Closing Date, the Issuer also issued one
class of subordinated notes, which, along with the two other
classes of notes not subject to this refinancing, will remain
outstanding.
Steele Creek 2014-1 is a managed cash flow CLO. The issued notes
are collateralized primarily by broadly syndicated first lien
senior secured corporate loans. At least 95.0% of the portfolio
must consist of senior secured loans, cash, and eligible
investments, and up to 5.0% of the portfolio may consist of second
lien loans and unsecured loans. The underlying portfolio is 100%
ramped as of the refinancing closing date.
Steele Creek Investment Management LLC (the "Manager") manages the
CLO. It directs the selection, acquisition, and disposition of
collateral on behalf of the Issuer and may engage in trading
activity, including discretionary trading. After the reinvestment
period, which ends in August 2018, the Manager may reinvest
unscheduled principal payments and proceeds from sales of credit
risk obligations, subject to certain restrictions.
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.
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. For modeling
purposes, Moody's used the following base-case assumptions:
Par amount: $400,000,000
Diversity Score: 60
Weighted Average Rating Factor (WARF): 2971
Weighted Average Spread (WAS): 3.95%
Weighted Average Recovery Rate (WARR): 48.34%
Weighted Average Life (WAL): 4.85 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 rating 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 2971 to 3417)
Rating Impact in Rating Notches
Class A-1-R Notes: 0
Class A-2-R Notes: 0
Class B-R Notes: -1
Class C-R Notes: -2
Class E-2-R Notes: 0
Percentage Change in WARF -- increase of 30% (from 2971 to 3862)
Rating Impact in Rating Notches
Class A-1-R Notes: 0
Class A-2-R Notes: 0
Class B-R Notes: -2
Class C-R Notes: -3
Class E-2-R Notes: -1
TOWD POINT 2017-1: Fitch Assigns 'Bsf' Rating to Class B2 Notes
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Fitch Ratings has assigned the following ratings to Towd Point
Mortgage Trust 2017-1:
-- $1,358,063,000 class A1 notes 'AAAsf'; Outlook Stable;
-- $115,492,000 class A2 notes 'AAsf'; Outlook Stable;
-- $120,648,000 class M1 notes 'Asf'; Outlook Stable;
-- $101,056,000 class M2 notes 'BBBsf'; Outlook Stable;
-- $94,868,000 class B1 notes 'BBsf'; Outlook Stable;
-- $74,245,000 class B2 notes 'Bsf'; Outlook Stable;
-- $115,492,000 class A2A exchangeable notes 'AAsf'; Outlook
Stable;
-- $115,492,000 class X1 notional exchangeable notes 'AAsf';
Outlook Stable;
-- $115,492,000 class A2B exchangeable notes 'AAsf'; Outlook
Stable;
-- $115,492,000 class X2 notional exchangeable notes 'AAsf';
Outlook Stable;
-- $120,648,000 class M1A exchangeable notes 'Asf'; Outlook
Stable;
-- $120,648,000 class X3 notional exchangeable notes 'Asf';
Outlook Stable;
-- $120,648,000 class M1B exchangeable notes 'Asf'; Outlook
Stable;
-- $120,648,000 class X4 notional exchangeable notes 'Asf';
Outlook Stable;
-- $101,056,000 class M2A exchangeable notes 'BBBsf'; Outlook
Stable;
-- $101,056,000 class X5 notional exchangeable notes 'BBBsf';
Outlook Stable;
-- $101,056,000 class M2B exchangeable notes 'BBBsf'; Outlook
Stable;
-- $101,056,000 class X6 notional exchangeable notes 'BBBsf';
Outlook Stable.
The following classes will not be rated by Fitch:
-- $65,996,000 class B3 notes;
-- $65,995,000 class B4 notes;
-- $65,996,364 class B5 notes.
The notes are supported by one collateral group that consists of
11,398 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 calculation date.
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): As of the statistical
cut-off date 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 is 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): As of the statistical cut-off date
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'.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by WestCor Land Title Insurance Company (WestCor), Clayton
Services LLC, and AMC Diligence, LLC (AMC)/JCIII & Associates, Inc.
(JCIII). The third-party due diligence described in Form 15E
focused on: regulatory compliance, pay history, servicing comments,
the presence of key documents in the loan file and data integrity.
In addition, Westcor and AMC were retained to perform an updated
title and tax search, as well as a review to confirm that the
mortgages were recorded in the relevant local jurisdiction and the
related assignment chains.
A regulatory compliance and data integrity review was completed on
100% of the pool. A pay history review was conducted on 100% of the
pool, and a servicing comment review was completed on the loans
which have experienced a delinquency in the past 12 months.
Fitch considered this information in its analysis and based on the
findings, Fitch made minor adjustments to its analysis:
Fitch made an adjustment on 122 loans that were subject to federal,
state, and/or local predatory testing. These loans contained
material violations including an inability to test for high-cost
violations or confirm compliance, which could expose the trust to
potential assignee liability. These loans were marked as
"indeterminate". Typically the HUD issues are related to missing
the Final HUD, illegible HUDs, incomplete HUDs due to missing
pages, or only having estimated HUDs. The final HUD1 was not used
to test for High-Cost loans. To mitigate this risk, Fitch assumed a
100% LS for loans in the states that fall under Freddie Mac's do
not purchase list of "high cost" or "high risk"; 16 loans were
affected by this approach.
For the remaining 117 loans, where the properties are not located
in the states that fall under Freddie Mac's do not purchase list,
the likelihood of all loans being high cost is low. However, Fitch
assume the trust could potentially incur notable legal expenses.
Fitch increased its loss severity expectations by 5% for these
loans to account for the risk.
There were 520 loans missing modification documents or a signature
on modification documents. For these loans, timelines were extended
by an additional three months, in addition to the six-month
timeline extension applied to the entire pool.
TOWD POINT 2017-1: Moody's Assigns Def. Ba2 Rating to Cl. B1 Debt
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Moody's Investors Service has assigned definitive ratings to
seventeen classes of notes issued by Towd Point Mortgage Trust
2017-1.
The notes are backed by one pool of seasoned, performing and
re-performing residential mortgage loans. The collateral pool as of
the cut-off date is comprised of 11,398 first lien, fixed-rate and
adjustable rate mortgage loans, and has a non-zero updated weighted
average FICO score of 692 and a weighted average current LTV of
88.1%. Approximately 84.3% of the loans in the collateral pool have
been previously modified. Select Portfolio Servicing, Inc. is the
servicer for the loans in the pool.
The complete rating actions are:
Issuer: Towd Point Mortgage Trust 2017-1
Cl. A1, Definitive Rating Assigned Aaa (sf)
Cl. A2, Definitive Rating Assigned Aa2 (sf)
Cl. A2A, Definitive Rating Assigned Aa2 (sf)
Cl. A2B, Definitive Rating Assigned Aa2 (sf)
Cl. B1, Definitive Rating Assigned Ba2 (sf)
Cl. X1, Definitive Rating Assigned Aa2 (sf)
Cl. X2, Definitive Rating Assigned Aa2 (sf)
Cl. X3, Definitive Rating Assigned A2 (sf)
Cl. X4, Definitive Rating Assigned A2 (sf)
Cl. X5, Definitive Rating Assigned Baa2 (sf)
Cl. X6, Definitive Rating Assigned Baa2 (sf)
Cl. M1, Definitive Rating Assigned A2 (sf)
Cl. M1A, Definitive Rating Assigned A2 (sf)
Cl. M1B, Definitive Rating Assigned A2 (sf)
Cl. M2, Definitive Rating Assigned Baa2 (sf)
Cl. M2A, Definitive Rating Assigned Baa2 (sf)
Cl. M2B, Definitive Rating Assigned Baa2 (sf)
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected losses on TPMT 2017-1's collateral pool is 10.0%
in Moody's base case scenario. Moody's loss estimates take into
account the historical performance of Prime, Alt-A and Subprime
loans that have similar collateral characteristics as the loans in
the pool, and also incorporate an expectation of a continued strong
credit environment for RMBS, supported by improving home prices
over the next two to three years.
The methodologies used in these ratings were "Moody's Approach to
Rating Securitisations Backed by Non-Performing and Re-Performing
Loans" published in August 2016 and "US RMBS Surveillance
Methodology" published in January 2017.
Additionally, the methodology used in rating Cl. X1, Cl. X2, Cl.
X3, Cl. X4, Cl. X5, Cl. X6 was "Moody's Approach to Rating
Structured Finance Interest-Only Securities" published in October
2015.
Collateral Description
TPMT 2017-1's collateral pool is primarily comprised of seasoned,
re-performing mortgage loans. Approximately 84.3% of the loans in
the collateral pool have been previously modified. The majority of
the loans underlying this transaction exhibit collateral
characteristics similar to that of seasoned Alt-A mortgages.
Moody's based its expected losses on a pool of re-performing
mortgage loans on Moody's estimates of 1) the default rate on the
remaining balance of the loans and 2) the principal recovery rate
on the defaulted balances. The two factors that most strongly
influence a re-performing mortgage loan's likelihood of re-default
are the length of time that the loan has performed since
modification, and the amount of the reduction in monthly mortgage
payments as a result of modification. The longer a borrower has
been current on a re-performing loan, the less likely they are to
re-default. Approximately 78.8% of the borrowers of the loans in
the collateral pool have been current on their payments for the
past 24 months at least.
Moody's estimated expected losses using two approaches -- (1)
pool-level approach, and (2) re-performing loan level analysis. In
the pool-level approach, Moody's estimates losses on the pool by
applying Moody's assumptions on expected future delinquencies,
default rates, loss severities and prepayments as observed from
Moody's surveillance of similar collateral. Moody's projected
future annual delinquencies for eight years by applying annual
default rates and delinquency burnout factors. The delinquency
burnout factors reflect Moody's future expectations of the economy
and the U.S. housing market. Based on the loan characteristics of
the pool and the demonstrated pay histories, Moody's applied an
expected annual delinquency rate of 8.0% for this pool to calculate
the delinquencies on the collateral pool for year one. Moody's then
calculated future delinquencies using default burnout and voluntary
conditional prepayment rate (CPR) assumptions. Moody's aggregated
the delinquencies and converted them to losses by applying pool
specific lifetime default frequency and loss severity assumptions.
Moody's CPR and loss severity assumptions are based on actual
observed performance of GSE and non-GSE seasoned re-performing
modified loans and prior TPMT deals. In applying Moody's loss
severity assumptions, Moody's accounted for the lack of principal
and interest advancing in this transaction.
Moody's also conducted a loan level analysis on TPMT 2017-1's
collateral pool. Moody's applied loan-level baseline lifetime
propensity to default assumptions, and considered the historical
performance of seasoned Prime, Alt-A and Subprime loans with
similar collateral characteristics and payment histories. Moody's
then adjusted this base default propensity up for (1)
adjustable-rate loans, (2) loans that have the risk of coupon
step-ups and (3) loans with high updated loan to value ratios
(LTVs). Moody's applied a higher baseline lifetime default
propensity for interest-only loans, using the same adjustments. To
calculate the final expected loss for the pool, Moody's applied a
loan-level loss severity assumption based on the loans' updated
estimated LTVs. Moody's further adjusted the loss severity
assumption upwards for loans in states that give super-priority
status to homeowner association (HOA) liens, to account for
potential risk of HOA liens trumping a mortgage.
The deferred balance in this transaction is $176,551,422
representing approximately 8.6% of the total unpaid principal
balance. Loans that have HAMP and proprietary remaining principal
reduction amount (PRA) totaled $7,701,314 representing
approximately 4.4% of total deferred balance.
Under HAMP-PRA, the principal of the borrower's mortgage may be
reduced by a predetermined amount called the PRA forbearance amount
if the borrower satisfies certain conditions during a trial period.
The principal reduction occurs over three years. More specifically,
if the loan is in good standing on the first, second and third
annual anniversaries of the effective date of the trial period, the
loan servicer reduces the unpaid principal balance of the loan by
one-third of the initial PRA forbearance amount on each anniversary
date. This means that if the borrower continues to make timely
payments on the loan for three years, the entire PRA forbearance
amount is forgiven. Also, if the loan is in good standing and the
borrower voluntary pays off the loan, the entire forbearance amount
is forgiven.
For non-PRA forborne amounts, the deferred balance is the full
obligation of the borrower and must be paid in full upon (i) sale
of property (ii) voluntary payoff and (iii) final scheduled payment
date. For loans that default in future or get modified after the
closing date, the servicer may opt for partial principal
forgiveness to the extent permitted under the servicing agreement.
Moody's assumes that 100% of the remaining PRA amount would be
forgiven and not recovered. Moody's assumptions is based in large
part on the performance of TPMT 2015-5, where approximately 95% of
deferred losses to date are attributed to PRA amounts. Hence,
Moody's expects very low recoveries, if any, from HAMP and
proprietary PRA amounts. In addition, for non-PRA deferred balance,
Moody's applied a slightly higher default rate for these loans than
what Moody's assumed for the overall pool given that these
borrowers have experienced past credit events that required loan
modification, as opposed to borrowers who have been current and
have never been modified. For non-PRA loans Moody's assumed
approximately 85% severity based on SPS' experience to date across
its portfolio in recovering deferred balance through either
voluntary payoff or liquidation of the property after default. The
final expected loss for the collateral pool reflects the due
diligence findings of four independent third party review (TPR)
firms as well as Moody's assessments of TPMT 2017-1's
representations & warranties (R&Ws) framework.
Transaction Structure
TPMT 2017-1 has a sequential priority of payments structure, in
which a given class of notes can only receive principal payments
when all the classes of notes above it have been paid off.
Similarly, losses will be applied in the reverse order of priority.
The Class A1, A2, A2A, A2B, M1, M2, M1A, M1B, M2A, M2B, X1, X2, X3,
X4, X5 and X6 notes carry a fixed-rate coupon subject to the
collateral adjusted net WAC and applicable available funds cap. The
Class B1, B2, B3, B4 and B5 are Variable Rate Notes where the
coupon is equal to the lesser of adjusted net WAC and applicable
available funds cap. There are no performance triggers in this
transaction. Additionally, the servicer will not advance any
principal or interest on delinquent loans.
With the exception of TPMT 2016-5, 2016-4, 2016-3, and 2015-1, in
other previously issued TPMT transactions, the monthly excess cash
flow can leak out after paying any net WAC shortfalls and
previously unpaid expenses. However, the monthly excess cash flow
in this transaction, after payment of such expenses, if any, will
be fully captured to pay the principal balance of the bonds
sequentially, allowing for a faster paydown of the bonds.
Moody's modeled TPMT 2017-1's cashflows using SFW®, a cashflow
tool developed by Moody's Analytics. To assess the final rating on
the notes, Moody's ran 96 different loss and prepayment scenarios
through SFW. The scenarios encompass six loss levels, four loss
timing curves, and four prepayment curves. The structure allows for
timely payment of interest and ultimate payment of principal with
respect to the notes by the legal final maturity.
Third Party Review
Four independent third party review (TPR) firms conducted due
diligence on 100% of the loans in TPMT 2017-1's collateral pool for
compliance, pay string history, title and tax review and data
capture. The four TPR firms -- JCIII & Associates, LLC
(subsequently acquired by AMC Diligence, LLC), Clayton Services,
LLC, AMC Diligence, LLC, and Westcor Land Title Insurance Company
(Westcor) -- reviewed compliance, data integrity and key documents,
to verify that loans were originated in accordance with federal,
state and local anti-predatory laws. The TPR firms also conducted
audits of designated data fields to ensure the accuracy of the
collateral tape.
Based on Moody's analysis of the third-party review reports,
Moody's determined that a portion of the loans had legal or
compliance exceptions that could cause future losses to the trust.
Moody's incorporated an additional hit to the loss severities for
these loans to account for this risk. FirstKey Mortgage, LLC, the
asset manager for the transaction, retained Westcor and AMC
Diligence, LLC to review the title and tax reports for the loans in
the pool, and will oversee Westcor and monitor the loan sellers in
the completion of the assignment of mortgage chains. 100% of the
loans are in first lien position. In addition, FirstKey expects a
significant number of the assignment and endorsement exceptions to
be cleared within the first twelve months following the closing
date of the transaction. The representation provider has deposited
collateral of $0.5 million in Assignment Reserve Account to ensure
that the asset manager completes the clearing of these exceptions.
Representations & Warranties
Moody's ratings also factors in TPMT 2017-1's weak representations
and warranties (R&Ws) framework. The representation provider,
FirstKey Mortgage, LLC and the responsible party, Cerberus Global
Residential Mortgage Opportunity Fund, L.P., are unrated by
Moody's. Moreover, FirstKey's obligations will be in effect for
only thirteen months (until the payment date in March 2018). The
R&Ws themselves are weak because they contain many knowledge
qualifiers and the regulatory compliance R&W does not cover
monetary damages that arise from TILA violations whose right of
rescission has expired. While the transaction provides a Breach
Reserve Account to cover for any breaches of R&Ws, the size of the
account is small relative to TPMT 2017-1's aggregate collateral
pool ($2.06 billion). An initial deposit of $4.48 million will be
remitted to the Breach Reserve Account on the closing date, with an
initial Breach Reserve Account target amount of $7,651,350 as of
the cut-off date.
Transaction Parties
The transaction benefits from a strong servicing arrangement.
Select Portfolio Servicing, Inc. will service 100% of TPMT 2017-1's
collateral pool. Moody's assess SPS higher compared to their peers.
Furthermore, FirstKey Mortgage, LLC, the asset manager, will
oversee the servicer, which strengthens the overall servicing
framework in the transaction. Wells Fargo Bank National Association
and U.S. Bank National Association are the Custodians of the
transaction. The Delaware Trustee for TPMT 2017-1 is Wilmington
Trust, National Association. TPMT 2017-1's Indenture Trustee is
U.S. Bank National Association.
Factors that would lead to an upgrade or downgrade of the ratings:
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligors defaulting or
deterioration in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market. Other reasons
for worse-than-expected performance include poor servicing, error
on the part of transaction parties, inadequate transaction
governance and fraud.
VENTURE XII CLO: S&P Assigns 'BB' Rating on Cl. E-R Notes
---------------------------------------------------------
S&P Global Ratings assigned its ratings to the replacement class
A-R, B-R, C-R, D-R, and E-R notes from Venture XII CLO Ltd., a U.S.
collateralized loan obligation (CLO) transaction managed by MJX
Asset Management LLC. S&P withdrew its ratings on the class A-1,
A-X, B-1, B-2, C-1, C-2, D, and E notes from this transaction after
they were fully redeemed.
On the Feb. 28, 2017, refinancing date, the proceeds from the
replacement note issuances were used to redeem the original notes
as outlined in the transaction document provisions. Therefore, S&P
is withdrawing the ratings on the original notes in line with their
full redemption, and assigning final ratings to the replacement
notes.
The notes are being issued via a supplemental indenture, which, in
addition to outlining the terms of the replacement notes, will also
reset the non-call end date, reinvestment end date, legal final
maturity date, and weighted average life test.
S&P's 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 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 or ultimate
principal, or both, to each of the rated tranches.
S&P's review of this transaction also relied in part upon a
criteria interpretation with respect to "CDOs: Mapping A Third
Party's Internal Credit Scoring System To Standard & Poor's Global
Rating Scale," published May 8, 2014, which allows S&P to use a
limited number of public ratings from other nationally recognized
statistical rating organizations (NRSROs) for the purposes of
assessing the credit quality of assets not rated by S&P Global
Ratings. The criteria provide specific guidance for treatment of
corporate assets not rated by S&P Global Ratings, and the
interpretation outlines treatment of securitized assets.
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
Venture XII CLO Ltd.
Replacement class Rating Amount (mil $)
A-R AAA (sf) 475.000
B-R AA (sf) 70.000
C-R A (sf) 43.000
D-R BBB (sf) 36.000
E-R BB (sf) 42.000
Subordinated notes NR 74.000
RATINGS WITHDRAWN
Venture XII CLO Ltd.
Rating
Original class To From
A-1 NR AAA (sf)
A-X NR AAA (sf)
B-1 NR AA (sf)/Watch Pos
B-2 NR AA (sf)/Watch Pos
C-1 NR A (sf)/Watch Pos
C-2 NR A (sf)/Watch Pos
D NR BBB (sf)
E NR BB (sf)
NR--Not rated.
WELLS FARGO 2017-RC1: S&P Gives Prelim. BB- Rating on Cl. X-E Certs
-------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Wells Fargo
Commercial Mortgage Trust 2017-RC1's $634.9 million commercial
mortgage pass-through certificates series 2017-RC1.
The certificate issuance is a commercial mortgage-backed securities
transaction backed by 61 commercial mortgage loans with an
aggregate principal balance of $634.9 million ($525.5 million of
offered certificates), secured by the fee and leasehold interests
in 78 properties across 21 states.
The preliminary ratings are based on information as of Feb. 22,
2017. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of the underlying
collateral's economics, the trustee-provided liquidity, the
collateral pool's relative diversity, and our overall qualitative
assessment of the transaction.
PRELIMINARY RATINGS ASSIGNED
Wells Fargo Commercial Mortgage Trust 2017-RC1
Class Rating(i) Amount ($)
A-1 AAA (sf) 20,099,000
A-2 AAA (sf) 73,875,000
A-3 AAA (sf) 100,000,000
A-4 AAA (sf) 201,209,000
A-SB AAA (sf) 27,034,000
A-S AAA (sf) 46,746,000
X-A AAA (sf) 422,217,000(ii)
X-B A (sf) 103,293,000(ii)
B AA (sf) 29,404,000
C A (sf) 27,143,000
X-D(iii) BBB- (sf) 30,912,000(ii)
X-E((iii) BB- (sf) 23,373,000(ii)
X-F(iii) B+ (sf) 8,293,000(ii)
X-G(iii) NR 15,080,045(ii)
D(iii) BBB- (sf) 30,912,000
E(iii) BB- (sf) 23,373,000
F(iii) B+ (sf) 8,293,000
G(iii) NR 15,080,045
RR Interest(iii) NR 31,745,687
(i)The certificates will be issued to qualified institutional
buyers according to Rule 144A of the Securities Act of 1933.
(ii)Notional balance.
(iii)Non-offered certificates.
NR--Not rated.
WOODMONT TRUST 2017-1: S&P Assigns BB Rating on Class E Notes
-------------------------------------------------------------
S&P Global Ratings assigned its ratings to Woodmont 2017-1 Trust's
$434.70 million floating-rate notes.
The note issuance is a collateralized loan obligation transaction
backed by middle market speculative-grade senior secured term
loans.
The ratings reflect S&P's view of:
-- The diversified collateral pool, which consists primarily of
middle market speculative-grade senior secured term loans
that are governed by collateral quality tests. The credit
enhancement provided through the subordination of cash
flows, excess spread, and overcollateralization.
-- The collateral manager's experienced team, which can affect
the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading. The
transaction's legal structure, which is expected to be
bankruptcy remote.
RATINGS ASSIGNED
Woodmont 2017-1 Trust
Class Rating Amount
(mil. $)
A AAA (sf) 284.30
B AA (sf) 48.60
C (deferrable) A (sf) 37.90
D (deferrable) BBB- (sf) 30.70
E (deferrable) BB (sf) 33.20
Certificates NR 71.50
NR--Not rated.
[*] Fitch Takes Various Rating on 15 SF CDOs Issued 2001-2005
-------------------------------------------------------------
Fitch Ratings has taken the following rating actions on 60 tranches
from 15 structured finance collateralized debt obligations (SF
CDOs) with exposure to various structured finance assets.
-- Affirmed 54 tranches;
-- Upgraded six tranches;
KEY RATING DRIVERS
Fitch affirmed 42 classes at 'Csf' that have credit enhancement
(CE) levels exceeded by the expected losses (EL) from the
distressed collateral (rated 'CCsf' and lower) of each portfolio.
For these classes, the probability of default was evaluated without
factoring potential losses from the performing assets. In the
absence of mitigating factors, default for these notes at or prior
to maturity continues to appear inevitable.
Fitch affirmed two classes at 'CCsf' where default remains
probable. The classes' current CE levels exceed the EL, but their
CE is lower than the losses projected at the 'CCCsf' rating stress
under Fitch's Structured Finance Portfolio Credit Model (SF PCM)
analysis.
Fitch affirmed at 'Dsf' six non-deferrable classes that continue to
experience interest payment shortfalls.
Fitch affirmed the ratings on the remaining classes due to
continued stable performance.
The upgrades are attributed to significant deleveraging of each
transaction's capital structure which has resulted in increased CE
for the notes. According to the SF PCM analysis, these tranches are
now able to withstand losses at a higher rating stress compared to
Fitch's previous review.
For the upgraded transactions, Fitch performed two additional
sensitivity scenarios. In the first, the assets weighted average
lives were extended to half of their term to their legal
maturities. In the second, the ratings of obligors which made up
greater than 5% of the portfolio were lowered by one rating
category to account for potential performance volatility of a
concentrated portfolio. The results of the sensitivity analysis
support the upgrades. The Stable Outlooks reflect Fitch's view that
the notes have sufficient level of protection to withstand
potential deterioration of the underlying collateral going
forward.
The Rating Outlook for four of the upgraded tranches has been
revised to Positive. Fitch expects that these notes will continue
to benefit from deleveraging and are likely to be paid within a
year.
RATING SENSITIVITIES
Negative migration, defaults beyond those projected, and lower than
expected recoveries could lead to downgrades for classes analysed
under the SF PCM. Classes already rated 'Csf' have limited
sensitivity to further negative migration given their highly
distressed rating levels. However, there is potential for
non-deferrable classes to be downgraded to 'Dsf' should they
experience any interest payment shortfalls.
[*] Moody's Hikes $20.5MM of Resecuritized RMBS Issued 2004 & 2006
------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of four tranches
from three resecuritization transactions backed by RMBS.
The complete rating action is:
Issuer: Bayview Financial Asset Trust 2004-SSR1
Cl. M, Upgraded to B1 (sf); previously on Apr 8, 2016 Upgraded to
B3 (sf)
Issuer: CWHEQ Revolving Home Equity Loan Resecuritization Trust
2006-RES
Cl. 04L-1a, Upgraded to B3 (sf); previously on Feb 11, 2013
Affirmed Caa2 (sf)
Cl. 04L-1b, Upgraded to B3 (sf); previously on Feb 11, 2013
Affirmed Caa2 (sf)
Issuer: Fannie Mae Grantor Trust 2004-T5
Cl. AB-2, Upgraded to Baa1 (sf); previously on Jun 1, 2011
Downgraded to Baa3 (sf)
Ratings Rationale
The ratings upgrades of underlying bonds pledged to the related
resecuritizations have prompted the subsequent upgrades of Fannie
Mae Grantor Trust 2004-T5 Cl. AB-2 tranche and CWHEQ Revolving Home
Equity Loan Resecuritization Trust 2006-RES Cl. 04L-1a and Cl.
04L-1b tranches.
Bayview Financial Asset Trust 2004-SSR1 class Cl. M upgrade is
primarily due to the increase in credit enhancement supporting this
bond.
The principal methodology used in these ratings was "Moody's
Approach to Rating Resecuritizations" published in February 2014.
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 4.8% in January 2017 from 4.9% in
January 2016. 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 on the underlying transactions or other policy or
regulatory change can impact the performance of these transactions.
[*] Moody's Hikes $497MM of Subprime RMBS Issued 2003-2006
----------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 30 tranches
from 12 transactions issued by various issuers, backed by subprime
mortgage loans.
Complete rating actions are:
Issuer: Ameriquest Mortgage Securities Inc., Series 2003-5
Cl. A-5, Upgraded to B3 (sf); previously on May 4, 2012 Downgraded
to Caa1 (sf)
Cl. A-6, Upgraded to B1 (sf); previously on Mar 29, 2011 Downgraded
to B3 (sf)
Issuer: Equity One Mortgage Pass-Through Trust 2003-4
AV-1, Upgraded to A3 (sf); previously on May 3, 2012 Downgraded to
Baa2 (sf)
AV-2, Upgraded to A3 (sf); previously on Dec 14, 2012 Confirmed at
Baa2 (sf)
M-1, Upgraded to Ba2 (sf); previously on May 3, 2012 Downgraded to
B1 (sf)
Issuer: First Franklin Mortgage Loan Trust 2006-FF10
Cl. A1, Upgraded to Caa1 (sf); previously on Apr 6, 2010 Downgraded
to Caa3 (sf)
Cl. A4, Upgraded to Aa2 (sf); previously on Sep 30, 2015 Upgraded
to Baa1 (sf)
Cl. A5, Upgraded to B3 (sf); previously on Sep 30, 2015 Upgraded to
Caa3 (sf)
Cl. A7, Upgraded to Aa2 (sf); previously on Sep 30, 2015 Upgraded
to Baa1 (sf)
Issuer: NovaStar Mortgage Funding Trust, Series 2003-2
Cl. B-1, Upgraded to Baa3 (sf); previously on Mar 4, 2016 Upgraded
to Ba1 (sf)
Cl. M-1, Upgraded to A3 (sf); previously on Mar 4, 2016 Upgraded to
Baa1 (sf)
Cl. M-2, Upgraded to Baa1 (sf); previously on Mar 4, 2016 Upgraded
to Baa2 (sf)
Cl. M-3, Upgraded to Baa3 (sf); previously on Mar 4, 2016 Upgraded
to Ba1 (sf
Issuer: NovaStar Mortgage Funding Trust, Series 2004-1
Cl. B-1, Upgraded to Caa2 (sf); previously on Mar 10, 2011
Downgraded to Ca (sf)
Cl. M-5, Upgraded to B2 (sf); previously on Mar 10, 2011 Downgraded
to Caa1 (sf)
Issuer: Park Place Securities, Inc., Asset-Backed Pass-Through
Certificates, Series 2004-MHQ1
Cl. M-4, Upgraded to Ba3 (sf); previously on Mar 23, 2016 Upgraded
to B1 (sf)
Cl. M-5, Upgraded to B2 (sf); previously on Mar 23, 2016 Upgraded
to Caa3 (sf)
Issuer: Park Place Securities, Inc., Asset-Backed Pass-Through
Certificates, Series 2004-WHQ2
Cl. M-4, Upgraded to Ba3 (sf); previously on Mar 23, 2016 Upgraded
to B1 (sf)
Cl. M-5, Upgraded to Caa1 (sf); previously on Feb 28, 2013 Affirmed
C (sf)
Issuer: RASC Series 2003-KS5 Trust
Cl. A-II-A, Upgraded to Ba2 (sf); previously on Mar 24, 2016
Upgraded to B1 (sf)
Cl. A-II-B, Upgraded to Ba2 (sf); previously on Mar 24, 2016
Upgraded to B1 (sf)
Cl. A-I-5, Upgraded to B2 (sf); previously on Mar 24, 2016 Upgraded
to Caa1 (sf)
Cl. A-I-6, Upgraded to B2 (sf); previously on Mar 24, 2016 Upgraded
to B3 (sf)
Issuer: Renaissance Home Equity Loan Trust 2004-4
Cl. MF-1, Upgraded to B3 (sf); previously on Mar 10, 2015 Upgraded
to Caa2 (sf)
Issuer: Structured Asset Investment Loan Trust 2003-BC4
Cl. M1, Upgraded to Baa2 (sf); previously on Mar 24, 2016 Upgraded
to Ba1 (sf)
Issuer: Structured Asset Investment Loan Trust 2003-BC6
Cl. B, Upgraded to B2 (sf); previously on Mar 4, 2011 Downgraded to
C (sf)
Cl. M1, Upgraded to Baa3 (sf); previously on Mar 24, 2016 Upgraded
to Ba3 (sf)
Cl. M2, Upgraded to Ba3 (sf); previously on Mar 4, 2011 Downgraded
to Ca (sf)
Cl. M4, Upgraded to B1 (sf); previously on Mar 4, 2011 Downgraded
to Ca (sf)
Issuer: Terwin Mortgage Trust, Series TMTS 2003-8HE
Cl. M-2, Upgraded to Caa2 (sf); previously on May 3, 2012
Downgraded to Ca (sf)
RATINGS RATIONALE
The rating 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
expectation on these pools.
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in January 2017.
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 4.8% in January 2017 from 4.9% in
January 2016. 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 Hikes $83.8MM of ARM RMBS Issued from 2002-2005
-----------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 11 tranches
from four transactions, backed by Alt-A and Option ARM RMBS loans,
issued by multiple issuers.
Complete rating actions are as follows:
Issuer: DSLA Mortgage Loan Trust 2005-AR2
Cl. 2-A1A, Upgraded to Ba1 (sf); previously on Apr 4, 2016 Upgraded
to Ba3 (sf)
Issuer: WaMu Mortgage Pass-Through Certificates, Series 2004-CB2
Cl. II-A, Upgraded to Baa3 (sf); previously on Jun 29, 2012
Downgraded to Ba1 (sf)
Cl. III-A, Upgraded to Baa3 (sf); previously on Jun 29, 2012
Downgraded to Ba1 (sf)
Cl. IV-A, Upgraded to Baa3 (sf); previously on Jun 29, 2012
Downgraded to Ba1 (sf)
Cl. V-A, Upgraded to Baa1 (sf); previously on Feb 28, 2011
Downgraded to Baa2 (sf)
Cl. VI-A, Upgraded to Baa1 (sf); previously on Feb 28, 2011
Downgraded to Baa2 (sf)
Cl. VII-A, Upgraded to Baa1 (sf); previously on Jun 29, 2012
Downgraded to Baa3 (sf)
Issuer: WaMu Mortgage Pass-Through Certificates, Series 2004-CB4
Cl. II-P, Upgraded to Baa2 (sf); previously on Mar 4, 2011
Downgraded to Baa3 (sf)
Cl. II-1-A, Upgraded to Baa1 (sf); previously on Jun 30, 2015
Upgraded to Baa2 (sf)
Cl. II-2-A, Upgraded to Baa1 (sf); previously on Jun 30, 2015
Upgraded to Baa2 (sf)
Issuer: WaMu Mortgage Pass-Through Ctfs. 2002-AR17 Trust
Cl I-A, Upgraded to Ba3 (sf); previously on Sep 2, 2014 Upgraded to
B1 (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 principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in January 2017.
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 4.8% in January 2017 from 4.9% in
January 2016. 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 $230.7MM of ARM Debt Issued 2005-2007
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 3 tranches
from 3 transactions backed by Option ARM mortgage loans, issued by
multiple issuers.
Complete rating actions are:
Issuer: HarborView Mortgage Loan Trust 2005-11
Cl. 2-A-1A, Upgraded to A3 (sf); previously on Apr 7, 2016 Upgraded
to Baa2 (sf)
Issuer: HarborView Mortgage Loan Trust 2007-4
Cl. 2A-1, Upgraded to Ba3 (sf); previously on Apr 7, 2016 Upgraded
to B3 (sf)
Issuer: WaMu Mortgage Pass-Through Certificates, Series 2006-AR13
Cl. 2A, Upgraded to Ba1 (sf); previously on Apr 7, 2016 Upgraded to
Ba3 (sf)
RATINGS RATIONALE
The rating upgrade on CL.2A-1 in HarborView Mortgage Loan Trust
2007-4 is primarily due to an error correction. In previous rating
actions, the allocation of interest payments was incorrectly
modeled resulting in less excess cashflow available for principal
payments to the Group 2 tranches than called for in the transaction
documents. This has been corrected, and rating action reflects the
change.
The rating upgrades on bonds from HarborView Mortgage Loan Trust
2005-11 and WaMu Mortgage Pass-Through Certificates, Series
2006-AR13 are primarily due to improvement of credit enhancement
available to the bonds compared to expected losses on the bonds.
The actions also reflect the recent performance of the underlying
pools and Moody's updated loss expectation on these pools.
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in January 2017.
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 4.8% in January 2017 from 4.9% in
January 2016. 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 $464MM of RMBS Issued From 2005
-----------------------------------------------------------
Moody's Investors Service has upgraded the ratings of eleven
tranches from two transactions backed by conforming balance RMBS
loans, issued by miscellaneous issuers.
The complete rating actions are:
Issuer: Freddie Mac Whole Loan Securities Trust, Series 2015-SC02
Cl. M-1, Upgraded to A1 (sf); previously on Nov 23, 2015 Definitive
Rating Assigned A2 (sf)
Cl. M-2, Upgraded to A3 (sf); previously on Nov 23, 2015 Definitive
Rating Assigned Baa2 (sf)
Cl. M-3, Upgraded to Baa3 (sf); previously on Nov 23, 2015
Definitive Rating Assigned Ba1 (sf)
Issuer: Structured Agency Credit Risk (STACR) Debt Notes, Series
2015-DN1
Cl. MA, Upgraded to A1 (sf); previously on Apr 19, 2016 Upgraded to
A3 (sf)
Cl. M-2, Upgraded to Aa2 (sf); previously on Apr 19, 2016 Upgraded
to A1 (sf)
Cl. M-2F, Upgraded to Aa2 (sf); previously on Apr 19, 2016 Upgraded
to A1 (sf)
Cl. M-2I, Upgraded to Aa2 (sf); previously on Apr 19, 2016 Upgraded
to A1 (sf)
Cl. M-3, Upgraded to A2 (sf); previously on Apr 19, 2016 Upgraded
to Baa1 (sf)
Cl. M-3F, Upgraded to A2 (sf); previously on Apr 19, 2016 Upgraded
to Baa1 (sf)
Cl. M-3I, Upgraded to A2 (sf); previously on Apr 19, 2016 Upgraded
to Baa1 (sf)
Cl. M-12, Upgraded to Aa2 (sf); previously on Apr 19, 2016 Upgraded
to Aa3 (sf)
RATINGS RATIONALE
The ratings upgraded are primarily due to an increase in credit
enhancement available to the bonds and a reduction in our expected
pool losses. The actions are also a result of the recent
performance of the underlying pools which have displayed very low
levels of serious delinquencies (60 day plus, REO, Foreclosure,
Modification, or Bankruptcy) for STACR 2015-DN1 and no serious
delinquencies for FWLS 2015-SC02 and reflect Moody's updated
default projections on the pools.
The principal methodology used in these ratings was "Moody's
Approach to Rating US Prime RMBS" published in February 2015.
Additionally, the methodology used in rating Structured Agency
Credit Risk (STACR) Debt Notes, Series 2015-DN1 Cl. M-2I and Cl.
M-3I 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 4.8% in January 2017 from 4.9% in
January 2016. 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 $58.7MM of RMBS Issued 2001-2006
------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 11 tranches
and downgraded the rating of one tranche issued from seven
transactions backed by "scratch and dent" mortgage loans.
Complete rating actions are:
Issuer: Ameriquest Mortgage Securities Inc., Quest Trust 2004-X1
Cl. A, Upgraded to Aaa (sf); previously on Apr 13, 2016 Upgraded to
Aa2 (sf)
Underlying Rating: Upgraded to Aaa (sf); previously on Apr 13, 2016
Upgraded to Aa2 (sf)
Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
Issuer: Bayview Financial Mortgage Pass-Through Certificates,
Series 2004-C
Cl. M-1, Upgraded to Aaa (sf); previously on May 31, 2011
Downgraded to Aa2 (sf)
Cl. M-2, Upgraded to Aa2 (sf); previously on Apr 13, 2016 Upgraded
to A1 (sf)
Cl. M-3, Upgraded to A1 (sf); previously on Apr 13, 2016 Upgraded
to A3 (sf)
Cl. M-4, Upgraded to Baa3 (sf); previously on Apr 13, 2016 Upgraded
to Ba1 (sf)
Issuer: CS Mortgage-Backed Pass-Through Certificates, Series
2006-CF3
Cl. A-1, Upgraded to Aaa (sf); previously on Apr 13, 2016 Upgraded
to Aa2 (sf)
Issuer: CSFB Mortgage Pass-Through Certificates, Series 2004-CF1
Cl. M-1, Downgraded to B2 (sf); previously on Nov 21, 2012
Downgraded to B1 (sf)
Cl. M-2, Upgraded to Caa2 (sf); previously on May 19, 2011
Downgraded to Ca (sf)
Issuer: EMC Mortgage Loan Trust 2003-A (Reperforming Mortgage
Loans)
Cl. A-1, Upgraded to B1 (sf); previously on May 26, 2011 Downgraded
to B2 (sf)
Issuer: EMC Mortgage Loan Trust Pass-Through Certificates, Series
2001-A
Cl. A, Upgraded to Ba1 (sf); previously on May 20, 2011 Downgraded
to Ba3 (sf)
Issuer: Structured Asset Securities Corporation 2005-GEL4
Cl. M2, Upgraded to Aaa (sf); previously on Apr 13, 2016 Upgraded
to Aa2 (sf)
Cl. M3, Upgraded to B1 (sf); previously on Apr 13, 2016 Upgraded to
Caa1 (sf)
RATINGS RATIONALE
The ratings upgrades are primarily due to the overall credit
enhancement available to the bonds. The downgrade of CSFB Mortgage
Pass-Through Certificates, Series 2004-CF1 Class M-1 is due to
recent interest shortfalls that are unlikely to be reimbursed. 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 January 2017.
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 4.8% in January 2017 from 4.9% in
January 2016. 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 37 Classes From 8 US RMBS Deals
-----------------------------------------------------------
S&P Global Ratings completed its review of 37 classes from eight
U.S. residential mortgage-backed securities (RMBS) transactions
issued between 2003 and 2006. The review yielded nine upgrades,
three downgrades, and 25 affirmations.
With respect to insured obligations, where we maintain a rating on
the bond insurer that is lower than what S&P would rate the class
without bond insurance, or where the bond insurer is not rated, S&P
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.
Class A ('BB (sf)') from Home Equity Loan Trust 2004-HS3 was
insured by a
rated insurance provider when the deal was originated, but S&P
Global Ratings
has since withdrawn the rating on the insurance provider of that
class.
The rating actions on interest-only (IO) classes reflect the
application of S&P's IO criteria, which provide that S&P will
maintain the current rating 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 these
IO ratings. The ratings on each of these classes have been
affected by recent rating actions on the reference classes upon
which their notional balances are based. Specifically, S&P will
maintain active surveillance of these IO classes using the
methodology applied before the release of its 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 reflect the increased credit support to these classes
relative to S&P's projected losses.
The upgrades include six ratings that were raised three or more
notches because of increased credit support and the classes'
ability to withstand a higher level of projected losses than
previously anticipated.
S&P raised its ratings on classes A-1 and A-3 from Bear Stearns
Asset Backed Securities Trust 2006-SD2 to 'AAA (sf)' from
'AA- (sf)' because credit support for these classes increased to
64.87% in January 2017 from 44.86% in July 2014. S&P also raised
its ratings on classes M-1 and M-2 from the same transaction to
'A (sf)' and 'BB (sf)' from 'BB- (sf)' and 'B- (sf)', respectively,
because credit support for these classes increased to 38.84% and
25.69% from 26.97% and 17.93%, respectively, during the same time
period.
S&P raised its ratings on classes A-3 and M-1 from RAAC Series
2006-SP4 Trust to 'AAA (sf)' and 'A (sf)' from 'BB+ (sf)' and
'B- (sf)', respectively, because credit support for these classes
increased to 67.60% and 42.63% in January 2017 from 44.24% and
26.92% in July 2014, respectively.
S&P raised its ratings on class M-3 from Bear Stearns Asset Backed
Securities Trust 2006-SD2 and class M-2 from RAAC Series 2006-SP4
Trust to 'B- (sf)' and 'B (sf)', respectively, from 'CCC (sf)'
because we believe these classes are no longer vulnerable to
default.
DOWNGRADES
S&P lowered its ratings on classes B-3 and B-4 from Merrill Lynch
Mortgage Investors Trust Series MLCC 2003-D to 'D (sf)' from
'CCC (sf)' and 'CC (sf)', respectively, and S&P's rating on class
B-5 from Merrill Lynch Mortgage Investors Trust Series MLCC 2004-B
to 'D (sf)' from 'CC (sf)' because of principal writedowns incurred
by these classes and S&P's belief that its projected credit support
for the affected classes will be insufficient to cover our
projected losses for the related transactions at a higher rating.
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.
For certain transactions, S&P considered specific performance
characteristics that, in its view, could add volatility to its loss
assumptions and, in turn, to the ratings suggested by S&P's cash
flow projections. When S&P's model recommended an upgrade, it
either limited the extent of our upgrade or affirmed its ratings on
those classes to account for this uncertainty and promote ratings
stability. In general, these classes have one or more of these
characteristics that limit any potential upgrade:
-- Insufficient subordination, overcollateralization, or both;
-- Delinquency trends;
-- Historical interest shortfalls;
-- Low priority in principal payments; and/or
-- Significant growth in observed loss severities.
In addition, some of the transactions have failed their delinquency
triggers, resulting in reduced--or a complete stop
of--unscheduled principal payments to their subordinate classes.
However, these transactions allow for unscheduled principal
payments to resume to the subordinate classes if the delinquency
triggers begin passing again. This would result in eroding the
credit support available for the more senior classes. Therefore,
S&P affirmed its ratings on certain classes in these transactions
even though these classes may have passed at higher 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 its 'B' expected case projected losses for these classes.
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/2lJsrmo
[*] S&P Completes Review on 52 Classes From 9 RMBS Deals
--------------------------------------------------------
S&P Global Ratings completed its review of 52 classes from nine
U.S. residential mortgage-backed securities (RMBS) transactions
issued between 1995 and 2005. The review yielded two upgrades, 47
affirmations, one withdrawal, and two discontinuances. The
transactions in this review are backed by a mix of fixed- and
adjustable-rate subprime mortgage loans, which are secured
primarily by first liens on one- to four-family residential
properties.
For insured obligations where S&P maintains a rating on the bond
insurer that is lower than what S&P would rate the class without
bond insurance or where the bond insurer is not rated, S&P 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 on the underlying
obligation, without considering the potential credit enhancement
from the bond insurance.
Of the classes reviewed, these are insured by an insurance provider
that is currently rated by S&P Global Ratings:
-- Argent Securities Inc. Series 2004-W1's class AV-1
('AAA (sf)'), insured by Assured Guaranty Municipal Corp.
('AA'); and
-- Asset Backed Securities Corp. Home Equity Loan Trust Series
2004-HE7's class A1 ('AAA (sf)'), insured by Assured
Guaranty Municipal Corp. ('AA').
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
S&P raised its rating on class M-6 from CWABS Inc.'s series 2004-3
to 'CCC (sf)' from 'CC (sf)' because it believes this class is no
longer virtually certain to default, primarily due to the improved
performance of the collateral backing this transaction. However,
the 'CCC (sf)' rating indicates that S&P believes that its
projected credit support will remain insufficient to cover its
projected loss for this class and that the class is still
vulnerable to defaulting.
S&P also raised its rating on class M-1 from CWABS Inc.'s series
2003-BC2 to 'B- (sf)' from 'D (sf)'. The rating had previously
been set to 'D (sf)' due to an interest shortfall that had been
outstanding for more than 12 months and that has since then been
reimbursed. This class has not exhibited any additional shortfalls
for the past 17 months. In addition, the overcollateralization
amount is at 91% of its target and the class is currently receiving
all principal distributions since the remaining senior class 2A1
has reached its target enhancement level. The upgrade was derived
by applying S&P's interest shortfall criteria.
AFFIRMATIONS
S&P affirmed its ratings on 23 classes in the 'AAA' through 'B'
rating categories. These affirmations reflect S&P's opinion that
its projected credit support on these classes remained relatively
consistent with its prior projections and is sufficient to cover
our projected losses for those rating scenarios.
For certain transactions, S&P considered specific performance
characteristics that, in its view, could add volatility to its loss
assumptions and, in turn, to the ratings suggested by S&P's cash
flow projections. When S&P's model recommended an upgrade, it
either limited the extent of its upgrade or affirmed its ratings on
those classes to account for this uncertainty and promote ratings
stability. In general, these classes have one or more of these
characteristics that limit any potential upgrade:
-- Insufficient subordination/overcollateralization; and/or
-- Historical interest shortfalls.
The ratings affirmed at 'CCC (sf)' or 'CC (sf)' reflect S&P's
belief that its projected credit support will remain insufficient
to cover its 'B' expected case projected losses for these classes.
WITHDRAWALS
S&P withdrew its rating on class A-5 from Delta Funding Home Equity
Loan Trust 1995-2 because the related pool has a small number of
loans remaining. Once a pool has declined to a de minimis amount,
S&P believes there is a high degree of credit instability that is
incompatible with any rating level.
DISCONTINUANCES
S&P discontinued its ratings on class A-2ss from Morgan Stanley ABS
Capital I Inc. Trust 2005-HE2 and class B from CWABS Inc.'s series
2004-3, which were paid in full during recent remittance periods.
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/2mFvE6D
[*] S&P Completes Review on 64 Classes From 10 RMBS Deals
---------------------------------------------------------
S&P Global Ratings completed its review of 64 classes from 10 U.S.
residential mortgage-backed securities (RMBS) transactions issued
between 2003 and 2006. The review yielded 45 upgrades, 17
affirmations, one withdrawal, and one discontinuance. 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.
The affirmations on classes X-1 and X-2 from Harborview Mortgage
Loan Trust 2004-4 at 'AA+ (sf)' reflect the application of S&P's
interest-only (IO) criteria, which 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 these IO
ratings. Specifically, S&P will maintain active surveillance of
these IO classes using the criteria applied before the release of
its update.
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 29 ratings that were raised three or more
notches and 16 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 these:
-- 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 29 upgrades that were raised three or more notches, the
raised ratings on classes I-A-1, I-A-2, and I-A-3 (to 'AA+ (sf)'
from 'A+ (sf)') and classes II-A-1 and II-A-2 (to 'A+ (sf)' from
'BBB+ (sf)') from Bear Stearns ALT-A Trust 2003-5 reflect a
decrease in our projected losses for the related transactions. S&P
has decreased its projected losses because there have been fewer
reported total delinquencies during the most recent performance
periods compared with those reported during the previous review
dates. Total delinquencies from Bear Stearns ALT-A Trust 2003-5
decreased to 11.5% as of January 2017 from 13.8% as of August 2014.
The remaining 24 classes that were raised three or more notches
reflect an increase in credit support and the classes' ability to
withstand a higher level of projected losses than previously
anticipated:
-- S&P raised its rating on classes A-1, A-2, A-3, and A-5 from
Bear Stearns Asset Backed Securities Trust 2003-AC5 to
'AA- (sf)' from 'A- (sf)' because credit support increased
to 24.3% as of January 2017 from 20.8% as of August 2014.
-- S&P raised its rating on class M-2 from Bear Stearns Asset
Backed Securities Trust 2003-AC5 to 'BBB- (sf)' from 'B
(sf)' because credit support increased to 12.9% as of
January 2017 from 8.9% as of August 2014.
-- S&P raised its rating on class B from Bear Stearns Asset
Backed Securities Trust 2003-AC5 to 'BB (sf)' from 'B- (sf)'
because credit support increased to 10.9% as of January 2017
from 6.8% as of August 2014.
-- S&P raised its rating on class A-4 from GSAA Home Equity
Trust 2005-MTR1 to 'AA (sf)' from 'BBB+ (sf)' because credit
support increased to 34.8% as of January 2017 from 22.5% as
of August 2014.
-- S&P raised its rating on class A-5 from GSAA Home Equity
Trust 2005-MTR1 to 'BBB (sf)' from 'BB (sf)' because credit
support increased to 22.2% as of January 2017 from 13.8% as
of August 2014.
-- S&P raised its rating on class M-1 from Merrill Lynch
Mortgage Investors Trust Series 2005-A3 to 'B+ (sf)' from
'CCC (sf)' because credit support increased to 16.7% as of
January 2017 from 10.6% as of August 2014.
-- S&P raised its rating on class M3 from Merrill Lynch
Mortgage Investors Trust Series 2006-FF1 to 'AA+ (sf)' from
'A+ (sf)' because credit support increased to 53.7% as of
January 2017 from 32.7% as of August 2014.
-- S&P raised its rating on class M4 from Merrill Lynch
Mortgage Investors Trust Series 2006-FF1 to 'AA+ (sf)' from
'BBB+ (sf)' because credit support increased to 43.8% as of
January 2017 from 26.2% as of August 2014.
-- S&P raised its rating on class M5 from Merrill Lynch
Mortgage Investors Trust Series 2006-FF1 to 'AA (sf)' from
'BB (sf)' because credit support increased to 34.8% as of
January 2017 from 20.4% as of August 2014.
-- S&P raised its rating on class M6 from Merrill Lynch
Mortgage Investors Trust Series 2006-FF1 to 'A+ (sf)' from
'B (sf)' because credit support increased to 28.2% as of
January 2017 from 15.9% as of August 2014.
-- S&P raised its rating on class B1 from Merrill Lynch
Mortgage Investors Trust Series 2006-FF1 to 'BBB+ (sf)' from
'B- (sf)' because credit support increased to 21.8% as of
January 2017 from 11.8% as of August 2014.
-- S&P raised its rating on class B2 from Merrill Lynch
Mortgage Investors Trust Series 2006-FF1 to 'BB (sf)' from
'CCC (sf)' because credit support increased to 17.8% as of
January 2017 from 9.1% as of August 2014.
-- S&P raised its rating on class 1-A-3 and 1-A-4 from Morgan
Stanley Mortgage Loan Trust 2005-6AR to 'AA+ (sf)' from
'A+ (sf)' because credit support increased to 51.5% as of
January 2017 from 30.1% as of August 2014.
-- S&P raised its rating on class 1-M-1 from Morgan Stanley
Mortgage Loan Trust 2005-6AR to 'AA- (sf)' from 'BBB+ (sf)'
because credit support increased to 41.8% as of January 2017
from 24.4% as of August 2014.
-- S&P raised its rating on class 1-M-2 from Morgan Stanley
Mortgage Loan Trust 2005-6AR to 'A (sf)' from 'BB+ (sf)'
because credit support increased to 33.2% as of January 2017
from 19.3% as of August 2014.
-- S&P raised its rating on class 1-M-3 from Morgan Stanley
Mortgage Loan Trust 2005-6AR to 'BBB (sf)' from 'BB- (sf)'
because credit support increased to 27.8% as of January 2017
from 16.2% as of August 2014.
-- S&P raised its rating on class 1-M-4 from Morgan Stanley
Mortgage Loan Trust 2005-6AR to 'BBB- (sf)' from 'B+ (sf)'
because credit support increased to 24.5% as of January 2017
from 14.3% as of August 2014.
-- S&P raised its rating on class 1-M-5 from Morgan Stanley
Mortgage Loan Trust 2005-6AR to 'BB (sf)' from 'B (sf)'
because credit support increased to 22.0% as of January 2017
from 12.8% as of August 2014.
-- S&P raised its rating on class M-2 from Opteum Mortgage
Acceptance Corporation, Series 2005-3 to 'A (sf)' from
'BB+ (sf)' because credit support increased to 24.5% as of
January 2017 from 15.3% as of August 2014.
-- S&P raised its rating on class M-3 from Opteum Mortgage
Acceptance Corporation, Series 2005-3 to 'BB (sf)' from
'B (sf)' because credit support increased to 17.9% as of
January 2017 from 11.2% as of August 2014.
S&P also raised its ratings on classes 1-B-2 and 1-B-3 from Morgan
Stanley Mortgage Loan Trust 2005-6AR and on class M-5 from Opteum
Mortgage Acceptance Corp.'s series 2005-3 to 'B- (sf)'from
'CCC (sf)' because these classes experienced increased credit
support, and we believe these classes are no longer vulnerable to
default.
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 its prior
projections and is sufficient to cover its projected losses for
those rating scenarios.
For certain transactions, S&P considered specific performance
characteristics that, in its view, could add volatility to its loss
assumptions and, in turn, to the ratings suggested by S&P's cash
flow projections. When S&P's model recommended an upgrade, it
either limited the extent of its upgrade or affirmed its ratings on
those classes to account for this uncertainty and promote ratings
stability. In general, these classes have one or more of these
characteristics that limit any potential upgrade:
-- Insufficient subordination, overcollateralization, or both;
-- Delinquency trends;
-- Historical interest shortfalls; and/or
-- Lower priority in principal payments.
In addition, some of the transactions have failed their delinquency
triggers, resulting in reduced--or a complete stop of--unscheduled
principal payments to their subordinate classes. However, these
transactions allow for unscheduled principal payments to resume to
the subordinate classes if the delinquency triggers begin passing
again. This would result in eroding the credit support available
for the more senior classes. Therefore, S&P affirmed its ratings
on certain classes in these transactions even though these classes
may have passed at higher 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 its '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.
WITHDRAWAL
S&P withdrew its rating on class 5-A-1 from Banc of America Funding
2005-E Trust because Group 5 within the related pool has a small
number of loans remaining. Once a pool has declined to a de
minimis amount, S&P believes there is a high degree of credit
instability that is incompatible with any rating level.
DISCONTINUANCE
S&P discontinued our 'AAA (sf)' rating on class A1 from Merrill
Lynch Mortgage Investors Trust Series 2006-FF1 as this class was
paid in full as of the January 2017 distribution date.
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/2m8LOrf
[*] S&P Completes Review on 70 Classes From 18 US RMBS Deals
------------------------------------------------------------
S&P Global Ratings completed its review of 70 classes from 18 U.S.
residential mortgage-backed securities (RMBS) transactions issued
between 2002 and 2006. The review yielded nine upgrades, 15
downgrades, 42 affirmations, three withdrawals, and one
discontinuance.
The transactions in this review are backed by a mix of fixed- and
adjustable-rate prime jumbo, subprime, and outside the guidelines
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, S&P
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.
Of the classes reviewed, only one class is insured by an insurance
provider that is currently rated by S&P Global Ratings: Renaissance
Home Equity Loan Trust 2002-4's class A ('AA+ (sf)'), insured by
Assured Guaranty Municipal Corp. ('AA').
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
S&P's projected credit support for the affected classes is
sufficient to cover its projected losses for these rating levels.
The upgrades reflect increased credit support relative to S&P's
projected losses.
The upgrades include five ratings that were raised three or more
notches.
All nine upgrades were due to an increase in credit support and the
classes' ability to withstand a higher level of projected losses
than previously anticipated. The increase in credit support is
attributed to a greater allocation of principal to the more-senior
classes in the payment structure either because of failing triggers
or deal-specific principal payment allocation mechanics benefiting
these classes. As a result, these classes were able to withstand
loss stresses at higher rating scenarios. These nine upgrades
include five classes raised from 'CCC (sf)' because S&P believes
these classes are no longer vulnerable to default.
DOWNGRADES
S&P lowered its ratings on three classes to speculative-grade
('BB+' or lower) from investment-grade ('BBB-' or higher). Another
eight of the lowered ratings remained at an investment-grade level,
while the remaining four 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 higher ratings. The downgrades reflect one or more
of these:
-- Deteriorated credit performance trends;
-- Eroded credit support;
-- Rising constant prepayment rates (CPRs);
-- Tail risk; and/or
-- Principal-only criteria.
The downgrades include three ratings that were lowered three or
more notches, reflect tail risk.
The downgrade on class M-1 from Terwin Mortgage Trust Series TMTS
2003-4HE reflects the increase in S&P's projected losses and its
belief that the projected credit support for the affected classes
will be insufficient to cover the projected losses S&P applied at
the previous rating levels. The increase in S&P's projected losses
is due to higher reported severe delinquencies during the most
recent performance periods compared with those reported during the
previous review dates. Terwin Mortgage Trust Series TMTS
2003-4HE's severe delinquencies increased to 21.0% in December 2016
from 11.2% in July 2014. Severe delinquencies referenced above are
defined as any loan that is 60-plus days delinquent, in foreclosure
or real estate-owned status, or in bankruptcy.
The downgrades on classes 1-A and 2-A from Structured Asset
Investment Loan Trust 2003-BC12 are due to decreased credit
enhancement available to these classes. Both of these classes have
experienced the paydowns and writedowns of junior support classes,
therefore eroding credit support. As a result, these classes are
exposed to potential back-ended losses.
The downgrades on classes 1-A-1, 1-A-3, and 1-A-4 from Banc of
America Mortgage Trust 2004-9 reflect the impact of the delinquency
trigger that is now allowing unscheduled principal payments to be
made to junior class 30-B-1, which is eroding credit support for
the affected senior classes. Before the recent passing of the
delinquency trigger, all unscheduled principal was applied to
paying down the senior classes locking out junior class 30-B-1 of
unscheduled principal.
The downgrades on classes I-A-1 and I-A-7 from Bear Stearns ARM
Trust 2002-12 and class I-A-5 from Cendant Mortgage Capital LLC
series 2003-4 reflect an increase in the prepayment rate observed
for the underlying pool. The higher prepayments have allowed more
principal payments to be made to the transaction's subordinate
classes, eroding credit support for the senior classes and leaving
them vulnerable to potential back-ended losses. Cendant Mortgage
Capital LLC series 2003-4's 12-month CPR has increased to 17.6% as
of January 2017 from 12.9% as of April 2016. Collateral group
one's 12-month CPR in Bear Stearns ARM Trust 2002-12 has increased
to 21.7% in January 2017 from 17.3% in December 2014.
Tail Risk
Cendant Mortgage Capital LLC's series 2003-4 is 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 II-A-1, II-A-2, and
II-A-3 by conducting a loan-level analysis that assesses this risk,
as set forth in S&P's criteria, "U.S. RMBS Surveillance Credit And
ash Flow Analysis For Pre-2009 Originations," published March 2,
2016.
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.
For certain transactions, S&P considered specific performance
characteristics that, in its view, could add volatility to its loss
assumptions and, in turn, to the ratings suggested by S&P's cash
flow projections. When S&P's model recommended an upgrade, it
either limited the extent of its upgrade or affirmed its ratings on
those classes to account for this uncertainty and promote ratings
stability. In general, these classes have one or more of these
characteristics that limit any potential upgrade:
-- Insufficient subordination, overcollateralization, or both;
-- Delinquency trends;
-- Historical interest shortfalls; and/or
-- Low priority in principal payments.
In addition, some of the transactions have failed their delinquency
triggers, resulting in reduced--or a complete stop of--unscheduled
principal payments to their subordinate classes. However, these
transactions allow for unscheduled principal payments to resume to
the subordinate classes if the delinquency triggers begin passing
again. This would result in eroding the credit support available
for the more-senior classes. Therefore, S&P affirmed its ratings
on certain classes in these transactions even though these classes
may have passed at higher 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 its '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.
WITHDRAWALS
S&P withdrew its ratings on classes I-A-1, III-A-1, and IV-A-1 from
First Horizon Mortgage Pass-Through Trust 2006-AR2 because the
related collateral group has a small number of loans remaining. In
this transaction, cross-subordination has been depleted because all
junior classes have been written down; therefore, credit
instability is addressed on the related collateral group level. In
this situation, once the related collateral group has declined to a
de minimis amount, S&P believes there is a high degree of credit
instability that is incompatible with any rating level.
DISCONTINUANCES
S&P discontinued its rating on class A1B1 from ACE Securities Corp.
Home Equity Loan Trust Series 2005-AG1, which was paid in full
during the remittance period on January 2017.
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/2meDXbx
[*] S&P Discontinues Ratings on 70 Classes From 26 CDO Deals
------------------------------------------------------------
S&P Global Ratings discontinued its ratings on 65 classes from 21
cash flow (CF) collateralized loan obligation (CLO) transactions,
two classes from two CF mezzanine structured finance (SF)
collateralized debt obligation (CDO) transactions, and three
classes from three CF CDOs backed by commercial mortgage-backed
securities (CMBS).
The discontinuances follow the complete paydown of the notes as
reflected in the most recent trustee-issued note payment reports
for each transaction:
-- 1776 CLO I Ltd. (CF CLO): senior-most tranches paid down;
other rated tranches still outstanding.
-- Black Diamond CLO 2006-1 (Luxembourg) S.A. (CF CLO): senior-
most tranches paid down; other rated tranches still
outstanding.
-- Bridgeport CLO Ltd. (CF CLO): optional redemption in January
2017.
-- Carlyle Daytona CLO Ltd. (CF CLO): senior-most tranches paid
down; other rated tranches still outstanding.
-- C-Bass CBO VIII Ltd. (CF mezzanine SF CDO): senior-most
tranches paid down; other rated tranches still outstanding.
-- CIFC Funding 2007-I Ltd. (CF CLO): optional redemption in
February 2017.
-- Dryden XVIII Leveraged Loan 2007 Ltd. (CF CLO): optional
redemption in January 2017.
-- Eastland CLO Ltd. (CF CLO): senior-most tranches paid down;
other rated tranches still outstanding.
-- Gleneagles CLO Ltd. (CF CLO): senior-most tranches paid
down; other rated tranches still outstanding.
-- GoldenTree Loan Opportunities III Ltd. (CF CLO): senior-most
tranches paid down; other rated tranches still outstanding.
-- Gramercy Real Estate CDO 2005-1 Ltd. (CF CDO of CMBS):
senior-most tranches paid down; other rated tranches still
outstanding.
-- Gramercy Real Estate CDO 2006-1 Ltd. (CF CDO of CMBS):
senior-most tranches paid down; other rated tranches still
outstanding.
-- Inwood Park CDO Ltd. (CF CLO): optional redemption in
January 2017.
-- Jasper CLO Ltd. (CF CLO): senior-most tranches paid down;
other rated tranches still outstanding.
-- KVK CLO 2012-2 Ltd. (CF CLO): optional redemption in
February 2017.
-- Liberty CLO Ltd. (CF CLO): senior-most tranches paid down;
other rated tranches still outstanding.
-- LightPoint CLO VII Ltd. (CF CLO): optional redemption in
February 2017.
-- MACH ONE 2005-CDN ULC (CF CDO of CMBS): last remaining rated
tranche paid down.
-- Newfleet CLO 2016-1 Ltd. (CF CLO): class X notes(i) paid
down; other rated tranches still outstanding.
-- Schiller Park CLO Ltd. (CF CLO): all rated tranches paid
down.
-- Shackleton I CLO Ltd. (CF CLO): senior-most tranches paid
down; other rated tranches still outstanding.
-- Symphony CLO III Ltd. (CF CLO): senior-most tranches paid
down; other rated tranches still outstanding.
-- Venture VI CDO Ltd. (CF CLO): optional redemption in
February 2017.
-- Voya CLO V Ltd. (CF CLO): optional redemption in February
2017.
-- WhiteHorse IV Ltd. (CF CLO): senior-most tranches paid down;
their rated tranches still outstanding.
-- Zais Investment Grade Ltd. IX (CF Mezzanine SF CDO): senior-
most tranches paid down; other rated tranches still
outstanding.
(i)An "X note" within a CLO is generally a note with a principal
balance intended to be repaid early in the CLO's life using
interest proceeds from the CLO's waterfall.
RATINGS DISCONTINUED
1776 CLO I Ltd.
Rating
Class To From
A1 NR AAA (sf)
A2 NR AAA (sf)
Black Diamond CLO 2006-1 (Luxembourg) S.A.
Rating
Class To From
A-D NR AAA (sf)
A-E NR AAA (sf)
A-R NR AAA (sf)
Bridgeport CLO Ltd.
Rating
Class To From
A-1 NR AAA (sf)
A-2 NR AAA (sf)
B NR AAA (sf)
C NR A+ (sf)
D NR BB+ (sf)
Carlyle Daytona CLO Ltd.
Rating
Class To From
A-1L NR AAA (sf)
A-1LV NR AAA (sf)
C-Bass CBO VIII Ltd.
Rating
Class To From
C NR B (sf)
CIFC Funding 2007-I Ltd.
Rating
Class To From
A-2L NR AAA (sf)
A-3L NR AAA (sf)
B-1L NR AA+ (sf)
B-2L NR BBB+ (sf)
Dryden XVIII Leveraged Loan 2007 Ltd.
Rating
Class To From
B NR BB+ (sf)
Eastland CLO Ltd.
Rating
Class To From
A-2a NR AAA (sf)
Gleneagles CLO Ltd.
Rating
Class To From
C NR AAA (sf)
GoldenTree Loan Opportunities III Ltd.
Rating
Class To From
A-1A-J NR AAA (sf)
A-1B-J NR AAA (sf)
A-2 NR AAA (sf)
Gramercy Real Estate CDO 2005-1 Ltd.
Rating
Class To From
B NR BB+ (sf)
Gramercy Real Estate CDO 2006-1 Ltd.
Rating
Class To From
B NR B+ (sf)
Inwood Park CDO Ltd.
Rating
Class To From
A-1B NR AAA (sf)
A-2 NR AAA (sf)
B NR AAA (sf)
C NR AAA (sf)
D NR AAA (sf)
E NR BB+ (sf)
Jasper CLO Ltd.
Rating
Class To From
C NR A+ (sf)
KVK CLO 2012-2 Ltd.
Rating
Class To From
A NR AAA (sf)
B NR AA (sf)
C NR A (sf)
D NR BBB (sf)
E NR BB (sf)
Liberty CLO Ltd.
Rating
Class To From
B NR AA+ (sf)
LightPoint CLO VII Ltd.
Rating
Class To From
A-1 NR AAA (sf)
A-2 NR AAA (sf)
B NR A+ (sf)/Watch POS
C NR BBB- (sf)/Watch POS
D NR B+ (sf)
MACH ONE 2005-CDN1 ULC
Rating
Class To From
N NR B+ (sf)
Newfleet CLO 2016-1 Ltd.
Rating
Class To From
X NR AAA (sf)
Schiller Park CLO Ltd.
Rating
Class To From
A-1-B NR AAA (sf)
A-2 NR AAA (sf)
B NR AAA (sf)
C NR AA+ (sf)/Watch POS
D NR A+ (sf)/Watch POS
Shackleton I CLO Ltd.
Rating
Class To From
A-R NR AAA (sf)
B-1-R NR AA+ (sf)
B-2-R NR AA+ (sf)
C-R NR AA- (sf)
D-R NR BBB+ (sf)
Symphony CLO III Ltd.
Rating
Class To From
A-1a NR AAA (sf)
Venture VI CDO Ltd.
Rating
Class To From
A-1 NR AAA (sf)
A-1-J NR AAA (sf)
A-1-S NR AAA (sf)
A-2 NR AA+ (sf)
B NR AA- (sf)
C NR BBB+ (sf)
Voya CLO V Ltd.
Rating
Class To From
A-1a NR AAA (sf)
A-1b NR AAA (sf)
A-2 NR AAA (sf)
B NR AA+ (sf)
C NR A+ (sf)
D NR BB+ (sf)
WhiteHorse IV Ltd.
Rating
Class To From
A-1 NR AAA (sf)
Zais Investment Grade Ltd. IX
Rating
Class To From
A-2 NR AAA (sf)
NR--Not rated.
*********
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