/raid1/www/Hosts/bankrupt/TCR_Public/220410.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, April 10, 2022, Vol. 26, No. 99
Headlines
1211 AVENUE 2015-1211: Fitch Affirms BB Rating on Class E Certs
ANCHORAGE CAPITAL 24: Moody's Gives Ba3 Rating to Class E Notes
APIDOS CLO XXXIX: Moody's Assigns Ba3 Rating to $20MM Cl. E Notes
AVIS BUDGET 2022-1: Moody's Assigns (P)Ba2 Rating to Class D Notes
BALLYROCK CLO 19: S&P Assigns Prelim BB-(sf) Rating on Cl. D Notes
BANK 2018-BNK12: Fitch Lowers Rating on 2 Tranches to 'CCC'
BB-UBS TRUST 2012-TFT: S&P Affirms CCC(sf) Rating on Class E Certs
BEAR STEARNS 2005-PWR7: Moody's Cuts Rating on Cl. C Certs to Caa3
BENCHMARK 2021-B23: DBRS Confirms B(low) Rating on Cl. 360D Certs
BINOM SECURITIZATION 2022-RPL1: DBRS Finalizes B Rating on B2 Debt
BIRCH GROVE 4: Moody's Assigns Ba3 Rating to $20MM Class E Notes
BSPRT ISSUER 2022-FL8: DBRS Finalizes B(low) Rating on Cl. H Notes
BWAY 2015-1740: S&P Lowers Class E Certs Rating to 'B- (sf)'
BWAY COMMERCIAL 2022-26BW: DBRS Finalizes BB Rating on E Certs
BX COMMERCIAL 2022-AHP: DBRS Finalizes B(low) Rating on F Certs
BX TRUST 2019-RP: Fitch Affirms B- Rating on Class F Certs
BX TRUST 2022-IND: Moody's Assigns (P)B3 Rating to Cl. F Certs
CF MORTGAGE 2019-CF1: Fitch Affirms B- Rating on 2 Tranches
CFCRE COMMERCIAL 2017-C8: Fitch Affirms CCC Rating on 2 Tranches
CFMT LLC 2022-AB2: DBRS Finalizes BB(low) Rating on Class M5 Notes
CHNGE MORTGAGE 2022-2: DBRS Gives Prov. B Rating on Cl. B-2 Certs
CIFC FUNDING 2022-II: Moody's Assigns Ba3 Rating to $20MM E Notes
CIM TRUST 2022-R1: DBRS Gives Prov. B(high) Rating on Cl. B2 Notes
CITIGROUP 2022-INV2: Moody's Gives '(P)B3' Rating to B-5 Certs
CITIGROUP MORTGAGE 2022-INV2: Moody's Gives '(P)B3' to B-5 Certs
CITIGROUP MORTGAGE 2022-INV2: Moody's Gives B3 Rating to B-5 Certs
COMM 2010-C1: Moody's Lowers Rating on Class G Debt to Caa2
COMM 2013-CCRE12: Moody's Cuts Rating on Cl. C Certificates to Ba3
COMM 2013-CCRE9: Fitch Lowers Rating on Class D Debt to B-
COMM 2014-CCRE20: DBRS Lowers Class F Certs Rating to C
COMM 2015-CCRE24: Fitch Affirms CCC Rating on Class F Debt
COMM 2015-LC21: DBRS Lowers Class X-D Certs Rating to BB(low)
DEEPHAVEN RESIDENTIAL 2022-2: S&P Assigns 'B-' Rating on B-2 Notes
DT AUTO 2022-1: DBRS Gives Prov. BB Rating on Class E Notes
EXETER AUTOMOBILE 2022-2: S&P Assigns Prelim BB Rating on E Notes
FANNIE MAE 2022-R04: S&P Assigns Prelim 'BB-' Rating on 1B-1 Notes
FINANCE OF AMERICA 2022-HB1: DBRS Gives Prov. B Rating on M5 Notes
GS MORTGAGE 2012-GCJ7: DBRS Lowers Class F Certs Rating to D
GS MORTGAGE 2013-GC10: DBRS Lowers Class F Certs Rating to CCC
GS MORTGAGE 2022-GR2: Moody's Assigns B3 Rating to Cl. B-5 Certs
GS MORTGAGE 2022-PJ3: Moody's Assigns B3 Rating to Cl. B-5 Certs
GS MORTGAGE-BACKED 2022-PJ3: Fitch Rates Class B-5 Certs 'B+'
HERTZ VEHICLE III: Moody's Assigns Ba2 Rating to 3 Tranches
HIN TIMESHARE 2020-A: Fitch Affirms B Rating on Class E Debt
JP MORGAN 2011-C3: Fitch Affirms C Rating on 2 Tranches
JP MORGAN 2012-C8: DBRS Confirms B Rating on Class G Certs
JP MORGAN 2014-C25: Fitch Affirms CC Rating on 2 Tranches
JP MORGAN 2017-JP6: Fitch Affirms B- Rating on Class G-RR Certs
JP MORGAN 2022-3: Fitch Gives Final B Rating to Class B-5 Debt
JP MORGAN 2022-INV3: Fitch Gives Final B- Rating to B-5 Debt
JPMDB COMMERCIAL 2018-C8: Fitch Affirms B- Rating on 2 Tranches
LSTAR COMMERCIAL 2015-3: DBRS Hikes F Certs Rating to BB(high)
MADISON PARK LIII: Moody's Assigns Ba3 Rating to $26MM Cl. E Notes
MAGNETITE XXXII: S&P Assigns BB- (sf) Rating on Class F Notes
MARBLE POINT XXIV: Moody's Assigns Ba3 Rating to $20MM Cl. E Notes
MELLO MORTGAGE 2022-INV2: S&P Assigns B- (sf) Rating on B-5 Certs
MORGAN STANLEY 2011-C3: Moody's Lowers Rating on Cl. G Debt to Ca
MORGAN STANLEY 2015-MS1: DBRS Confirms B(high) Rating on F Certs
MORGAN STANLEY 2022-L8: Fitch Gives Final B- Rating to 2 Tranches
NATIXIS 2022-RRI: S&P Assigns Prelim B- (sf) Rating on Cl. F Certs
OCP CLO 2016-12: Fitch Gives BB- Rating to Class E-R2 Notes
RAIT CRE I: Fitch Hikes Ratings on 2 Tranches to CCsf
REGATTA XIX FUNDING: Moody's Assigns B3 Rating to $5MM Cl. F Notes
RESIDENTIAL 2022-I: S&P Assigns Prelim 'BB-' Rating on 14 Notes
RUN TRUST 2022-NQM1: Fitch Gives Final B- Rating to Cl. B-2 Certs
SLM STUDENT 2003-4: Fitch Affirms B Rating on 6 Tranches
SYMPHONY CLO XXXII: Moody's Assigns Ba3 Rating to $12MM E Notes
TCW CLO 2022-1: S&P Assigns BB- (sf) Rating on Class E Notes
TRTX 2022-FL5: DBRS Finalizes B(low) Rating on Class G Notes
UNITED AUTO 2022-1: DBRS Finalizes BB Rating on Class E Notes
UNITY-PEACE PARK: Moody's Assigns (P)Ba3 Rating to Class E Notes
VELOCITY COMMERCIAL 2022-1: DBRS Finalizes B(low) on 3 Tranches
VNDO TRUST 2016-350P: S&P Lowers Class E Certs Rating to 'B (sf)'
WEHLE PARK CLO: Moody's Assigns Ba3 Rating to $21.6MM Cl. E Notes
WELLS FARGO 2012-LC5: Moody's Affirms Caa1 Rating on Cl. F Certs
WELLS FARGO 2015-NXS1: DBRS Confirms B Rating on Class F Certs
WELLS FARGO 2017-C38: Fitch Lowers Rating on Class E Certs to Bsf
WFRBS COMMERCIAL 2011-C5: Moody's Cuts Rating on X-B Certs to Caa1
WFRBS COMMERCIAL 2012-C10: Moody's Cuts Class E Debt Rating to Ca
WFRBS COMMERCIAL 2012-C9: Fitch Cuts Rating on Cl. F Certs to 'B-'
ZAIS CLO 14: Moody's Hikes Rating on $13.5MM Class E Notes to Ba2
[*] DBRS Reviews 632 Classes From 71 U.S. RMBS Transactions
[*] Moody's Takes Actions on $118.1-Mil. of US RMBS Issued 2005
[*] S&P Takes Various Actions on 46 Classes from 12 US RMBS Deals
*********
1211 AVENUE 2015-1211: Fitch Affirms BB Rating on Class E Certs
---------------------------------------------------------------
Fitch Ratings has affirmed eight classes of 1211 Avenue of the
Americas Trust 2015-1211 commercial mortgage pass-through
certificates.
The certificates represent the beneficial interests in the mortgage
loan securing the borrower's fee simple interest in a 45-story,
office building totaling approximately two million sf of office and
retail space located at 1211 Avenue of the Americas in New York,
NY. The 10-year, fixed-rate, interest-only loan matures in August
2025.
DEBT RATING PRIOR
---- ------ -----
1211 Avenue of the Americas Trust 2015-1211
A-1A1 90117PAA3 LT AAAsf Affirmed AAAsf
A-1A2 90117PAC9 LT AAAsf Affirmed AAAsf
B 90117PAJ4 LT AA-sf Affirmed AA-sf
C 90117PAL9 LT A-sf Affirmed A-sf
D 90117PAN5 LT BBB-sf Affirmed BBB-sf
E 90117PAQ8 LT BBsf Affirmed BBsf
X-A 90117PAE5 LT AAAsf Affirmed AAAsf
X-B 90117PAG0 LT AA-sf Affirmed AA-sf
KEY RATING DRIVERS
Overall Stable Performance Since Issuance: The property continues
to maintain a high occupancy at 97.8% as of December 2021 and
December 2020, up from 95.7% at YE 2019, 94.6% at YE 2018 and 91.5%
at issuance. The most recent servicer-reported year-end (YE) 2021
net cash flow (NCF) debt service coverage ratio (DSCR) was 2.31x
compared to 2.38x at YE 2020 and 2.53x at YE 2019.
Fitch's current NCF has declined slightly to $85.9 million compared
to $92.6 million at the last rating action and $95.5 million at
issuance, largely due to Fitch's increased vacancy and tenant
improvement assumptions which are in-line with comparable office
properties in the submarket. In addition, tenant reimbursements
have declined from historical levels. Fitch expects cash flow to
improve as reimbursements stabilize and contractual rent steps take
effect.
Above Average Property Quality in Strong Location: 1211 Avenue of
the Americas consists of a 45-story, class A− office building
located in Midtown Manhattan. The property is adjacent to
Rockefeller Center and in close proximity to subway lines and major
transportation hubs.
High-Quality Tenancy: The top five tenants account for
approximately 92% of the NRA and include Twenty-First Century Fox,
Inc (63.7% of NRA; rated 'A-'; lease expiry in November 2025),
Ropes & Gray (16.7% of NRA; lease expiry in March 2027), Axis
Reinsurance (6.2% of NRA; lease expiry in August 2023), RBC (3.2%
of NRA; rated 'AA-'; lease expiry in December 2026) and Nordea
(2.2% of NRA; rated 'AA-'; lease expiry in April 2031). Tenants
with investment-grade credit ratings account for approximately
69.2% of the NRA. Approximately 9.3% of the NRA expires before loan
maturity.
Fitch Leverage: The $1.035 billion mortgage loan has a Fitch DSCR
and loan-to-value (LTV) of 1.01x and 87.4%, respectively, and debt
of $514 psf.
Sponsorship and Property Manager: The loan sponsor is Ivanhoé
Cambridge Inc. The property is sub-managed by IC US Capital
Properties LLC.
Single Asset: The transaction is secured by a single property and
is, therefore, more susceptible to single-event risks related to
the market, sponsor, or the largest tenants occupying the
property.
Coronavirus Exposure: Fitch reviewed the sponsor and tenant profile
of the subject property and viewed the collateral to have a limited
impact from the coronavirus pandemic due to the high concentration
of investment-grade tenancy and the longer-term nature of the
leases. Fitch will continue to monitor any declines in loan
performance and will adjust ratings and Outlooks accordingly.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- A significant and sustained decline in occupancy and/or
property cash flow.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrades to classes B through E are possible with stable to
improved occupancy, sustained cash flow improvement and
further clarity on the reason behind the volatility with
respect to expense reimbursements and other income. Fitch
rates classes A-1A1 and A-1A2 at 'AAAsf'; therefore, upgrades
are not possible.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
ANCHORAGE CAPITAL 24: Moody's Gives Ba3 Rating to Class E Notes
---------------------------------------------------------------
Moody's Investors Service has assigned ratings to two classes of
notes issued by Anchorage Capital CLO 24, Ltd. (the "Issuer" or
"Anchorage 24").
Moody's rating action is as follows:
US$270,000,000 Class A-1 Senior Secured Floating Rate Notes due
2034, Assigned Aaa (sf)
US$14,400,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2034, Assigned Ba3 (sf)
The notes listed are referred to herein, collectively, as the
"Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
Anchorage 24 is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 92.5% of the portfolio must consist of
senior secured loans and eligible investments, and up to 7.5% of
the portfolio may consist of second lien loans, unsecured loans and
permitted non-loan assets. The portfolio is approximately 90%
ramped as of the closing date.
Anchorage Capital Group, L.L.C. (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 three-year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the Rated Notes, the Issuer issued five other
classes of secured notes and one class 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 December 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $450,000,000
Diversity Score: 60
Weighted Average Rating Factor (WARF): 3262
Weighted Average Spread (WAS): 3.70%
Weighted Average Coupon (WAC): 5.50%
Weighted Average Recovery Rate (WARR): 47.5%
Weighted Average Life (WAL): 6.54 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
December 2021.
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.
APIDOS CLO XXXIX: Moody's Assigns Ba3 Rating to $20MM Cl. E Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned ratings to seven classes of
notes issued by Apidos CLO XXXIX Ltd (the "Issuer" or "Apidos CLO
XXXIX").
Moody's rating action is as follows:
US$307,500,000 Class A-1 Senior Secured Floating Rate Notes Due
2035, Assigned Aaa (sf)
US$12,500,000 Class A-2 Senior Secured Floating Rate Notes Due
2035, Assigned Aaa (sf)
US$40,000,000 Class B-1 Senior Secured Floating Rate Notes Due
2035, Assigned Aa2 (sf)
US$20,000,000 Class B-2 Senior Secured Fixed Rate Notes Due 2035,
Assigned Aa2 (sf)
US$30,000,000 Class C Mezzanine Deferrable Floating Rate Notes Due
2035, Assigned A2 (sf)
US$30,000,000 Class D Mezzanine Deferrable Floating Rate Notes Due
2035, Assigned Baa3 (sf)
US$20,000,000 Class E Mezzanine Deferrable Floating Rate Notes Due
2035, Assigned Ba3 (sf)
The notes listed are referred to herein, collectively, as the
"Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
Apidos CLO XXXIX is a managed cash flow CLO. The issued notes will
be collateralized primarily by broadly syndicated 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 second lien loans, unsecured loans,
first lien last out loans and bonds. The portfolio is approximately
90% ramped as of the closing date.
CVC 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 approximately five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the Rated Notes, the Issuer issued 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 December 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $500,000,000
Diversity Score: 85
Weighted Average Rating Factor (WARF): 2922
Weighted Average Spread (WAS): 3.50%
Weighted Average Coupon (WAC): 5.50%
Weighted Average Recovery Rate (WARR): 48.0%
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
December 2021.
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.
AVIS BUDGET 2022-1: Moody's Assigns (P)Ba2 Rating to Class D Notes
------------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to the
notes to be issued by Avis Budget Rental Car Funding (AESOP) LLC
(the issuer). The series 2022-1 notes will have an expected final
maturity of approximately 65 months. The issuer is an indirect
subsidiary of the sponsor, Avis Budget Car Rental, LLC (ABCR, B1
stable). ABCR is a subsidiary of Avis Budget Group, Inc. ABCR is
the owner and operator of Avis Rent A Car System, LLC (Avis),
Budget Rent A Car System, Inc. (Budget), Zipcar, Inc, Payless Car
Rental, Inc. (Payless) and Budget Truck.
The complete rating actions are as follows:
Issuer: Avis Budget Rental Car Funding (AESOP) LLC, Series 2022-1
Series 2022-1 Rental Car Asset Backed Notes, Class A, Assigned
(P)Aaa (sf)
Series 2022-1 Rental Car Asset Backed Notes, Class B, Assigned
(P)A2 (sf)
Series 2022-1 Rental Car Asset Backed Notes, Class C, Assigned
(P)Baa3 (sf)
Series 2022-1 Rental Car Asset Backed Notes, Class D, Assigned
(P)Ba2 (sf)
RATINGS RATIONALE
The provisional ratings on the series 2022-1 notes are based on (1)
the credit quality of the collateral in the form of rental fleet
vehicles, which ABCR uses in its rental car business, (2) the
credit quality of ABCR as the primary lessee and as guarantor under
the operating lease, (3) the track-record and expertise of ABCR as
sponsor and administrator, (4) consideration of the vastly improved
rental car market conditions, (5) the available dynamic credit
enhancement, which consists of subordination and
over-collateralization, (6) minimum liquidity in the form of cash
and/or a letter of credit, and (7) the transaction's legal
structure.
The total credit enhancement requirement for the series 2022-1
notes will be dynamic, and determined as the sum of (1) 5.0% for
vehicles subject to a guaranteed depreciation or repurchase program
from eligible manufacturers (program vehicles) rated at least Baa3
by Moody's, (2) 8.5% for all other program vehicles, and (3) 13.1%
minimum for non-program (risk) vehicles, in each case, as a
percentage of the outstanding note balance. The actual required
amount of credit enhancement will fluctuate based on the mix of
vehicles in the securitized fleet. As in prior issuances, the
transaction documents stipulate that the required total enhancement
shall include a minimum portion which is liquid (in cash and/or a
letter of credit), sized as a percentage of the outstanding note
balance, rather than fleet vehicles. The class A, B, C notes will
also benefit from subordination of 28.0%, 18.5% and 12.0% of the
outstanding balance of the series 2022-1 notes, respectively.
The assumptions Moody's applied in its analysis of this
transaction:
Risk of sponsor default: Moody's assumed a 60% decrease in the
probability of default (from Moody's idealized default probability
tables) implied by the B1 rating of the sponsor. This decrease
reflects Moody's view that, in the event of a bankruptcy, ABCR
would be more likely to reorganize under a Chapter 11 bankruptcy
filing, as it would likely realize more value as an ongoing
business concern than it would if it were to liquidate its assets
under a Chapter 7 filing. Furthermore, given the sponsor's
competitive position within the industry and the size of its
securitized fleet relative to its overall fleet, the sponsor is
likely to affirm its lease payment obligations in order to retain
the use of the fleet and stay in business. Moody's arrived at the
60% decrease assuming an 80% probability that Avis would reorganize
under a Chapter 11 bankruptcy and a 75% probability (90% assumed
previously) that Avis would affirm its lease payment obligations in
the event of a Chapter 11 bankruptcy.
Disposal value of the fleet: Moody's assumed the following haircuts
to the net book value (NBV) of the vehicle fleet:
Non-Program Haircut upon Sponsor Default (Car): Mean: 19%
Non-Program Haircut upon Sponsor Default (Car): Standard Deviation:
6%
Non-Program Haircut upon Sponsor Default (Truck): Mean: 35%
Non-Program Haircut upon Sponsor Default (Truck): Standard
Deviation: 8%
Non-Program Haircut upon Sponsor Default (Tesla): Mean: 29%
Non-Program Haircut upon Sponsor Default (Tesla): Standard
Deviation: 10%
Fixed Program Haircut upon Sponsor Default: 10%
Additional Fixed Non-Program Haircut upon Manufacturer Default
(Car): 20%
Additional Fixed Non-Program Haircut upon Manufacturer Default
(Truck): 10%
Additional Fixed Non-Program Haircut upon Manufacturer Default
(Tesla): 50%
Fleet composition -- Moody's assumed the following fleet
composition (based on NBV of vehicle fleet):
Non-program Vehicles: 95%
Program Vehicles: 5%
Non-program Manufacturer Concentration (percentage, number of
manufacturers, assumed rating):
Aa/A Profile: 25%, 2, A3
Baa Profile: 47%, 2, Baa3
Ba/B Profile: 25%, 1, Ba3; 3%, 1, Ba1
Program Manufacturer Concentration (percentage, number of
manufacturers, assumed rating):
Aa/A Profile: 0%, 0, A3
Baa Profile: 50%, 1, Baa3
Ba/B Profile: 50%, 1, Ba3
Manufacturer Receivables: 0%; receivables distributed in the same
proportion as the program fleet (Program Manufacturer Concentration
and Manufacturer Receivables together should add up to 100%)
Correlation: Moody's applied the following correlation
assumptions:
Correlation among the sponsor and the vehicle manufacturers: 10%
Correlation among all vehicle manufacturers: 25%
Default risk horizon -- Moody's assumed the following default risk
horizon:
Sponsor: 5 years
Manufacturers: 1 year
Moody's uses a fixed set of time horizon assumptions, regardless of
the remaining term of the transaction, when considering sponsor and
manufacturer default probabilities and the expected loss of the
related liabilities, which simplifies Moody's modeling approach
using a standard set of benchmark horizons.
Detailed application of the assumptions are provided in the
methodology.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Rental Vehicle
Securitizations Methodology" published in October 2021.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the ratings of the series 2022-1 notes, as
applicable if, among other things, (1) the credit quality of the
lessee improves, (2) the likelihood of the transaction's sponsor
defaulting on its lease payments were to decrease, and (3)
assumptions of the credit quality of the pool of vehicles
collateralizing the transaction were to strengthen, as reflected by
a stronger mix of program and non-program vehicles and stronger
credit quality of vehicle manufacturers.
Down
Moody's could downgrade the ratings of the series 2022-1 notes if,
among other things, (1) the credit quality of the lessee weakens,
(2) the likelihood of the transaction's sponsor defaulting on its
lease payments were to increase, (3) the likelihood of the sponsor
accepting its lease payment obligation in its entirety in the event
of a Chapter 11 were to decrease and (4) assumptions of the credit
quality of the pool of vehicles collateralizing the transaction
were to weaken, as reflected by a weaker mix of program and
non-program vehicles and weaker credit quality of vehicle
manufacturers.
BALLYROCK CLO 19: S&P Assigns Prelim BB-(sf) Rating on Cl. D Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Ballyrock
CLO 19 Ltd./Ballyrock CLO 19 LLC's floating-rate notes.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Ballyrock Investment Advisors LLC and
its affiliates.
The preliminary ratings are based on information as of April 5,
2022. 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 diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Ballyrock CLO 19 Ltd./Ballyrock CLO 19 LLC
Class A-1 notes, $222.00 million: AAA (sf)
Class A-1 loans(i), $50.00 million: AAA (sf)
Class A-2, $51.00 million: AA (sf)
Class B (deferrable), $25.50 million: A (sf)
Class C (deferrable), $25.50 million: BBB- (sf)
Class D (deferrable), $17.00 million: BB- (sf)
Subordinated notes, $42.00 million: Not rated
(i)The class A-1 loans will be issued on the closing date in the
amount shown above. Thereafter, neither the class A-1 loans nor the
class A-1 notes are exchangeable into either notes or loans,
respectively.
BANK 2018-BNK12: Fitch Lowers Rating on 2 Tranches to 'CCC'
-----------------------------------------------------------
Fitch Ratings has downgraded four classes, and affirmed 12 of BANK
2018-BNK12. In addition, Fitch has revised the Rating Outlook on
classes E and X-E to Stable from Negative.
DEBT RATING PRIOR
---- ------ -----
BANK 2018-BNK12
A-1 06541KAW8 LT AAAsf Affirmed AAAsf
A-2 06541KAX6 LT AAAsf Affirmed AAAsf
A-3 06541KAZ1 LT AAAsf Affirmed AAAsf
A-4 06541KBA5 LT AAAsf Affirmed AAAsf
A-S 06541KBD9 LT AAAsf Affirmed AAAsf
A-SB 06541KAY4 LT AAAsf Affirmed AAAsf
B 06541KBE7 LT AA-sf Affirmed AA-sf
C 06541KBF4 LT A-sf Affirmed A-sf
D 06541KAJ7 LT BBB-sf Affirmed BBB-sf
E 06541KAL2 LT B-sf Downgrade BB-sf
F 06541KAN8 LT CCCsf Downgrade B-sf
X-A 06541KBB3 LT AAAsf Affirmed AAAsf
X-B 06541KBC1 LT AAAsf Affirmed AAAsf
X-D 06541KAA6 LT BBB-sf Affirmed BBB-sf
X-E 06541KAC2 LT B-sf Downgrade BB-sf
X-F 06541KAE8 LT CCCsf Downgrade B-sf
KEY RATING DRIVERS
Increased Certainty of Loss: Despite generally stable loss
expectations for the majority of the pool compared to Fitch's prior
rating action, the downgrades of classes E and F reflect higher
loss expectations on the Fair Oaks Mall, (8.7%), which has an
upcoming maturity in May 2023, and the continued underperformance
of CoolSprings Galleria (9.7%). Fitch's ratings incorporate a base
case loss of 4.7%. Including these two malls, there are seven Fitch
Loans of Concern (FLOCs:24.9%) that have been flagged for upcoming
lease expirations, declining performance, high vacancy and/or
pandemic-related underperformance.
The Fair Oaks Mall loan has the largest increase in expected losses
since Fitch's prior rating action. The loan is secured by an
enclosed mall located in Fairfax, VA. The subject is anchored by
JCPenney (non-collateral), Macy's with Furniture Gallery
(non-collateral), Dick's (non-collateral) and a second Macy's
(collateral). This loan is on the servicer's watchlist for
violating a DSCR covenant and subsequent hard cash management.
September 2021 YTD NCF DSCR was 0.98x on the total debt stack, and
1.73x for the trust A-note portion. YE 2020 NOI had fallen to $22.5
million from $29.6 million as of YE 2019 and underwritten NOI of
$29.9 million. The subject was closed between March and May 2020
due to the pandemic. According to the borrower, approximately 80%
of tenants were paying full rent as of April 2021.
Subject September 2021 TTM in-line sales (including Apple) were
$447 psf compared to $344 psf in 2020, $516 psf in 2019. September
2021 TTM in-line sales excluding Apple were $318 psf compared to
$248 psf in 2020, $371 psf in 2019. Forever 21's (NRA 6.6%) lease
is scheduled to expire in January 2023. Fitch's base case loss of
9.7% assumes a 15% cap rate on YE 2020 NOI to reflect Fitch's
concern with declining YTD performance and refinance risk concerns
as the loan matures in May 2023.
The largest contributor to modelled losses is CoolSprings Galleria,
which is secured by a 1.2 million-sf mall located in Franklin, TN;
the mall is anchored by Macy's, JCPenney, Belk and Dillard's. The
loan's ownership structure is a "50/50" joint venture split between
TIAA and CBL. This loan transferred to special servicing in October
2021 in response to CBL entering Chapter 11 bankruptcy in November
2020.
The loan was returned to master servicing in January 2022 following
the execution of a modification agreement and CBL's reorganization
and emergence from Chapter 11. Under the terms of the modification
the lender would waive the bankruptcy defaults in exchange for the
borrower covering the costs of the modification and CBL's ownership
interest in the property being assumed by one of its newly formed
subsidiaries.
The pandemic continues to effect property performance. Subject YE
2021 NOI fell to $16.7 million from $17.6 million as of YE 2020,
$20.3 million as of YE 2019, and underwritten NOI of $19.7 million.
In-line sales excluding Apple at the property, were $465 psf in
2015; however, yoy sales decreased in 2016 and 2017, falling to
$438 psf, a 5.8% decrease. Apple TTM sales were $3,289 psf as of
August 2021, $4,101 psf as of August 2020 and $6,129 psf as of
August 2018.
Fitch's base case loss of 15.6% assumes a 15% cap rate and 10%
haircut on YE 2021 NOI to reflect Fitch's concern with declining
performance and significant competition with overlapping anchors
and declining sales.
Minimal Change to Credit Enhancement: As of the February 2022
distribution date, the pool's aggregate principal balance has paid
down by 2.9% to $874.8 million from $901.2 million at issuance.
Fair Oaks Mall (FLOC) and Bell Park Plaza (0.55%) are scheduled to
mature in May and March 2023, respectively. Two loans comprising
0.54% of the outstanding pool principal balance has been defeased.
Of the remaining pool balance, 21 loans comprising 48.7% of the
pool were classified as full interest-only through the term of the
loan.
ADDITIONAL CONSIDERATIONS
Investment-Grade Credit Opinion Loans: Four loans comprising 23.5%
of the transaction received an investment-grade credit opinion at
issuance. Fair Oaks Mall, ; 181 Fremont Street (6.6%); The Gateway
(6.3%) ; and Apple Campus 3 (1.9%) . Fitch no longer considers Fair
Oaks Mall to have credit characteristics consistent with an
investment-grade credit opinion.
Co-op Concentration: The transaction contains a total of 22 loans
(11.6% of the pool) secured by multifamily cooperatives located
primarily within the greater New York City metro area. At issuance,
the pool's Fitch DSCR and LTV net of co-op loans are 1.18x and
108.5%, respectively.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- An increase in pool level losses from underperforming or
specially serviced loans. Downgrades to classes A-1 through B,
X-A and X-B are less likely due to the high CE but may occur
at 'AAAsf' or 'AA-sf' should interest shortfalls occur, or if
the probability of an outsized loss on the specially serviced
loans or a FLOC becomes more likely.
-- Downgrades to class C, would occur should overall pool losses
increase and/or one or more large loans have an outsized loss
which would erode CE. Downgrades to classes D, E, F, X-D, X-E
and X-F would occur should loss expectations increase due to
an increase in specially serviced loans.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Stable to improved asset performance, coupled with additional
paydown and/or defeasance. Upgrades to the 'A-sf' and 'AA-sf'
rated classes are not expected but would likely occur with
significant improvement in CE and/or defeasance and/or the
stabilization to the properties impacted by the pandemic.
-- Upgrades of the 'BBB-sf' class are considered unlikely and
would be limited based on the sensitivity to concentrations or
the potential for future concentrations. Classes would not be
upgraded above 'Asf' if there were likelihood of interest
shortfalls. An upgrade to the 'B-sf' and 'CCCsf' rated classes
is not likely unless the performance of the remaining pool
stabilizes and the senior classes pay off.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
BB-UBS TRUST 2012-TFT: S&P Affirms CCC(sf) Rating on Class E Certs
------------------------------------------------------------------
S&P Global Ratings lowered its ratings on six classes of commercial
mortgage pass-through certificates from BB-UBS Trust 2012-TFT, a
U.S. CMBS transaction. In addition, S&P affirmed its 'CCC (sf)'
rating on class E from the same transaction.
This is a U.S. CMBS transaction currently backed by two uncrossed
mortgage loans, each secured by a regional mall property.
Rating Actions
S&P said, "The rating actions reflect our reevaluation of the two
regional malls that secure the two uncrossed mortgage loans in the
transaction: Tucson Mall ($199.6 million, 58.5% of the pooled trust
balance) and Town East Mall ($141.8 million, 41.5%). We lowered our
aggregated expected-case valuation by 25.2% to $287.0 million,
based on the updated performance information and the updated
aggregated appraisal values, which were 52.9% and 27.4% lower than
the aggregated appraisal values at origination and 2020,
respectively. Specifically, we lowered our sustainable net cash
flow (NCF) for the two malls by 20.0% from our last review to $25.5
million to account for the further decline in reported performance,
which was primarily due to the continued challenges facing the
retail mall sector. We also increased our capitalization rates from
our last review to 9.50% on Tucson Mall and 8.50% on Town East
Mall, up 50 and 75 basis points (bps), respectively. Furthermore,
our rating actions today reflect the borrowers' inability to
refinance the loans in 2020 and 2021, resulting in two separate
loan modifications.
"Specifically, the downgrade of class D to 'CCC (sf)' and the
affirmation of class E at 'CCC (sf)' reflect our view that, based
on an S&P Global Ratings' loan-to-value (LTV) ratio of over 100% on
the Tucson Mall loan, these classes are more susceptible to reduced
liquidity support. In addition, the risk of default and losses has
increased due to current market conditions."
Although the model-indicated ratings were lower than the classes'
revised rating levels, we tempered our downgrades on classes A, B,
and C because S&P weighted certain qualitative considerations,
including:
-- The significant market value decline that would be needed
before these classes experience losses,
-- The liquidity support provided in the form of servicer
advancing,
-- The conversion of the loans from interest-only (IO) to
amortizing as a result of the prior loan modifications,
-- The borrowers' commitment to keeping the loans current
throughout special servicing,
-- The borrowers' prepayment of scheduled amortization,
-- The current debt yield of both properties,
-- The available reserves in place for both properties, and
-- The relative position of the classes in the waterfall.
While both loans have reported current payment status through their
March 2022 debt service payments, they were twice modified because
the borrowers were unable to refinance the loans by their original
maturity dates in June 2020, and both loans now mature in June
2022. Each loan has two one-year extension options, subject to debt
yield tests, resulting in fully extended maturity dates occurring
in June 2024. S&P said, "The servicer, Wells Fargo Bank N.A., has
not provided an update on the borrowers' intentions; however, we
believe that the properties' current reported cash flows meet the
required debt yield tests for the borrowers to exercise one of its
two extension options. We will continue to monitor the reported
performance of the malls, as well as the borrowers' ability to pay
off the loans upon their upcoming maturity dates. We may take
additional rating actions if either mall's performance further
deteriorates and/or the loans default at maturity."
S&P said, "The downgrade of the class TE nonpooled certificates
reflects our reevaluation of the Town East Mall loan. The class TE
raked certificates derive 100% of their cash flow from a
subordinate nonpooled component of the whole loan.
"We lowered our rating on the class X-A IO certificates based on
our criteria for rating IO securities, in which the ratings on the
IO securities would not be higher than the lowest-rated reference
class. The notional amount of class X-A references class A.
"The recent rapid spread of the Omicron variant highlights the
inherent uncertainties of the pandemic, but also the importance and
benefits of vaccines. While the risk of new, more severe variants
displacing Omicron and evading existing immunity cannot be ruled
out, our current base case assumes that existing vaccines can
continue to provide significant protection against severe illness.
Furthermore, many governments, businesses, and households around
the world are tailoring policies to limit the adverse economic
impact of recurring COVID-19 waves. Consequently, we do not expect
a repeat of the sharp global economic contraction in second-quarter
2020. Meanwhile, we continue to assess how well individual issuers
adapt to new waves in their geography or industry."
Transaction Summary
This is a U.S. large loan transaction backed by two uncrossed
fixed-rate mortgage loans, down from three fixed-rate loans at
issuance. As of the March 7, 2022, trustee remittance report, the
trust had a pooled trust balance of $341.4 million and an aggregate
trust balance of $355.9 million (including the nonpooled loan
component), down from $552.9 million and $567.8 million,
respectively, at issuance. The pooled trust has not incurred any
principal losses to date.
S&P's property-level analysis included a reevaluation of the two
regional malls backing the two loans in the pool using
servicer-provided operating statements from 2018 through 2021, and
the September 2021 rent rolls.
Tucson Mall loan
The Tucson Mall loan, the larger of the two loans, has a pooled
trust balance of $199.6 million (58.5% of the pool balance), down
from $205.5 million at issuance. The loan is secured by the
borrower's fee and leasehold interests in 667,561 sq. ft. of a 1.3
million-sq.-ft. regional mall in Tucson, Ariz. The loan was IO at
issuance but amortizes on a 30-year schedule since it was modified
in July 2021, it pays fixed interest of 3.57%, and it matures on
June 1, 2022. The loan has two one-year extension options as a
result of the modification, which are subject to debt yield tests
of 6.75% and 7.75%, respectively. As of the March 2022 reporting
period, the servicer reported $6.5 million in combined reserves.
S&P's property-level analysis considered the year-over-year decline
in servicer-reported NCF from 2018 through 2020: (16.2)% to $16.8
million in 2019 and (20.7)% to $13.9 million in 2020. The servicer
reported a $10.3 million NCF for the nine months ended Sept. 30,
2021. The steep declines in 2019 and 2020 are primarily a result of
decreasing base rent revenue and other income. As of the Sept. 30,
2021, rent roll, the collateral property was 93.4% occupied and the
five largest collateral tenants, comprising 31.6% of net rentable
area (NRA), included:
-- Forever 21 (12.7% of NRA; January 2022 lease expiration, but
continues to be in mall directory);
-- Dick's Sporting Goods (7.9%; January 2029),
-- REI (4.3%; February 2026),
-- The Container Store (3.4%; February 2031), and
-- H&M (3.3%; January 2022, but continues to be in mall
directory).
The mall also includes noncollateral anchors:
-- Dillard's (187,742 sq. ft.; BB-/Positive),
-- Macy's (139,078 sq. ft.; BB/Positive),
-- J.C. Penney (131,616 sq. ft.; not rated), and
-- A vacant anchor space (183,022 sq. ft.) formerly occupied by
Sears until April 2020.
The facility faces elevated tenant rollover risk over the coming
year, with 36.8% of NRA expiring or already expired. Wells Fargo
reported 93.0% occupancy and 1.86x debt service coverage (DSC) on
the trust balance for the nine months ended Sept. 30, 2021.
S&P said, "Our current analysis on the Tucson Mall loan considered
tenant bankruptcies and store closures, and excluded income from
tenants that are no longer listed on the mall directory website or
that have announced store closures, which resulted in our assumed
collateral occupancy rate of 86.4%. We derived our sustainable NCF
of $10.9 million, which is 28.6% and 21.5% lower than our last
review and the 2020 servicer-reported NCF, respectively. We then
divided our NCF by an S&P Global Ratings' capitalization rate of
9.50% (an increase of 50 bps from the last review to account for
the continued decline in performance and vacant anchor space),
arriving at our expected-case value of $114.9 million, down 34.8%
from the last review value of $176.0 million. This yielded an S&P
Global Ratings' LTV ratio of 173.8% on the trust balance."
Town East Mall loan
The Town East Mall loan, the smallest loan in the pool, has a
pooled trust balance of $141.8 million (41.5% of the pool balance)
and a whole loan balance of $156.3 million, of which $14.5 million
supports the class TE raked certificates, down from $14.8 million
at issuance. The whole loan is secured by the borrower's fee
interest in 466,536 sq. ft. of a 1.2 million-sq.-ft. regional mall
in Mesquite, Texas. The collateral square footage increased by
50,020 when the Dick's Sporting Goods space was constructed in
2018. The loan was IO at issuance but amortizes on a 25-year
schedule since it was modified in July 2021, it pays fixed interest
of 3.57%, and it matures on June 1, 2022. The loan has two one-year
extension options as a result of the modification, which are
subject to debt yield tests of 11.00% and 11.50%, respectively. As
of the March 2022 reporting period, the servicer reported $12.5
million in combined reserves.
S&P said, "Our property-level analysis considered the flat to
declining servicer-reported NCF from 2019 through 2021: 1.6% to
$20.6 million in 2019, (12.3)% to $18.1 million in 2020, and
(11.8)% to $15.9 million in 2021. We attributed the sharp decline
in 2020 primarily to lower base rent and other income, and the
further decline in 2021 performance primarily to increased
utilities, payroll, and repairs and maintenance expenses." As of
the Sept. 30, 2021, rent roll, the collateral property was 80.3%
occupied and the five largest collateral tenants, comprising 25.9%
of the NRA, included:
-- Dick's Sporting Goods (10.6% of NRA; January 2029 lease
expiration),
-- Foot Locker (5.7%; January 2030),
-- H&M (4.3%; January 2023),
-- Forever 21 (2.9%; January 2022), and
-- Victoria's Secret (2.3%; January 2023).
The mall also includes noncollateral anchors:
-- Dillard's (207,000 sq. ft.; BB-/Positive),
-- J.C. Penney (195,475 sq. ft.; not rated),
-- Macy's (193,866 sq. ft.; BB/Positive), and
-- A vacant anchor space (213,045 sq. ft.) formerly occupied by
Sears until April 2021.
The mall faces concentrated tenant rollover in 2022 (24.3% of NRA),
2023 (15.7%), and 2024 (13.9%), and the three major anchors
(Dillard's, Macy's, and J.C. Penney) are all on month-to-month
leases. Wells Fargo reported a 2.77x debt service coverage on the
trust balance for year-end 2021.
S&P said, "We derived our sustainable NCF of $14.6 million, which
is 9.1% and 8.2% lower than our last review and the 2021
servicer-reported NCF, respectively. We then divided our NCF by an
S&P Global Ratings' capitalization rate of 8.50% (an increase of 75
bps from the last review to account for the continued decline in
performance), arriving at our expected-case value of $172.2
million, down 17.1% from the last-review value of $207.7 million.
This yielded S&P Global Ratings' LTV ratios of 82.4% and 90.8% on
the pooled trust balance and whole loan balance, respectively."
Ratings Lowered
BB-UBS Trust 2012-TFT
Class A, To: AA (sf); From: AAA (sf)
Class B, To: BBB- (sf); From: A (sf)
Class C, To: B- (sf); From: BB- (sf)
Class D, To: CCC (sf); From: B- (sf)
Class TE, To: B (sf); From: BB (sf)
Class X-A, To: AA (sf); From: AAA (sf)
Rating Affirmed
BB-UBS Trust 2012-TFT
Class E: CCC (sf)
BEAR STEARNS 2005-PWR7: Moody's Cuts Rating on Cl. C Certs to Caa3
------------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on four and
downgraded two classes in Bear Stearns Commercial Mortgage
Securities Trust 2005-PWR7 as follows:
Cl. B, Downgraded to B2 (sf); previously on Sep 28, 2021 Downgraded
to Ba3 (sf)
Cl. C, Downgraded to Caa3 (sf); previously on Sep 28, 2021
Downgraded to Caa1 (sf)
Cl. D, Affirmed C (sf); previously on Sep 28, 2021 Downgraded to C
(sf)
Cl. E, Affirmed C (sf); previously on Sep 28, 2021 Affirmed C (sf)
Cl. F, Affirmed C (sf); previously on Sep 28, 2021 Affirmed C (sf)
Cl. X-1*, Affirmed C (sf); previously on Sep 28, 2021 Affirmed C
(sf)
*Reflects Interest Only Class
RATINGS RATIONALE
Two P&I classes were downgraded due the ongoing interest shortfalls
and risks of higher losses due to the significant exposure to one
loan that is in special servicing and already REO. The one
specially servicing loan, The Shops at Boca Park, represents 98% of
the pool and has been deemed non-recoverable by the master servicer
causing interest shortfalls to impact up to Cl. B.
Three P&I classes were affirmed because the ratings are consistent
with realized losses plus Moody's anticipated losses due to the
deal's significant exposure to an REO loan.
Affirm the interest only (IO) class based on the credit quality of
the referenced classes.
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to
disrupt economies and credit markets across sectors and regions.
Moody's analysis has considered the effect on the performance of
commercial real estate from the current weak US economic activity
and a gradual recovery for the coming months. Although an economic
recovery is underway, it is tenuous and its continuation will be
closely tied to containment of the virus. As a result, the degree
of uncertainty around Moody's forecasts is unusually high. Stress
on commercial real estate properties will be most directly stemming
from declines in hotel occupancies (particularly related to
conference or other group attendance) and declines in foot traffic
and sales for non-essential items at retail properties.
Moody's regard the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Moody's rating action reflects a base expected loss of 71.2% of the
current pooled balance, compared to 66.4% at Moody's last review.
Moody's base expected loss plus realized losses is now 8.6% of the
original pooled balance, compared to 8.5% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or a significant improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include 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 rating all classes except
interest-only classes was and "Large Loan and Single Asset/Single
Borrower Commercial Mortgage-Backed Securitizations Methodology"
published November 2021.
Moody's analysis incorporated a loss and recovery approach in
rating the P&I classes in this deal since 98.0% of the pool is in
special servicing. In this approach, Moody's determines a
probability of default for each specially serviced and troubled
loan that it expects will generate a loss and estimates a loss
given default based on a review of broker's opinions of value (if
available), other information from the special servicer, available
market data and Moody's internal data. The loss given default for
each loan also takes into consideration repayment of servicer
advances to date, estimated future advances and closing costs.
Translating the probability of default and loss given default into
an expected loss estimate, Moody's then applies the aggregate loss
from specially serviced to the most junior classes and the recovery
as a pay down of principal to the most senior classes.
DEAL PERFORMANCE
As of the March 11, 2022 distribution date, the transaction's
aggregate certificate balance has decreased by 95.7% to $48.8
million from $1.12 billion at securitization. The certificates are
collateralized by three remaining mortgage loans. Two loans,
constituting 2.0% of the pool, have defeased and are secured by US
government securities. The one remaining loan is in special
servicing and already REO.
Eight loans have been liquidated from the pool with a loss,
resulting in an aggregate realized loss of approximately $61.7
million (for an average loss severity of 65%).
The specially serviced loan is the Shops at Boca Park ($47.8
million – 98% of the pool), which is secured by a 137,000 square
foot (SF) retail center located in Las Vegas, Nevada approximately
12 miles northwest of the Vegas Strip. Property performance has
significantly declined since securitization and the loan
transferred in and out of special servicing since 2009 with the
loan going to special servicing for the third time in December
2015. The Trust took title in September 2018 and the loan is now
real estate owned (REO). The servicer commentary indicates the
property is approximately 89% leased with potential LOI's on the
remaining three vacancies and the property is being prepared to be
marketed for sale. The master servicer has deemed this loan
non-recoverable which has caused interest shortfalls to impact all
the remaining P&I classes.
BENCHMARK 2021-B23: DBRS Confirms B(low) Rating on Cl. 360D Certs
-----------------------------------------------------------------
DBRS, Inc. confirmed its ratings on the following classes of
Commercial Mortgage Pass-Through Certificates, Series 2021-B23
issued by Benchmark 2021-B23 Mortgage Trust:
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-4A1 at AAA (sf)
-- Class A-4A2 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class 360A at A (low) (sf)
-- Class 360B at BBB (low) (sf)
-- Class 360C at BB (low) (sf)
-- Class 360D at B (low) (sf)
All trends are Stable.
The rating confirmations reflect the overall stable performance of
the transaction since issuance in 2021. At closing, the transaction
consisted of 53 fixed-rate loans secured by 65 properties with a
trust balance of $1.59 billion. As of the January 2022 remittance,
all 53 loans remain in the pool, with no losses or defeasance to
date. There has been minimal amortization, with only 0.26%
collateral reduction since issuance. Amortization will be limited
through the life of the deal as there are 34 loans, representing
76.6% of the pool balance, that are interest only (IO) for the full
term. An additional 13 loans, representing 20.0% of the pool
balance, have partial IO periods that remain active. As noted at
issuance, the pool is expected to pay down by only 3.6% prior to
maturity. The pool is concentrated with loans backed by office
properties, which represent 57.5% of the pool. The next largest
property types are mixed-use and industrial, which represent 23.4%
and 12.0% of the pool, respectively.
As of the January 2022 remittance, there are three loans on the
servicer's watchlist, representing 7.1% of the pool, including one
loan in the top 15. There are no delinquent or specially serviced
loans. The largest loan on the servicer's watchlist is MGM Grand &
Mandalay Bay (4.7% of the pool). The underlying properties are two
full-service luxury resorts and casinos consisting of 9,748 rooms
on the Las Vegas Strip. Like most hotels across the country, the
Coronavirus Disease (COVID-19) pandemic has affected the subject
properties, with the operating cash flows and occupancy rates
significantly depressed from their 2019 levels. The trailing 12
months (T-12) ended June 30, 2021, figures reported occupancy rates
of 50.4% and 53.1% for the MGM Grand and the Mandalay Bay
properties, respectively. These figures compare with the YE2019
occupancy rates of 91.4% and 92.8%, respectively.
Although cash flow remains depressed compared with historical
figures, DBRS Morningstar notes the properties are trending in the
right direction as the T-12 ended June 30, 2021, departmental
income at the MGM Grand property reported a 66.8% increase over its
YE2020 figure, while the Mandalay property reported a 44.7%
increase over its YE2020 figure. In addition, tourism in Las Vegas
has improved significantly since the start of the pandemic.
According to the Review Journal, July 2021 was the strongest
visitation month as 3.3 million travelers visited the city, which
is a 50.3% increase from the first seven months of 2020.
Four loans—360 Spear, MGM Grand & Mandalay Bay, the Grace
Building, and First Republic Center—were assigned
investment-grade shadow ratings at issuance. Combined, these loans
represent 17.5% of the pool. As part of this review, DBRS
Morningstar concluded that current and expected ongoing performance
remains consistent with the originally assigned shadow ratings.
The Class 360A, 360B, 360C, and 360D are loan-specific certificates
(rake bonds) collateralized by the subordinate companion note for
the 360 Spear whole loan. The loan-specific certificates will only
be entitled to receive distributions from, and will only incur
losses with respect to, the trust subordinate companion loan. The
trust subordinate companion loan is included as an asset of the
issuing entity but is not part of the mortgage pool backing the
pooled certificates. No class of pooled certificates will have any
interest in the trust subordinate companion loan.
Notes: All figures are in U.S. dollars unless otherwise noted.
BINOM SECURITIZATION 2022-RPL1: DBRS Finalizes B Rating on B2 Debt
------------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the BINOM 2022-RPL1
Mortgage-Backed Notes, Series 2022-RPL1 (the Notes) issued by BINOM
Securitization Trust 2022-RPL1 (BINOM 2022-RPL1 or the Issuer) as
follows:
-- $211.0 million Class A1 at AAA (sf)
-- $34.7 million Class M1 at AA (sf)
-- $16.6 million Class M2 at A (Low) (sf)
-- $10.7 million Class M3 at BBB (Low) (sf)
-- $10.9 million Class B1 at BB (Low) (sf)
-- $7.4 million Class B2 at B (sf)
The AAA (sf) rating on the Notes reflects 31.95% of credit
enhancement provided by subordinated certificates. The AA (sf), A
(low) (sf), BBB (low) (sf), BB (low) (sf), and B (sf) ratings
reflect 20.75%, 15.40%, 11.95%, 8.45%, and 6.05% of credit
enhancement, respectively.
Other than the specified classes above, DBRS Morningstar does not
rate any other classes in this transaction.
The BINOM 2022-RPL1 securitization is backed by seasoned performing
and reperforming first-lien mortgages funded by the issuance of the
Notes. The Notes are backed by 1,887 loans with a total principal
balance of $310,070,311 as of the Cut-Off Date (January 1, 2022).
BINOM 2022-RPL1 represents the first rated seasoned performing and
reperforming loan securitization issued by the Sponsor, BREDS IV
Residential Holdco L.L.C., from the BINOM shelf. The Sponsor is a
special-purpose entity owned by the private equity fund Blackstone
Real Estate Debt Strategies IV L.P. and its managed accounts.
For this deal, the mortgage loans are approximately 176 months
seasoned. The portfolio contains approximately 94.8% modified
loans, and modifications happened more than two years ago for
approximately 84.9% of the modified loans. Within the pool, 1,075
mortgages, equating to approximately 13.1% of the total principal
balance, have non-interest-bearing deferred amounts. There are no
Home Affordable Modification Program and proprietary principal
forgiveness amounts included in the deferred amounts. The majority
of the pool (95.8%) is not subject to the Consumer Financial
Protection Bureau's Ability-to-Repay/Qualified Mortgage rules
because of seasoning.
As of the Cut-Off Date, 94.1% of the pool is current and 5.9% is 30
days delinquent under the Mortgage Bankers Association (MBA)
delinquency method. Approximately 4.9% of the mortgage loans have
been zero times 30 days delinquent (0 x 30) for at least the past
24 months under the MBA delinquency method. At the same time,
approximately 80.5% of the mortgage loans have been 0 x 30 for at
least the past 12 and six months.
The Sponsor, or an affiliate, acquired the loans directly or
indirectly from various originators or other secondary market
participants prior to the Closing Date. On the Closing Date, B4R
Depositor, LLC, the Depositor, will contribute the loans to the
Trust.
The Sponsor, or a majority-owned affiliate, will retain a 5%
eligible vertical residual interest consisting of at least 5% of
each class of Notes other than the Class R Notes to satisfy the
credit risk retention requirements promulgated under the Dodd-Frank
Act. Such retention aligns Sponsor and investor interest in the
capital structure.
As of the Cut-Off Date, the loans are serviced by Rushmore Loan
Management Services (64.3%) and NewRez LLC doing business as
Shellpoint Mortgage Servicing (35.7%). There will not be any
advancing of delinquent principal or interest on any mortgages by
the Servicers or any other party to the transaction; however, the
Servicers are obligated to certain make advances in respect of
homeowner's association fees, taxes, and insurance, and reasonable
costs and expenses incurred in the course of servicing and
disposing of properties.
On or after the earlier of (1) the payment date in January 2025 or
(2) the date on which the aggregate stated principal balance of the
loans falls to 10% or less of the Cut-Off Date balance, the Issuer
may, at its option, redeem the Notes at the optional termination
price (par plus interest, including interest and Net WAC
shortfalls, fees, and post-closing deferred amounts and servicing
advances) described in the transaction documents (Optional
Redemption).
The transaction employs a sequential-pay cash flow structure.
Principal proceeds and excess interest can be used to cover
interest shortfalls on the Notes, but such shortfalls on Class M2
and more subordinate bonds will not be paid from principal proceeds
until the more senior classes are retired. In addition, within the
principal payment priority, the Class A1 Notes as well as the Class
M1 Notes all receive interest before principal gets paid to Class
A1 Notes (IIPP). This feature preserves interest payments to those
more senior classes.
Certain cash flow features in this transaction are less commonly
seen in DBRS Morningstar-rated seasoned securitizations, such as
the presence of the Credit Event tied to the early redemption of
the Notes, interest rates on the Notes, and repayment of Net WAC
shortfalls:
-- The transaction includes an Expected Redemption Date (ERD). ERD
is the payment date in January 2027 on which the Issuer is expected
to redeem the Notes. Failure to do so constitutes a Credit Event.
-- The interest rates on the Notes step up after a Credit Event,
as described in the transaction documents. The interest rates on
the Notes are set at fixed rates, which are capped by Net WAC on or
prior to a Credit Event and, after the Credit Event, adjusted Net
WAC (the Net WAC adjusted for the non-Principal Only balance that
excludes the Class B3 Note amount after the Class B3 coupon rate
resets to zero following a Credit Event).
-- Notwithstanding the Notes' interest rates caps mentioned above,
the Net WAC shortfall is defined only for Class A1 and M1 Notes
(before the Credit Event only) and not defined for the other
classes of Notes (either before or after the Credit Event). As
such, if the Net WAC or Adjusted Net WAC, as applicable, falls
below the fixed coupon rates (either initial or stepped up), the
difference will not be paid to Class A1 and M1 Notes after a Credit
Event, and to all other classes either before or after the Credit
Event.
-- That said, if the Net WAC shortfalls occur before a Credit
Event, then the interest amount may be used to repay such
shortfalls on the Class A1 and M1 Notes before making interest
payments on other Notes.
-- Also, the principal amount can be used to repay the Net WAC
shortfalls, first to Class A1 and then, after the Class A1 Notes
are paid off, to the Class M1 Notes, before being used to amortize
the Note balance amounts. This feature reduces the likelihood that
the Class A1 and M1 Note holders receive the coupon lower than the
fixed rate. However, at the same time, it also reduces the interest
and principal amount available to the more subordinate noteholders,
and, as such, causes the structure to need elevated credit
enhancement levels relative to a comparable structure where such
shortfalls are repaid from the excess cash flow to all classes of
Notes.
Such nuanced features were considered and taken into account in the
DBRS Morningstar cash flow analysis.
CORONAVIRUS DISEASE (COVID-19) PANDEMIC IMPACT
The pandemic and the resulting isolation measures have caused an
immediate economic contraction, leading to sharp increases in
unemployment rates and income reductions for many consumers.
Shortly after the onset of the pandemic, DBRS Morningstar saw an
increase in delinquencies for many residential mortgage-backed
securities (RMBS) asset classes.
Such mortgage delinquencies were mostly in the form of
forbearances, which are generally short-term periods of payment
relief that may perform very differently from traditional
delinquencies. At the onset of the pandemic, the option to forbear
mortgage payments was widely available, driving forbearances to an
elevated level. When the dust settled, loans with
coronavirus-induced forbearance in 2020 performed better than
expected, thanks to government aid, low loan-to-value ratios
(LTVs), and acceptable underwriting in the mortgage market in
general. Across nearly all RMBS asset classes, delinquencies have
been gradually trending downward, as forbearance periods come to an
end for many borrowers.
Notes: All figures are in U.S. dollars unless otherwise noted.
BIRCH GROVE 4: Moody's Assigns Ba3 Rating to $20MM Class E Notes
----------------------------------------------------------------
Moody's Investors Service has assigned ratings to seven classes of
notes issued by Birch Grove CLO 4 Ltd. (the "Issuer").
Moody's rating action is as follows:
US$310,000,000 Class A-1 Senior Secured Floating Rate Notes due
2034, Assigned Aaa (sf)
US$15,000,000 Class A-2 Senior Secured Floating Rate Notes due
2034, Assigned Aaa (sf)
US$40,000,000 Class B-1 Senior Secured Floating Rate Notes due
2034, Assigned Aa2 (sf)
US$15,000,000 Class B-2 Senior Secured Fixed Rate Notes due 2034,
Assigned Aa2 (sf)
US$17,000,000 Class C-1 Mezzanine Secured Deferrable Floating Rate
Notes due 2034, Assigned A2 (sf)
US$8,000,000 Class C-2 Mezzanine Secured Deferrable Fixed Rate
Notes due 2034, Assigned A2 (sf)
US$20,000,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2034, Assigned Ba3 (sf)
The notes listed are referred to herein, collectively, as the
"Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
Birch Grove CLO 4 Ltd. is a managed cash flow CLO. The issued notes
will be collateralized primarily by broadly syndicated senior
secured corporate loans. At least 90.0% of the portfolio must
consist of senior secured loans, cash, and eligible investments,
and up to 10.0% of the portfolio may consist of second lien loans,
unsecured loans and bonds. The portfolio is approximately 90%
ramped as of the closing date.
Birch Grove Capital LP (the "Manager") will direct the selection,
acquisition and disposition of the assets on behalf of the Issuer
and may engage in trading activity, including discretionary
trading, during the transaction's three year reinvestment period.
Thereafter, subject to certain restrictions, the Manager may
reinvest unscheduled principal payments and proceeds from sales of
credit risk assets.
In addition to the Rated Notes, the Issuer issued one class of
secured notes and one class 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 December 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $500,000,000
Diversity Score: 75
Weighted Average Rating Factor (WARF): 2791
Weighted Average Spread (WAS): SOFR + 3.47%
Weighted Average Coupon (WAC): 6.50%
Weighted Average Recovery Rate (WARR): 47.00%
Weighted Average Life (WAL): 7 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
December 2021.
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.
BSPRT ISSUER 2022-FL8: DBRS Finalizes B(low) Rating on Cl. H Notes
------------------------------------------------------------------
DBRS, Inc. finalized provisional ratings on the following classes
of notes issued by BSPRT 2022-FL8 Issuer, Ltd.:
-- Class A Notes at AAA (sf)
-- Class A-S Notes at AAA (sf)
-- Class B Notes at AA (low) (sf)
-- Class C Notes at A (low) (sf)
-- Class D Notes at BBB (sf)
-- Class E Notes at BBB (low) (sf)
-- Class F Notes at BB (high) (sf)
-- Class G Notes at BB (low) (sf)
-- Class H Notes at B (low) (sf)
All trends are Stable.
The initial collateral consists of 26 floating-rate mortgage loans
secured by 34 mostly transitional real estate properties with a
cutoff balance totaling $1.03 billion (87.3% of the total fully
funded balance) exclusive of $80.6 million in remaining future
funding commitments and $68.9 million of pari passu debt. Of the 26
loans, Rivet & Rivet 26 (#1) is an unclosed, delayed-close loan as
of Tuesday, February, 2022. The Issuer has 90 days post-closing to
acquire the delayed-close assets. Furthermore, two other loans,
Harlem Multifamily Portfolio and The Printhouse, have received loan
modifications with a combination of a maturity date extension, an
extension fee update, a rate index change, changes to index floors
and interest rate spreads, changes in maintenance spreads, and/or
changes to carry reserves. The Printhouse modification also
included a principal paydown of the loan by $500,000 via a $350,000
equity infusion from the sponsor and $150,000 from the collapse of
the Interest Reserve. The transaction is a managed vehicle, which
includes a 24-month reinvestment period. As part of the
reinvestment period, the transaction includes a 180-day ramp-up
acquisition period that is expected to increase the trust balance
by $174.8 million to a total target collateral principal balance of
$1.2 billion. DBRS Morningstar assessed the $174.8 million ramp
component using a conservative loan construct and as a result, the
ramp loans have expected losses above the pool weighted average
(WA) loan expected loss. If a delayed-close mortgage asset is not
expected to close or fund prior to the purchase termination date,
then any amounts remaining will be transferred to the unused
proceeds account to acquire other ramp-up collateral interests.
During the reinvestment period, so long as the note protection
tests are satisfied and no event of default has occurred and is
continuing, the collateral manager may direct the reinvestment of
principal proceeds to acquire reinvestment collateral interests,
including funded companion participations, meeting the eligibility
criteria. The eligibility criteria, among other things, have a
minimum debt service coverage ratio (DSCR), loan-to-value ratio
(LTV), 18.0 Herfindahl score, and loan size limitations. Lastly,
the eligibility criteria stipulate Rating Agency Confirmation on
ramp loans, reinvestment loans, and on pari passu participation
acquisitions if a portion of the underlying loan is already
included in the pool, thereby allowing DBRS Morningstar to review
the new collateral interest and any potential impact on the
ratings.
The loans are mostly secured by cash-flowing assets, many of which
are in a period of transition with plans to stabilize and improve
the asset value. In total, 21 loans, representing 78.8% of the
pool, have remaining future funding participations totaling $80.6
million, which the Issuer may acquire in the future.
For the floating-rate loans, DBRS Morningstar used the one-month
Libor index for all loans, which is based on the lower of a DBRS
Morningstar stressed rate that corresponded to the remaining fully
extended term of the loans or the strike price of the interest rate
cap with the respective contractual loan spread added to determine
a stressed interest rate over the loan term. When the cutoff
balances were measured against the DBRS Morningstar As-Is Net Cash
Flow, 18 loans, comprising 70.4% of the initial pool balance, had a
DBRS Morningstar As-Is DSCR of 1.0 times (x) or below, a threshold
indicative of default risk. Furthermore, three loans, representing
12.3% of the initial cutoff balance, exhibit a DBRS Morningstar
Stabilized DSCR below 1.0x. The properties are often transitioning
with potential upside in cash flow; however, DBRS Morningstar does
not give full credit to the stabilization if there are no holdbacks
or if other loan structural features in place are insufficient to
support such treatment. Furthermore, even with the structure
provided, DBRS Morningstar generally does not assume assets to
stabilize above market levels.
The sponsor for the transaction, Benefit Street Partners Realty
Operating Partnership, L.P., is a wholly owned subsidiary of
Franklin BSP Realty Trust, Inc. (FBRT), formerly known as Benefit
Street Partners Realty Trust, Inc., and an experienced commercial
real estate (CRE) collateralized loan obligation (CLO) issuer and
collateral manager. As of September 30, 2021, FBRT managed a
commercial mortgage debt portfolio of approximately $3.3 billion
and had issued nine CRE CLO transactions. Through September 30,
2021, FBRT had not realized any losses on any of its CRE bridge
loans while also funding more than $15.5 billion of investments
across Benefit Street Partners' CRE group vehicles since its
inception in 2013. Additionally, BSPRT 2022-FL8 Holder, LLC will
purchase and retain 100% of the Class F Notes, the Class G Notes,
the Class H Notes, and the Preferred Shares, which total $214.5
million, or 17.9% of the transaction total.
The pool comprises only multifamily properties. This property type
has historically shown lower defaults and losses. Multifamily
properties benefit from staggered lease rollovers and generally low
expense ratios compared with other property types. While revenue is
quick to decline in a downturn because of the short-term nature of
the leases, it is also quick to respond when the market improves.
The business plan score (BPS) for the loans that DBRS Morningstar
analyzed was between 1.50 and 5.00 with an average of 2.04. On a
scale of 1 to 5, a higher DBRS Morningstar BPS is indicative of
more risk in the sponsor's business plan. Consideration is given to
the anticipated lift at the property from current performance,
planned property improvements, sponsor experience, project time
horizon, and overall complexity. Compared with similar
transactions, the subject has a relatively low average BPS, which
is indicative of lower risk.
The transaction is managed and includes a ramp-up component and
reinvestment period, which could result in negative credit
migration and/or an increased concentration profile over the life
of the transaction. The risk of negative migration is partially
offset by eligibility criteria that outline DSCR, LTV, 18.0
Herfindahl score minimum, 95.0% minimum multifamily, and loan size
limitations for reinvestment assets. A No-Downgrade Confirmation is
required from DBRS Morningstar for all reinvestment loans and
ramp-up loans. DBRS Morningstar accounted for the uncertainty
introduced by the 180-day ramp-up period by running a ramp scenario
that simulates the potential negative credit migration in the
transaction based on the eligibility criteria.
As of the cutoff date, the pool contains 26 loans with the top 10
loans representing 61.6% of the pool. Additionally, the pool has an
elevated state concentration with 47.4% of the pool located in
Texas and 22.2% of the pool within the Dallas-Plano-Irving MSA. The
pool's minimum diversity is accounted for in the DBRS Morningstar
model, raising the transaction's credit enhancement levels to
offset the concentration risk. Based on CRE CLO standards, the
Herfindahl score of 19.97 is considered reasonable, which is higher
than the scores of 16.7 in BSPRT 2021-FL7 and 14.9 in BSPRT
2021-FL6. The cutoff date balance will increase from ramp-up loans,
which is projected to occur over 60 days after closing. New loans
will increase loan count and add broader diversity to the pool,
raising the Herfindahl score. The 17 properties are located across
six separate MSAs. The eligibility criteria restrict the
concentration of Texas properties to be no more than 50% of the
aggregate outstanding pool balance and no Texas MSA to be more than
25%. The properties are primarily within core markets of their
respective MSAs, with a WA DBRS Morningstar Market Rank of 3.3 for
these properties. Additionally, DBRS Morningstar applied a
concentration penalty, which elevated the expected loss.
All loans have floating interest rates and 86.2% of the initial
pool are interest-only during their entire initial term, which
ranges from 18 months to 48 months, creating interest rate risk.
The borrowers of all 26 loans have purchased either Secured
Overnight Financing Rate (SOFR) or Libor rate caps ranging between
0.50% to 3.5% to protect against rising interest rates over the
term of the loans. All loans are short-term and, even with
extension options, have a fully extended maximum loan term of five
years. Additionally, 21 loans, representing 82.7% of the initial
trust balance, have at least one extension option, all of which are
exercisable subject to the loan's achievement of certain LTV, DSCR,
and/or debt yield requirements. All loans in the pool, except for
one representing 3.6% of the initial trust balance, amortize on a
30-year schedule or a fixed payment schedule at some point during
the fully extended loan term, either during the initial loan term
and/or the extension options. Twenty of the loans, representing
80.5% of the initial trust balance, amortize during all or a
portion of their extension options.
Notes: All figures are in U.S. dollars unless otherwise noted.
BWAY 2015-1740: S&P Lowers Class E Certs Rating to 'B- (sf)'
------------------------------------------------------------
S&P Global Ratings lowered its ratings on seven classes of
commercial mortgage pass-through certificates from BWAY 2015-1740
Mortgage Trust, a U.S. commercial mortgage-backed securities (CMBS)
transaction. At the same time, S&P affirmed its 'AAA (sf)' rating
on class A from the same transaction.
This is a U.S. CMBS transaction backed by a fixed-rate interest
only (IO) loan secured by an office property in Manhattan.
Rating Actions
S&P said, "The downgrades of classes B, C, D, E, and F and the
affirmation of class A reflect our reevaluation of the office
property that secures the sole loan in the transaction. Our
analysis considers that the sponsor has not made any progress on
re-leasing the office building even though the largest tenant, L
Brands (comprising 70.9% of the net rentable area [NRA]), announced
two years' prior (in 2020) to its March 2022 lease expiration date
that it did not intend to renew its lease and the second-largest
tenant, Davis & Gilbert (15.8% of NRA), vacated at the end of 2020.
The building is currently only approximately 10.0% leased and will
require significant capital to re-let the vacant space. Our rating
actions today also reflect, according to multiple news outlets, the
sponsor handing back the keys to the trust and the loan
subsequently transferring to special servicing on March 18, 2022.
"Our property-level analysis utilizes a stabilization approach
which also reflects softened submarket office fundamentals from
lower demand and longer re-leasing timeframe as more companies
adopt a hybrid work arrangement (details below). We assumed an
85.0% stabilized occupancy rate (compared to the current 9.6%
occupancy rate), $75.00 per sq. ft. gross rent, 52.0% operating
expense ratio, and a two-year lease up period, to arrive at a
stabilized net cash flow of approximately $26.1 million. Using a
7.25% capitalization rate and deducting about $69.5 million to
account for additional leasing costs and lost revenue to lease up
the property to our projected occupancy rate within the next two
years, we derived a $270.4 million stabilized expected-case value
or $448 per sq. ft., which is down 21.0% from our last review value
of $342.0 million. This yielded an S&P Global Ratings' LTV ratio of
113.9% on the trust balance.
"Specifically, the downgrade of class F to 'CCC (sf)' reflects our
view that, based on an S&P Global Ratings' loan-to-value (LTV)
ratio of over 100% and the transfer of the loan to special
servicing, the class is more susceptible to reduced liquidity
support, and the risk of default and loss have increased due to the
current market conditions.
"We tempered our downgrades on classes B, C, D, and E and affirmed
our rating on class A even though the model-indicated ratings were
lower than the classes' current or revised rating levels, because
we weighted qualitative considerations such as the 2015 appraisal
land value, the significant market value decline that would be
needed before these classes experience principal losses, liquidity
support provided in the form of servicer advancing, and the
relative position of the classes in the waterfall.
"While the loan had a reported current payment status through its
March 2022 debt service payments, we expect the loan will become
delinquent and the servicer to start advancing since the sponsor
has given back the keys, and the underlying collateral's cash flow,
based on an approximately 10.0% occupancy rate, is not sufficient
to cover debt service. We will continue to monitor for further
development on the loan, particularly, the resolution strategy and
timing. We may take additional rating actions if we receive new
information that differs from our expectations.
"We lowered our ratings on the class X-A and X-B IO certificates
based on our criteria for rating IO securities, in which the
ratings on the IO securities would not be higher than that of the
lowest-rated reference class. The notional balance of the class X-A
and X-B certificates reference class A and a portion of the class B
certificates."
Property-Level Analysis
S&P's property-level analysis considered that following the vacancy
of the two largest tenants, the property now consists of three
smaller office tenants (Spaces, Arcade Beauty, and EQ Management
LLC) and three restaurant/retail tenants (Citibank, Sugarfish, and
Sweetgreen), resulting in an occupancy rate that is slightly below
10.0%.
The property previously served as the global headquarters for L
Brands Inc. (BB-/Stable), occupying 428,339-sq.-ft. (70.9% of NRA).
However, as previously noted, the tenant vacated upon its March
2022 lease expiration and relocated to 55 Water Street in lower
Manhattan. S&P said, "Since our last review in April 2020, the then
second-largest tenant at the property, Davis & Gilbert LLP (95,341
sq. ft., 15.8%) had also vacated upon its Dec. 31, 2020, lease
expiration and relocated its headquarters to 1675 Broadway. While
we were aware of the tenancy movements in our last review, our
analysis also considered the property's desirable location in
midtown Manhattan, the below 10.0% submarket vacancy rate, the
staggered lease expiration of the remaining tenants, and strong
sponsorship from Blackstone to aid in the expected lease-up of any
vacant space at the property. At that time, we assumed a 90.9%
stabilized occupancy rate and minimal time and cost to lease up the
vacant space. As a result, we arrived at a stabilized value of
$342.1 million, or $567 per sq. ft."
S&P said, "However, the space vacated by Davis & Gilbert LLP
remains vacant, and there are no leasing prospects for the former L
Brands space. Coupled with weakened submarket office fundamentals
due to the pandemic and more companies embracing flexible work
arrangements, we revised our stabilization assumptions and
valuation of the property. In addition, we noted that several media
outlets recently reported that the sponsor, Blackstone, is no
longer interested in providing additional equity and has
transitioned ownership of the property to the trust. The underlying
loan was transferred to the special servicer, Green Loan Services
LLC, in March 2022.
"Our current property-level analysis reflects the aforementioned
developments as well as current market data and conditions.
According to CoStar, the Columbus Circle office submarket had
experienced lower demand due to its lack of premium office
buildings and has struggled to attract and retain tenants who have
relocated to more modern buildings in lower Manhattan and Hudson
Yards. CoStar noted that the submarket asking rent, vacancy rate,
and availability rate as of March 2022 were $75.67 per sq. ft.,
9.6%, and 16.1%, respectively. As a result, we projected the
property's occupancy rate to stabilized in two years to 85.0%, up
from its current 9.6% occupancy rate, and gross rent for the
leased-up space to be approximately $75.00 per sq. ft., with an
operating expense ratio of 52.0%. We arrived at a stabilized net
cash flow of approximately $26.1 million. Using a 7.25%
capitalization rate and deducting about $69.5 million to account
for additional leasing costs and lost revenue to lease up the
property to our stabilized occupancy rate within the next two
years, we derived a $270.4 million stabilized value or $448 per sq.
ft."
Transaction Summary
This is a U.S. stand-alone (single borrower) transaction backed by
a 10-year, fixed-rate IO mortgage loan, secured by the borrower's
fee simple interest in a 26-story, 603,928-sq.-ft. class A-/B+
office building located at 1740 Broadway between West 55th and West
56th Streets, in midtown Manhattan, within the Columbus Circle
office submarket. According to the March 10, 2022, trustee
remittance report, the mortgage loan has a trust balance of $308.0
million, the same as at issuance, is IO, pays an annual fixed
interest rate of 3.84%, and matures on Jan. 6, 2025. There is no
additional debt, and the trust has not incurred any principal
losses to date.
S&P said, "The recent rapid spread of the omicron variant
highlights the inherent uncertainties of the pandemic as well as
the importance and benefits of vaccines. While the risk of new,
more severe variants displacing omicron and evading existing
immunity cannot be ruled out, our current base case assumes that
existing vaccines can continue to provide significant protection
against severe illness. Furthermore, many governments, businesses
and households around the world are tailoring policies to limit the
adverse economic impact of recurring COVID-19 waves. Consequently,
we do not expect a repeat of the sharp global economic contraction
of second-quarter 2020. Meanwhile, we continue to assess how well
each issuer adapts to new waves in its geography or industry."
Rating Lowered
BWAY 2015-1740 Mortgage Trust
Class B: to 'A (sf)' from 'AA- (sf)'
Class C: to 'BBB- (sf)' from 'A- (sf)'
Class D: to 'BB- (sf)' from 'BBB- (sf)'
Class E: to 'B- (sf)' from 'BB- (sf)'
Class F: to 'CCC (sf)' from 'B+ (sf)'
Class X-A: to 'A (sf)' from 'AA- (sf)'
Class X-B: to 'A (sf)' from 'AA- (sf)'
Rating Affirmed
BWAY 2015-1740 Mortgage Trust
Class A: AAA (sf)
BWAY COMMERCIAL 2022-26BW: DBRS Finalizes BB Rating on E Certs
--------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the following
classes of Commercial Mortgage Pass-Through Certificates, Series
2022-26BW to be issued by BWAY Commercial Mortgage Trust
2022-26BW:
-- Class A at AAA (sf)
-- Class X at BBB (high) (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (sf)
-- Class E at BB (low) (sf)
All trends are Stable.
The collateral for the BWAY Commercial Mortgage Trust 2022-26BW
transaction consists of a 29-story, 839,712-square-foot (sf) office
building in the Financial District of Manhattan, New York. It is
located on Broadway Avenue across from Bowling Green and the
well-known Charging Bull statue. The property has good access to
transit with the 1, 2, 3, 4, 5, J, and Z subway lines in close
proximity; the PATH station at World Trade Center and ferry stops
at Battery Park are also nearby. The property includes 18,960 sf of
street-level retail space. The property was built in 1885 for
Standard Oil of New York with the tower added in 1926; it is now
leased to 44 tenants.
The property is a generally stable asset that is 82.2% leased with
credit tenants accounting for more than 40.0% of the rentable
square footage. The New York City Department of Education occupies
288,090 sf (34.3% of the net rentable area) and was granted
long-term credit tenant treatment in the DBRS Morningstar Net Cash
Flow (NCF) for its leases that expire in 2039 and 2041. Other
tenants with investment-grade credit include the New York State
Court of Claims (the Court of Claims), HSBC Bank, and Cornell
University. No other tenant accounts for more than 9.0% of the
space at the property. The remaining tenants include law, media,
education, and technology firms. The rollover for only one year,
2027, accounts for more than 10% of lease rollover in any single
year, and only 46.8% of the space expires during the loan term.
DBRS Morningstar expresses some concern related to a coworking
tenant, Live Primary LLC (Live Primary). The company is a small
operator in New York with limited scale and it filed for federal
bankruptcy protection in 2020, although it is not in bankruptcy
anymore. The tenant remains at the property under reduced rent
through 2023. The coworking environment continues to be competitive
with major players consolidating and aligning with brokerage firms
to improve tenancy, which may pressure smaller operators. At the
same time, the uncertainty of return to office plans following the
Coronavirus Disease (COVID-19) pandemic complicates the future
prospects for the coworking industry in general as contracts come
up for renewal. Finally, DBRS Morningstar views coworking space
with concern because the customized build-outs that were common
prior to the pandemic may require additional cost to tear down in
order to backfill spaces with conventional office tenants. To
account for these risks, the DBRS Morningstar NCF includes elevated
tenant improvement (TI) assumptions of $100.00 per sf (psf) for new
space and $50.00 psf for renewal space versus $60.00 psf and $30.00
psf for conventional tenants. DBRS Morningstar also employed a
renewal probability of 50% against the more standard assumption of
65%. The loan is structured with a Live Primary Rent Replication
Reserve of $1.15 million to the difference between the reduced Live
Primary rent through March 31, 2023, and the rent payable after
April 1, 2023.
The long-term effects of the coronavirus pandemic on office
buildings remain unclear; however, DBRS Morningstar believes that
CBD office markets may experience a flight to quality as the dust
settles on the disruption of the past two years. The ability of
older buildings to retain tenants may be limited to those seeking
the lowest cost of occupancy in the market. At the same time,
operating expenses continue to increase and environmental
regulations may put additional margin pressure on older assets. The
loan was structured with a $1.5 million capital expenditure (capex)
reserve to address the physical needs of the property.
Overall, the cash flow over the loan term is expected to be stable
given the good in-place tenancy. While the vacancy is elevated,
DBRS Morningstar concluded to the in-place occupancy with no upside
in cash flow. There are risks related to the coworking tenant;
however, DBRS Morningstar believes that adjustments to cash flow
and the upfront reserves are partially mitigating factors.
The Financial District in Manhattan is accessible to major transit
nodes and continues to draw interest from tenants. The Federal
Courthouse and the New York courts are less than a mile away and
act as a demand driver for law firms seeking proximity to the
courthouses. The vacancy rate in the Reis Downtown submarket was
modest at 10.8% and was stable through the coronavirus pandemic.
More than 51% of the space is leased to tenants with
investment-grade characteristics, including the New York City
Department of Education, which occupies 34.3% of the space under
two leases that will expire in 2039 and 2041, although the tenant
has termination rights in 2029 and 2031. Less than half of the
space will roll during the loan term and the roll is well dispersed
with only one year having more than 10% roll.
Chetrit Group is a New York-based real estate investment company
that operates more than 14 million sf of office space, the majority
of which is in New York City. Since acquiring the property in 2007,
the sponsor has spent $54.7 million in capex and TIs at the
property.
The second-largest tenant is a coworking operator with a prior
bankruptcy filing. The future of coworking operators (in
particular, smaller locally based operators) remains risky over the
near term. The Court of Claims has a lease the expires shortly
before the loan maturity date. It is likely that the borrower will
need to secure a renewal of this tenant as it seeks to refinance
the loan. DBRS Morningstar reduced the renewal probability and
increased the concluded TI assumption for the coworking tenant,
which has the effect of reducing the DBRS Morningstar NCF. The loan
is also structured with a rent replication reserve for the Live
Primary lease.
The ongoing coronavirus pandemic continues to pose challenges and
risks to virtually all major commercial real estate property types,
creating an element of uncertainty around future demand for office
space.
The DBRS Morningstar LTV on the $290.0 million first mortgage is
high at 124.5%. In addition, the property is encumbered by a $40.0
million mezzanine loan, which increases the DBRS Morningstar total
debt-to-LTV to 141.7%. In order to account for the high leverage
and additional financing, DBRS Morningstar programmatically reduced
its LTV benchmark targets for the transaction by 3.0% across the
capital structure.
Notes: All figures are in U.S. dollars unless otherwise noted.
BX COMMERCIAL 2022-AHP: DBRS Finalizes B(low) Rating on F Certs
---------------------------------------------------------------
DBRS, Inc. finalized provisional ratings to the following classes
of Commercial Mortgage Pass-Through Certificates, Series 2022-AHP
issued by BX Commercial Mortgage Trust 2022-AHP (BX 2022-AHP):
-- Class A at AAA (sf)
-- Class A-S 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)
-- Class F at B (low) (sf)
All trends are Stable.
The collateral for BX 2022-AHP includes the borrowers' fee-simple
interest in 43 affordable housing multifamily properties totaling
10,965 units throughout eight Florida markets, including Miami,
Fort Lauderdale, Tampa, and Palm Beach. The transaction sponsor,
BREIT Operating Partnership L.P., acquired the portfolio from
Cornerstone Group in December 2021 and January 2022 for a total of
$2.7 billion ($246,848 per unit). The properties were built between
1983 and 2011, with a weighted-average year built of 2002. Based on
the sponsor's estimated purchase price, the loan sponsor's implied
equity in the transaction is $1.2 billion.
There are 10,544 (96.2% of total) affordable units (income
restricted and rent restricted) across the portfolio, which DBRS
Morningstar generally views as favorable because the increasing
cost of rental housing has created elevated demand for affordable
housing, which lends enhanced cash flow stability to the assets.
This stability is demonstrated by the portfolio's average occupancy
of 98.9% from December 2017 through June 2021. As of the December
2021 rent roll, the occupancy rate was 98.5%, despite the
disruptions resulting from the Coronavirus Disease (COVID-19)
pandemic. Many of the units in the portfolio have below-markets
rents, and DBRS Morningstar views the limited risk of rental rate
declines to be an added cash flow stabilizer. Ultimately, DBRS
Morningstar's outlook on the stability of multifamily assets in and
around the Florida affordable housing market has historically been
positive.
Because of the Land Use Restrictions that limit rent and income
levels, the State of Florida has granted the properties various
property tax exemptions and abatements. While these improve the
level of cash flow, they can pose moderate risk should any change
in the laws in Florida or any violation of the affordable housing
covenants could result in higher future tax rates that may reduce
the cash flow and diminish the value of the underlying collateral.
However, tax exemption benefits throughout the portfolio are
generally correlated with the provision of affordable housing
units. Such affordable units are generally considered to be leased
at below-market rates to make them affordable to tenants at lower
income levels, and loss of tax exemptions or abatements might also
result in the ability to lease such affordable units at market
rents, potentially offsetting reductions in net cash flow incurred
from a loss of the property tax benefit. The portfolio's favorable
locations and strong fundamentals of the surrounding multifamily
markets as well as the sponsor's evidenced experience in the
ownership of affordable housing in the U.S. reinforce DBRS
Morningstar's comfort in the portfolio's ability to maintain cash
flow stability.
As a portfolio, the loan is structured to allow for partial
releases of collateral, which can increase the risk of adverse
selection. Typically, DBRS Morningstar views the inclusion of
release premiums of 115% of the allocated loans amounts (ALAs) or
higher as a mitigating factor to this risk. The loan documents
provide for a premium of 105% of the ALA for the first 30% and 110%
thereafter, which is viewed more negatively. Therefore DBRS
Morningstar assessed a penalty in its loan-to-value thresholds,
resulting in lower proceeds at each rating category.
In addition, the loan provides for pro rata principal paydowns
rather than a sequential-pay structure. This can negatively affect
the senior bonds in the transaction as they will not deleverage as
quickly under this structure. DBRS Morningstar included a penalty
for all rated classes above A (high) to account for this potential
risk.
Notes: All figures are in U.S. dollars unless otherwise noted.
BX TRUST 2019-RP: Fitch Affirms B- Rating on Class F Certs
----------------------------------------------------------
Fitch Ratings has upgraded two classes and affirmed four classes of
the BX Trust 2019-RP, Commercial Mortgage Pass-Through
Certificates, Series 2019-RP (BX Trust 2019-RP). The Rating Outlook
for class F has been revised to Stable from Negative, and the
Outlooks for classes B and C have been revised to Positive from
Stable.
DEBT RATING PRIOR
---- ------ -----
BX 2019-RP
A 05607VAA5 LT AAAsf Affirmed AAAsf
B 05607VAC1 LT AAsf Upgrade AA-sf
C 05607VAE7 LT Asf Upgrade A-sf
D 05607VAG2 LT BBB-sf Affirmed BBB-sf
E 05607VAJ6 LT BB-sf Affirmed BB-sf
F 05607VAL1 LT B-sf Affirmed B-sf
KEY RATING DRIVERS
Increased Credit Enhancement; Paydown from Releases: As of the
March 2022 remittance reporting, the pool's aggregate principal
balance has been paid down by 31.5% to $157.6 million from $230
million at issuance. Since Fitch's prior rating action, four of the
original 12 properties in the pool have been released resulting in
approximately $72.4 million in paydown to the transaction. Any
future paydown from releases will follow a sequential-pay structure
to the certificates after prepayments accounting for the first 20%
of loan were applied to the certificates on a pro-rata basis. The
upgrades and Outlook revisions for classes B and C to Positive from
Stable reflect the transaction paydown and resulting increased
credit enhancement.
Stable Performance and Cash Flow: As of YE 2021, the
servicer-reported NCF debt service coverage ratio (DSCR) for the
interest-only loan was 3.36x. According to the December 2021 rent
rolls, occupancy for the remaining portfolio has remained stable at
85.5% compared to 86% at issuance; several new leases have been
recently signed and occupancy is expected to increase to 89.5%.
Several tenants received pandemic related rent relief. The 24-Hour
Fitness tenant, occupying 20.5% of NRA at the Cornerstar property
and 5.4% of portfolio NRA, received a six-month rent abatement
April to September 2020 and a minimum rent reduction by 50% for the
remainder of the lease term (through Aug. 31, 2030). TJX Companies
(8.4% of portfolio; Marshalls [5.3%]; HomeGoods [3.1%]) deferred
payment of base rent due in June, July, and August 2020; however,
the TJX Companies tenants have repaid all deferred amounts. In
addition, Urban Air trampoline, occupying 11.6% of NRA at the
Cornerstar property and 3.1% of portfolio NRA, paid a percentage of
gross sales in lieu of rent for several months in 2020/21, but is
now paying its contracted rent amount.
The Outlook revision for class F reflects the stabilization of the
portfolio from the effects of the pandemic as well as expected
increase in occupancy and Net Cash Flow (NCF).
Experienced Sponsorship and Property Management: The loan is
sponsored by Blackstone Real Estate Partners VII L.P. (Blackstone)
and SITE Centers Corp. (SITE; fka DDR Corp.). SITE (BBB/Stable)
owns and/or manages 137 shopping centers in the U.S., which are
reportedly 92.7% leased as of December 2021. Blackstone reported
over $648.8 billion in assets under management as of March 2021.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downgrades to classes A and B are not likely due to the
position in the capital structure but may occur should
interest shortfalls occur. A downgrade to classes C through F
is possible if there is a material and sustained decline in
the portfolio's occupancy and/or cash flow.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- For classes B, C, D E, and F, it would include improved
portfolio performance over a sustained period and/or
additional releases and subsequent paydown without adverse
selection.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
BX TRUST 2022-IND: Moody's Assigns (P)B3 Rating to Cl. F Certs
--------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to seven
classes of CMBS securities, to be issued by BX Trust 2022-IND,
Commercial Mortgage Pass-Through Certificates, Series 2022-IND:
Cl. A, Assigned (P)Aaa (sf)
Cl. B, Assigned (P)Aa3 (sf)
Cl. C, Assigned (P)A3 (sf)
Cl. D, Assigned (P)Baa3 (sf)
Cl. E, Assigned (P)Ba3 (sf)
Cl. F, Assigned (P)B3 (sf)
Cl. X-CP*, Assigned (P)Baa1 (sf)
* Reflects Interest-Only Classes
RATINGS RATIONALE
The certificates are collateralized by the borrower's fee simple
interests in 115 and leasehold interest in 1 primarily industrial
properties located across 22 metropolitan statistical areas (MSAs)
in 16 states. Moody's ratings are based on the credit quality of
the loan and the strength of the securitization structure.
Moody's approach to rating this transaction involved the
application of Moody's Large Loan and Single Asset/Single Borrower
CMBS methodology and Moody's IO Rating methodology. The rating
approach for securities backed by a single loan compares the credit
risk inherent in the underlying collateral with the credit
protection offered by the structure. The structure's credit
enhancement is quantified by the maximum deterioration in property
value that the securities are able to withstand under various
stress scenarios without causing an increase in the expected loss
for various rating levels. In assigning single borrower ratings,
Moody's also consider a range of qualitative issues as well as the
transaction's structural and legal aspects.
The Portfolio contains a total of 19,247,789 SF of rentable area
across the following 10 industrial and commercial uses: Bulk
Warehouse (30.6% of NRA, 25.5% of ALA); Manufacturing (22.8%,
24.7%); Warehouse (30.9%, 24.1%); Light Industrial (5.1%, 6.6%);
Cold Storage (3.5%, 6.1%); Ground Up Development (3.7%, 5.3%); Data
Center (1.2%, 4.5%); Truck Terminal (1.6%, 2.7%); Office (0.5%,
0.4%); and Covered Land (0.3%, 0.2%).
Construction dates for properties in the portfolio range between
1941 and 2022, with a weighted average year built of 1992. Property
sizes for assets range between 16,158 SF and 1,490,797 SF, with an
average size of approximately 165,929 SF. Maximum clear heights for
properties range between 11 feet and 80 feet, with a weighted
average maximum clear height for the portfolio of approximately 30
feet. As of March 16, 2022, the portfolio was approximately 95.0%
leased to 140 individual tenants.
The credit risk of loans is determined primarily by two factors: 1)
Moody's assessment of the probability of default, which is largely
driven by each loan's DSCR, and 2) Moody's assessment of the
severity of loss upon a default, which is largely driven by each
loan's loan-to-value ratio, referred to as the Moody's LTV or MLTV.
As described in the CMBS methodology used to rate this transaction,
Moody's make various adjustments to the MLTV. Moody's adjust the
MLTV for each loan using a value that reflects capitalization (cap)
rates that are between Moody's sustainable cap rates and market cap
rates. Moody's also use an adjusted loan balance that reflects each
loan's amortization profile.
The Moody's first mortgage DSCR is 1.74x and Moody's first mortgage
stressed DSCR at a 9.25% constant is 0.61x. Moody's DSCR is based
on Moody's stabilized net cash flow.
Moody's LTV ratio for the first mortgage balance is 137.0% based on
Moody's Value. Adjusted Moody's LTV ratio for the first mortgage
balance is 118.6% based on Moody's Value using a cap rate adjusted
for the current interest rate environment. The property is also
encumbered with $890.0 million of mezzanine financing secured by a
pledge of the direct equity interests in the borrower. Inclusive of
the additional mezzanine debt, the total debt MLTV ratio is 206.2%
and the total debt Adjusted Moody's LTV ratio is 178.5%.
Moody's also grades properties on a scale of 0 to 5 (best to worst)
and considers those grades when assessing the likelihood of debt
payment. The factors considered include property age, quality of
construction, location, market, and tenancy. The pool's weighted
average property quality grade is 0.75.
Notable strengths of the transaction include: the proximity to
global gateway markets, infill locations, geographic diversity,
tenant granularity and diversity, strong occupancy, low percentage
of flex industrial and experienced sponsorship.
Notable concerns of the transaction include: the high Moody's LTV
ratio, tenant rollover, average property age,
floating-rate/interest-only mortgage loan profile and certain
credit negative legal features.
Moody's rating approach considers sequential pay in connection with
a collateral release as a credit neutral benchmark. Although the
loans' release premium mitigates the risk of a ratings downgrade
due to adverse selection, the pro rata payment structure limits
ratings upgrade potential as mezzanine classes are prevented from
building enhancement. The benefit received from pooling through
cross-collateralization is also reduced.
The principal methodology used in rating all classes except
interest-only classes was "Large Loan and Single Asset/Single
Borrower Commercial Mortgage-Backed Securitizations Methodology"
published in November 2021.
Moody's approach for single borrower and large loan multi-borrower
transactions evaluates 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. These
aggregated proceeds are then further adjusted for any pooling
benefits associated with loan level diversity, other concentrations
and correlations.
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 may
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously anticipated. Factors that may cause an
upgrade of the ratings include significant loan pay downs or
amortization, an increase in the pool's share of defeasance or
overall improved pool performance. Factors that may cause a
downgrade of the ratings include a decline in the overall
performance of the pool, loan concentration, increased expected
losses from specially serviced and troubled loans or interest
shortfalls.
CF MORTGAGE 2019-CF1: Fitch Affirms B- Rating on 2 Tranches
-----------------------------------------------------------
Fitch Ratings has affirmed the ratings for CF 2019-CF1 Mortgage
Trust commercial mortgage pass-through certificates series
2019-CF1. The Rating Outlooks for classes G and X-G have been
revised to Stable from Negative.
DEBT RATING PRIOR
---- ------ -----
CF 2019-CF1
A-1 12529MAA6 LT AAAsf Affirmed AAAsf
A-2 12529MAB4 LT AAAsf Affirmed AAAsf
A-3 12529MAD0 LT AAAsf Affirmed AAAsf
A-4 12529MAE8 LT AAAsf Affirmed AAAsf
A-5 12529MAF5 LT AAAsf Affirmed AAAsf
A-S 12529MAJ7 LT AAAsf Affirmed AAAsf
A-SB 12529MAC2 LT AAAsf Affirmed AAAsf
B 12529MAK4 LT AA-sf Affirmed AA-sf
C 12529MAL2 LT A-sf Affirmed A-sf
D 12529MCY2 LT BBBsf Affirmed BBBsf
E 12529MCZ9 LT BBB-sf Affirmed BBB-sf
F 12529MDA3 LT BB-sf Affirmed BB-sf
G 12529MDB1 LT B-sf Affirmed B-sf
X-A 12529MAG3 LT AAAsf Affirmed AAAsf
X-B 12529MAH1 LT A-sf Affirmed A-sf
X-D 12529MCV8 LT BBB-sf Affirmed BBB-sf
X-F 12529MCW6 LT BB-sf Affirmed BB-sf
X-G 12529MCX4 LT B-sf Affirmed B-sf
KEY RATING DRIVERS
Relatively Stable Loss Expectations: Overall pool performance and
base case loss expectations remained relatively stable since the
prior review and issuance. Fitch's current ratings incorporate a
base case loss of 4.2%.
There are seven Fitch Loans of Concern (FLOC) (12.4% of pool).
These loans were flagged due to high vacancy, low debt service
coverage ratio (DSCR) and/or pandemic-related underperformance.
Performance has stabilized for the majority of properties impacted
by the pandemic. The Outlook revisions to Stable from Negative
reflect the overall performance stabilization.
The largest FLOC, AC by Marriott San Jose (4.6%), is secured by a
seven-story, 210-key select service hotel located in San Jose, CA.
The property is situated in downtown San Jose, located near large
corporations such as Paypal, eBay, Amazon and Google. Annualized
September 2021 NOI DSCR was -.47x, and YE 2020 NOI DSCR was -.09x,
compared to 2.28x at YE 2019. Fitch's analysis included a 20%
stress to the YE 2019 NOI to reflect pandemic impacts on
performance; the modeled loss was 9%.
The second largest FLOC, Montgomery Commons (2.9%), is secured by a
183,219-sf community shopping center located in North Wales, PA.
Occupancy has fallen to 83% at YE 2020 from 91% at YE 2019, and
100% at issuance. The decline is due to a number of small tenants
vacating at lease expiration during 2020. The YE 2020 DSCR was
reported at 1.57x versus 1.96x at YE 2019. Fitch modeled an 11%
loss which incorporated a 10% stress to the YE 2020 NOI to reflect
the decline in occupancy and not receiving a recent rent roll.
Limited Change to Credit Enhancement: There has been minimal change
in credit enhancement since issuance. As of the March 2022
remittance, the pool's aggregate balance has been paid down by 72%
to $658.1 million from $662.0 million at issuance. There are 17
loans comprising 68.3% of the pool that are interest only for the
full term. No loans have been defeased, and no loans have been
disposed. Additionally, no loans are scheduled to mature until
March 2024.
Property Type Concentration: Approximately 41.1% of the loans in
the pool are secured by office properties followed by multifamily
at 15.2%, mixed-use at 9.6%, retail at 9.4% and hotel at 8.4%.
Pari Passu Loans: Eight loans comprising 41.5% of the pool are part
of a pari passu loan combination: 3 Columbus Circle (7.6% of the
pool), SSTII Self Storage Portfolio II (7.1%), 65 Broadway (6.1%),
Fairfax Multifamily Portfolio (5.3%), AC by Marriott San Jose
(5.3%), Atrium Two (4.1%), Stern Multifamily Portfolio (3.0%), and
Shelbourne Global Portfolio II (2.7%).
Investment-Grade Credit Opinion Loans: At issuance, four loans
totaling 24.0% of the pool were given standalone investment-grade
credit opinions; 3 Columbus Circle (7.6% of the pool), 65 Broadway,
(6.1% of the pool), Fairfax Multifamily Portfolio (5.3% of the
pool), and Amazon Distribution Livonia (5.2% of the pool), each
received a credit opinion of 'BBB-sf' on a standalone basis.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downgrades would occur with an increase in pool-level losses
from underperforming or specially serviced loans/assets.
Downgrades to classes A-1 through A-S and the interest-only
classes X-A are not likely due to the high credit enhancement,
but may occur should interest shortfalls occur.
-- Downgrades to classes B, C, D, E, F, X-B, X-D and X-F are
possible should performance of the FLOCs continue to decline;
should loans susceptible to the coronavirus pandemic not
stabilize; and/or loss expectations increase. Classes G and X-
G could be downgraded should loss expectations increase due to
further performance decline for the FLOCs, or should any loans
transfer to special servicing.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrades would occur with stable to improved asset
performance, coupled with additional paydown and/or
defeasance. Upgrades to classes B and C are not expected but
would likely occur with significant improvement in CE and/or
defeasance and/or the stabilization to the properties impacted
from the coronavirus pandemic.
-- Upgrade of the D and E classes are considered unlikely and
would be limited based on the sensitivity to concentrations or
the potential for future concentrations. Classes would not be
upgraded above 'Asf' if there were likelihood of interest
shortfalls. An upgrade to the F and G classes is not likely
unless the performance of the remaining pool stabilizes and
the senior classes pay off.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
CFCRE COMMERCIAL 2017-C8: Fitch Affirms CCC Rating on 2 Tranches
----------------------------------------------------------------
Fitch Ratings has affirmed 15 classes of CFCRE Commercial Mortgage
Trust 2017-C8 (CFCRE 2017-C8) Commercial Mortgage Pass-Through
Certificates. The Rating Outlooks for six classes have been revised
to Stable from Negative.
DEBT RATING PRIOR
---- ------ -----
CFCRE 2017-C8
A-1 12532CAW5 LT PIFsf Paid In Full AAAsf
A-3 12532CAZ8 LT AAAsf Affirmed AAAsf
A-4 12532CBA2 LT AAAsf Affirmed AAAsf
A-M 12532CBB0 LT AAAsf Affirmed AAAsf
A-SB 12532CAY1 LT AAAsf Affirmed AAAsf
B 12532CBC8 LT AA-sf Affirmed AA-sf
C 12532CBD6 LT A-sf Affirmed A-sf
D 12532CAA3 LT BBB-sf Affirmed BBB-sf
E 12532CAC9 LT Bsf Affirmed Bsf
F 12532CAE5 LT CCCsf Affirmed CCCsf
X-A 12532CBE4 LT AAAsf Affirmed AAAsf
X-B 12532CBF1 LT AA-sf Affirmed AA-sf
X-C 12532CBG9 LT A-sf Affirmed A-sf
X-D 12532CAJ4 LT BBB-sf Affirmed BBB-sf
X-E 12532CAL9 LT Bsf Affirmed Bsf
X-F 12532CAN5 LT CCCsf Affirmed CCCsf
KEY RATING DRIVERS
Improved Loss Expectations: Overall performance and base case loss
expectations for the pool have improved slightly since the last
rating action. The Rating Outlook revisions to Stable reflect lower
expected losses, as performance stabilizes on properties impacted
by the pandemic. There are eight Fitch Loans of Concern (FLOCs; 18%
of pool). Four loans (8.8%) are currently in special servicing, two
of which are performing (4.2%).
Fitch's current ratings reflect a base case loss of 4.8%.
The largest contributor to loss is the Flats East Bank Phase I loan
(4.1%), which is secured by a 128,070-sf mixed-use property located
in downtown Cleveland, along the Lake Erie lakefront. The
collateral includes the 150-key Aloft Cleveland Downtown, with
33,166 sf of ground floor retail space and a 174-space surface
parking lot. The property was developed concurrently with a large
18-story office property, which is not part of the collateral. The
loan transferred to special servicing in June 2020 as a result of
the pandemic. According to servicer updates the special servicer
and borrower are finalizing a settlement agreement.
Performance has begun to stabilize. Per the December 2021 STR
report, the subject hotel had occupancy, ADR and RevPAR rates of
53%, $138 and $73, respectively. RevPar is up 115% year-over-year.
Fitch modeled a loss of approximately 15% which reflects a value of
$186 psf.
The second largest contributor to loss is the MVP parking portfolio
loan (3%), which is secured by a portfolio of six surface parking
lots and one parking garage. The portfolio properties are located
across Indianapolis, Louisville, Nashville, Houston and St. Louis.
The properties benefit from proximity to major demand drivers such
as the Indiana Convention Center, Lucas Oil Stadium, Kentucky
International Convention Center, Nissan Stadium, Tennessee State
Capitol, University of Houston-Downtown, Downtown Aquarium-Houston,
Scottrade Center, The Dome at America's Center and Busch Stadium.
The loan has been designated as a FLOC due to a low DSCR. The
servicer reported YE 2020 interest only NOI DSCR was 0.96x compared
with 1.95x at YE 2019. Performance of the collateral has been
significantly impacted by the effects of the pandemic. In August
2021, alternative investment management firm, Bombe Asset
Management, acquired a majority stake in the parent company of the
sponsor resulting in a change in control of ownership. Fitch's
modeled loss of approximately 15% reflects a 20% haircut to the YE
2019 NOI. Given the recent capital investment and commitment by new
ownership, the assets are expected to stabilize over time.
The next largest contributor to loss is the Crossings at Hobart
loan (7%), which is secured by a 772,383 sf anchored retail center
located approximately 45 miles southeast of downtown Chicago in
Merrillville, IN. The largest tenants are Walmart (27% NRA through
March 2023); Hobby Lobby (7.7% NRA through August 2024) and
American Signature Furniture (6.2% NRA through January 2025). Per
the January 2021 rent roll, occupancy was 87%, which is a decline
from 99% due to Burlington Coat Factory vacating at lease
expiration. Upcoming rollover at the property includes 4.2% of the
NRA in 2022, followed by 44% in 2023 and 11.4 in 2024. The servicer
reported NOI DSCR was 1.40x at YE 2020 compared with 1.44x at YE
2019 and 1.43x at YE 2018.
Fitch applied a 15% haircut to the YE 2020 NOI to reflect the
occupancy decline and upcoming rollover.
Increased Credit Enhancement: As of the February 2022 distribution
date, the pool's aggregate principal balance was reduced by 15% to
$549.1 million from $644.7 million at issuance. There has been $2.7
million in realized losses to date, and interest shortfalls are
currently affecting the non-rated class. Six loans (26%) are
full-term interest-only, while five loans (16.5%) remain in their
partial interest-only periods. The majority of the pool matures in
2026 and 2027 (99%), with one loan (1%) scheduled to mature in
2022. According to servicer updates, the loan paid off in February
2022.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Upgrades to classes B and C would likely occur with
significant improvement in CE and/or defeasance; however,
adverse selection and increased concentrations, or the
underperformance of the FLOCs, could reverse this trend. An
upgrade to class D is unlikely and would be limited based on
sensitivity to concentrations or further adverse selection.
-- Classes would not be upgraded above 'Asf' if there were a
likelihood for interest shortfalls. An upgrade to classes E
and F is not likely until the later years in the transaction
and only if the performance of the remaining pool is stable
and/or properties vulnerable to the coronavirus return to pre-
pandemic levels, and if there is sufficient CE to the classes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Downgrades to classes A-1 through A-M are not likely due to
their position in the capital structure and the high CE;
however, downgrades to these classes may occur should interest
shortfalls occur. Downgrades to classes B, C, and D would
occur if loss expectations increase significantly and/or
should CE be eroded.
-- Downgrades to classes E and F would occur if the performance
of the FLOCs continues to decline and/or fail to stabilize, or
should losses from specially serviced loans/assets be larger
than expected or more certain.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
CFMT LLC 2022-AB2: DBRS Finalizes BB(low) Rating on Class M5 Notes
------------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the following
Asset-Backed Notes, Series 2022-1 issued by CFMT 2022-AB2, LLC (the
Issuer):
-- $493.2 million Class A at AAA (sf)
-- $25.3 million Class M1 at AA (sf)
-- $12.3 million Class M2 at A (high) (sf)
-- $13.1 million Class M3 at A (sf)
-- $14.0 million Class M4 at BBB (sf)
-- $18.7 million Class M5 at BB (low) (sf)
The AAA (sf) rating reflects 94.8% of the cumulative advance rate.
The AA (sf), A (high) (sf), A (sf), BBB (sf), and BB (low) (sf)
ratings reflect 99.6%, 102.0%, 104.5%, 107.2%, and 110.8% of the
cumulative advance rates, respectively.
Other than the specified classes above, DBRS Morningstar did not
rate any other classes in this transaction.
Lenders typically offer reverse mortgage loans to people who are at
least 62 years old. Through reverse mortgage loans, borrowers have
access to home equity through a lump sum amount or a stream of
payments without periodically repaying principal or interest,
allowing the loan balance to accumulate over a period of time until
a maturity event occurs. Loan repayment is required (1) if the
borrower dies, (2) if the borrower sells the related residence, (3)
if the borrower no longer occupies the related residence for a
period (usually a year), (4) if it is no longer the borrower's
primary residence, (5) if a tax or insurance default occurs, or (6)
if the borrower fails to properly maintain the related residence.
In addition, borrowers must be current on any homeowner's
association dues if applicable. Reverse mortgages are typically
nonrecourse; borrowers don't have to provide additional assets in
cases where the outstanding loan amount exceeds the property's
value (the crossover point). As a result, liquidation proceeds will
fall below the loan amount in cases where the outstanding balance
reaches the crossover point, contributing to higher loss severities
for these loans.
As of the December 31, 2021, initial cut-off date, the collateral
has approximately $340.3 million in unpaid principal balance from
1,077 active home equity conversion mortgage reverse mortgage loans
secured by first liens typically on single-family residential
properties, condominiums, multifamily (two- to four-family)
properties, manufactured homes, and planned unit developments. The
loans were originated between 2000 and 2019. Of the total loans,
680 have a fixed interest rate (70.8% of the balance), with a 5.27%
weighted-average coupon (WAC). The remaining 397 loans are
floating-rate interest (29.2% of the balance) with a 2.35% WAC,
bringing the entire collateral pool to a 4.42% WAC.
The transaction uses a sequential structure. No subordinate note
shall receive any principal payments until the senior notes (Class
A notes) have been reduced to zero. This structure provides credit
enhancement in the form of subordinate classes and reduces the
effect of realized losses. These features increase the likelihood
that holders of the most senior class of notes will receive regular
distributions of interest and/or principal. All note classes have
coupon caps at 2%.
The Class M1, M2, M3, M4, and M5 notes have principal lockout terms
insofar as they are not entitled to principal payments upon the
Issuer's failure to pay all interest (including any cap carryover
amount), principal, and fees due on the mandatory call date (such
period, the Class M Principal Lockout Period). Such Class M
Principal Lockout Period begins on the day following the mandatory
call date and ends on the earliest of (1) the occurrence of a
sufficient proceeds auction, (2) an acceleration event, and (3) the
ninth anniversary of the mandatory call date. If the Class M
Principal Lockout period ends before the occurrence of a sufficient
proceeds auction or an acceleration event, then amounts will be
paid in accordance with the priority of payments. Note that the
DBRS Morningstar cash flow as it pertains to each note models the
first payment being received after these dates for each of the
respective notes; hence at the time of issuance, DBRS Morningstar
does not expect these rules to affect the natural cash flow
waterfall.
Notes: All figures are in U.S. dollars unless otherwise noted.
CHNGE MORTGAGE 2022-2: DBRS Gives Prov. B Rating on Cl. B-2 Certs
-----------------------------------------------------------------
DBRS, Inc. assigned provisional ratings to the following Mortgage
Pass-Through Certificates, Series 2022-2 (the Certificates) to be
issued by CHNGE Mortgage Trust 2022-2 (CHNGE 2022-2 or the Trust):
-- $275.5 million Class A-1 at A (sf)
-- $19.2 million Class M-1 at BBB (sf)
-- $18.3 million Class B-1 at BB (sf)
-- $15.4 million Class B-2 at B (sf)
The A (sf) rating on the Class A-1 Certificates reflects 20.20% of
credit enhancement provided by subordinated Certificates. The BBB
(sf), BB (sf), and B (sf) ratings reflect 14.65%, 9.35%, and 4.90%
of credit enhancement, respectively.
Other than the specified classes above, DBRS Morningstar does not
rate any other classes in this transaction.
This is a securitization of a portfolio of fixed- and
adjustable-rate expanded prime first-lien residential mortgages
funded by the issuance of the Certificates. The Certificates are
backed by 606 mortgage loans with a total principal balance of
$345,289,846 as of the Cut-Off Date (February 1, 2022).
CHNGE 2022-2 represents the second securitization issued by the
Sponsor, Change Lending, LLC (Change). All the loans in the pool
were originated by Change, which is certified by the U.S.
Department of the Treasury as a Community Development Financial
Institution (CDFI). As a CDFI, Change is required to lend at least
60% of its production to certain target markets, which include
low-income borrowers or other underserved communities.
While loans originated by a CDFI are not required to comply with
the Consumer Financial Protection Bureau's Qualified Mortgage and
Ability-to-Repay rules, the mortgages included in this pool were
made to generally creditworthy borrowers with near-prime credit
scores, low loan-to-value ratios (LTVs), and robust reserves.
The loans in the pool were underwritten through Change's Community
Mortgage (90.5%) and E-Z Prime (9.5%) programs, both of which are
considered weaker than other origination programs because income
documentation verification is not required. Generally, underwriting
practices of these programs focus on borrower credit, borrower
equity contribution, housing payment history, and liquid reserves
relative to monthly mortgage payments. Because post-2008 crisis
historical performance is limited on these products, DBRS
Morningstar applied additional assumptions to increase the expected
losses for the loans in its analysis.
On or after the earlier of (1) the distribution date occurring in
February 2025 and (2) the date on which the aggregate stated
principal balance of the loans falls to 30% or less of the Cut-Off
Date balance, at its option, the Depositor may redeem all of the
outstanding certificates at the redemption price (par plus
interest). Such optional redemption may be followed by a qualified
liquidation, which requires (1) a complete liquidation of assets
within the Trust and (2) proceeds to be distributed to the
appropriate holders of regular or residual interests.
The Sponsor will have the option, but not the obligation, to
repurchase any mortgage loan that becomes 90 or more days
delinquent (not related to a Coronavirus Disease (COVID-19)
forbearance) under the Mortgage Bankers Association method at par
plus interest, provided that such purchases in aggregate do not
exceed 7.5% of the total principal balance as of the Cut-Off Date.
Change serves as the Servicer for the transaction, and LoanCare,
LLC is the Subservicer. The Servicer will fund advances of
delinquent principal and interest (P&I) on any mortgage until such
loan becomes 90 days delinquent, contingent upon recoverability
determination. The Servicer is also obligated to make advances in
respect of taxes, insurance premiums, and reasonable costs incurred
in the course of servicing and disposing of properties.
This transaction employs a sequential-pay cash flow structure.
Principal proceeds can be used to cover interest shortfalls on
certificates, but such shortfalls on the Class M-1 Certificates and
more subordinate bonds will not be paid from principal proceeds
until the more senior classes are retired. Furthermore, excess
spread can be used to cover realized losses and prior period bond
writedown amounts first before being allocated to unpaid cap
carryover amounts to Class A-1 down to Class M-1.
Under the U.S. Risk Retention Rules, CDFI loans fall within the
definition of community-focused residential mortgages. A
securitization transaction containing only community-focused
residential mortgages is exempt under the U.S. Risk Retention Rules
and, accordingly, the Sponsor will not be required to retain any
credit risk under Section 15G of the Securities Exchange Act of
1934 and the regulations promulgated thereunder. Notwithstanding
the exemption, Change has elected to retain the Class B-3, A-IO-S,
and XS Certificates.
Coronavirus Pandemic Impact
The coronavirus pandemic and the resulting isolation measures have
caused an immediate economic contraction, leading to sharp
increases in unemployment rates and income reductions for many
consumers. Shortly after the onset of the pandemic, DBRS
Morningstar saw an increase in delinquencies for many residential
mortgage-backed securities (RMBS) asset classes.
Such mortgage delinquencies were mostly in the form of
forbearances, which are generally short-term periods of payment
relief that may perform very differently from traditional
delinquencies. At the onset of the pandemic, the option to forbear
mortgage payments was widely available, driving forbearances to an
elevated level. When the dust settled, loans with
coronavirus-induced forbearance in 2020 performed better than
expected, thanks to government aid, low LTVs, and acceptable
underwriting in the mortgage market in general. Across nearly all
RMBS asset classes, delinquencies have been gradually trending
downward, as forbearance periods come to an end for many
borrowers.
Notes: All figures are in U.S. dollars unless otherwise noted.
CIFC FUNDING 2022-II: Moody's Assigns Ba3 Rating to $20MM E Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned ratings to four classes of
notes issued and one class of loans incurred by CIFC Funding
2022-II, Ltd. (the "Issuer" or "CIFC 2022-II").
Moody's rating action is as follows:
US$75,000,000 Class A-1L Loans due 2035, Assigned Aaa (sf)
US$235,000,000 Class A-1 Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$15,000,000 Class A-2 Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$20,000,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2035, Assigned Ba3 (sf)
US$5,015,000 Class F Junior Secured Deferrable Floating Rate Notes
due 2035, Assigned B2 (sf)
The loans and notes listed are referred to herein, collectively, as
the "Rated Debt."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
CIFC 2022-II is a managed cash flow CLO. The issued notes and
incurred loans will be collateralized primarily by broadly
syndicated senior secured corporate loans. At least 92.5% of the
portfolio must consist of first lien senior secured loans and
eligible investments, up to 7.5% of the portfolio may consist of
assets that are not senior secured loans or eligible investments,
and up to 5% of the portfolio may consist of permitted non-loan
assets. The portfolio is approximately 95% ramped as of the closing
date.
CIFC Asset 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 five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the Rated Debt, the Issuer issued three classes of
senior notes and 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 and loans 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 December 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $500,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 3122
Weighted Average Spread (WAS): 3.50%
Weighted Average Coupon (WAC): 6.00%
Weighted Average Recovery Rate (WARR): 47.7%
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
December 2021.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Debt is subject to uncertainty. The
performance of the Rated Debt 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 Debt.
CIM TRUST 2022-R1: DBRS Gives Prov. B(high) Rating on Cl. B2 Notes
------------------------------------------------------------------
DBRS, Inc. assigned the following provisional ratings to the
Mortgage-Backed Notes, Series 2022-R1 (the Notes) to be issued by
CIM Trust 2022-R1 (CIM 2022-R1 or the Trust):
-- $263.7 million Class A1 at AAA (sf)
-- $224.2 million Class A1-A at AAA (sf)
-- $39.6 million Class A1-B at AAA (sf)
-- $16.9 million Class M1 at AA (high) (sf)
-- $13.5 million Class M2 at A (high) (sf)
-- $10.2 million Class M3 at BBB (high) (sf)
-- $6.2 million Class B1 at BB (high) (sf)
-- $4.3 million Class B2 at B (high) (sf)
The AAA (sf) rating on the Notes reflects 19.65% of credit
enhancement provided by subordinated Notes in the transaction. The
AA (high) (sf), A (high) (sf), BBB (high) (sf), BB (high) (sf), and
B (high) (sf) ratings reflect 14.50%, 10.40%, 7.30%, 5.40%, and
4.10% of credit enhancement, respectively.
Other than the classes specified above, DBRS Morningstar does not
rate any other classes in this transaction.
This transaction is a securitization of a portfolio of primarily
seasoned performing and reperforming first-lien residential
mortgages funded by the issuance of mortgage-backed notes (the
Notes). The Notes are backed by 1,803 loans with a total principal
balance of $328,225,767 as of the Cut-Off Date (January 31, 2022).
The loans are approximately 169 months seasoned. As of the Cut-Off
Date, 95.6% of the pool is current, 4.1% is 30 days delinquent
under the Mortgage Bankers Association (MBA) delinquency method,
and 0.3% is in bankruptcy (all bankruptcy loans are performing or
are 30 days delinquent). Approximately 74.9% and 54.3% of the
mortgage loans have been zero times (x) 30 days delinquent for the
past 12 months and 24 months, respectively, under the MBA
delinquency method.
In the portfolio, 61.2% of the loans are modified. The
modifications happened more than two years ago for 82.8% of the
modified loans. Within the pool, 536 mortgages have
non-interest-bearing deferred amounts, which equate to 6.2% of the
total principal balance. Unless specified otherwise, all statistics
on the mortgage loans in this report are based on the current
balance, including the applicable non-interest-bearing deferred
amounts.
The majority of the pool (91.1%) is exempt from the Consumer
Financial Protection Bureau (CFPB) Ability-to-Repay (ATR)/Qualified
Mortgage (QM) rules. The loans subject to the ATR rules are
designated as QM Safe Harbor (5.6%), QM Rebuttable Presumption
(0.2%), and non-QM (3.0%) by unpaid principal balance.
Fifth Avenue Trust (the Seller) acquired the mortgage loans prior
to the Cut-Off Date and, through a wholly owned subsidiary, Funding
Depositor LLC (the Depositor), will contribute the loans to the
Trust. As the Sponsor, Chimera Investment Corporation (Chimera) or
one of its majority-owned affiliates will acquire and retain a 5%
eligible horizontal residual interest in the Notes, consisting of a
portion of the Class B2 Notes and all of the Class B3 and Class C
Notes in the aggregate, to satisfy the credit risk retention
requirements. Various entities originated and previously serviced
the loans through purchases in the secondary market.
Prior to CIM 2022-R1, Chimera had issued 47 seasoned
securitizations under the CIM shelf since 2014, all of which were
backed by subprime, reperforming, or nonperforming loans. DBRS
Morningstar has rated five of the previously issued CIM
reperforming loan (RPL) deals. Similar to the last DBRS
Morningstar-rated CIM RPL deal, this transaction exhibits much
stronger credit characteristics than transactions previously issued
under the CIM shelf. DBRS Morningstar reviewed the historical
performance of both the rated and unrated transactions issued under
the CIM shelf, particularly with respect to the reperforming
transactions, which may not have collateral attributes similar to
CIM 2022-R1. The reperforming CIM transactions generally have
delinquencies and losses in line with expectations for previously
distressed assets.
The loans will be serviced by Fay Servicing, LLC (Fay; 91.8%) and
Select Portfolio Servicing, Inc. (SPS; 8.2%). There will not be any
advancing of delinquent principal or interest on any mortgages by
the Servicers or any other party to the transaction; however, the
related Servicer is obligated to make advances in respect of
homeowner's association fees, taxes, and insurance as well as
reasonable costs and expenses incurred in the course of servicing
and disposing of properties.
On the earlier of the Payment Date occurring in February 2027 or
after the Payment Date when the aggregate note amount of the
offered Notes is reduced to 10% of the Closing Date note amount,
the Call Option Holder (the Depositor or any successor or assignee)
has the option to purchase all of the mortgage loans and any real
estate owned (REO) properties at a certain purchase price equal to
the unpaid principal balance of the mortgage loans, plus the fair
market value of the REO properties and any unpaid expenses and
reimbursement amounts.
The transaction employs a sequential-pay cash flow structure.
Principal proceeds can be used to cover interest shortfalls on the
Notes, but such shortfalls on Class M2 Notes and more subordinate
bonds will not be paid from principal proceeds until the Class A1
and M1 Notes are retired.
Coronavirus Disease (COVID-19) Impact
The coronavirus pandemic and the resulting isolation measures
caused an immediate economic contraction, leading to sharp
increases in unemployment rates and income reductions for many
consumers. Shortly after the onset of the pandemic, DBRS
Morningstar saw an increase in the delinquencies for many
residential mortgage-backed securities (RMBS) asset classes.
Such mortgage delinquencies were mostly in the form of
forbearances, which are generally short-term periods of payment
relief that may perform very differently from traditional
delinquencies. At the onset of the pandemic, the option to forebear
mortgage payments was widely available, driving forbearances to an
elevated level. When the dust settled, loans with
coronavirus-induced forbearance in 2020 performed better than
expected, thanks to government aid, low loan-to-value ratios, and
acceptable underwriting in the mortgage market in general. Across
nearly all RMBS asset classes, delinquencies have been gradually
trending downward in recent months as forbearance periods come to
an end for many borrowers.
As of the Cut-Off Date, there are no loans that are subject to an
active coronavirus-related forbearance plan with any Servicer.
Notes: All figures are in U.S. dollars unless otherwise noted.
CITIGROUP 2022-INV2: Moody's Gives '(P)B3' Rating to B-5 Certs
---------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to 68
classes of residential mortgage-backed securities (RMBS) issued by
Citigroup Mortgage Loan Trust (CMLTI) 2022-INV2. The ratings range
from (P)Aaa (sf) to (P)B3 (sf).
CMLTI 2022-INV2 securitization is backed by a pool of prime
conforming, investment property mortgage loans acquired by
Citigroup Global Markets Realty Corp. (CGMRC), the sponsor of this
transaction. CGMRC acquired the loans in the pool from five initial
sellers. Approximately 39.5%, 23.2% and 21.7% of the mortgage loans
(by UPB) were acquired by the mortgage loan sellers from
CitiMortgage, Inc ("CitiMortgage"), CMG Mortgage, Inc. d/b/a CMG
Financial ("CMG") and Home Point Financial Corporation
("Homepoint") respectively. No other seller or affiliated group of
sellers sold more than 10% of the mortgage loans in the aggregate.
This deal represents the second CMLTI securitization of prime,
conforming residential mortgage loans in 2022 and the twelfth rated
issue from the shelf since its inception in 2019. Approximately
97.8% of the loans (by UPB) are underwritten in accordance with
Freddie Mac or Fannie Mae guidelines, which take into
consideration, among other factors, the income, assets, employment
and credit score of the borrower as well as loan-to-value (LTV).
These loans were run through one of the government sponsored
enterprises' (GSE) automated underwriting systems (AUS) and
received an "Approve" or "Accept" recommendation. Each mortgage
loan is either 1) an extension of credit primarily for a business
purpose and is not a "covered transaction" as defined in Section
1026.43(b)(1) of Regulation Z, or 2) for purposes of the ATR Rules,
relies on the exception for eligible loan contained in 12 C.F.R.
1026.43(e)(4) (ie, the "QM patch"). As of the closing date, the
sponsor or a majority- owned affiliate of the sponsor will retain
at least 5% of the initial certificate principal balance or
notional amount of each class of certificates issued by the trust
to satisfy U.S. risk retention rules.
Fay Servicing, LLC (Fay) and CitiMortgage will be the servicers on
the deal, servicing 60.5% and 39.5% of the loans (by UPB)
respectively. There is no master servicer in this transaction.
CGMRC as Advancing Party for Fay, and CitiMortgage will be
responsible for making P&I advances. U.S. Bank Trust Company,
National Association (U.S. Bank Trust Company, long term issuer
rating'A1') will be the trust administrator and will act as the
backup advancing party, and U.S. Bank Trust National Association
will be the trustee.
One third-party review (TPR) firm, AMC Diligence, LLC, verified the
accuracy of the loan level information that Moody's received from
the sponsor. The firm conducted detailed credit, property
valuation, data accuracy and compliance reviews on 100% of the
mortgage loans in the collateral pool. The TPR results indicate
that there are no material compliance, credit, valuation or data
issues defects
Moody's analysed the underlying mortgage loans using Moody's
Individual Loan Analysis (MILAN) model.
In this transaction, the Class A-11 and A-11-IO coupons are indexed
to SOFR. However, based on the transaction's structure, the
particular choice of benchmark has no credit impact. First,
interest payments to the notes, including the floating rate notes,
are subject to the net WAC cap, which prevents the floating rate
notes from incurring interest shortfalls as a result of increases
in the benchmark index above the fixed rates at which the assets
bear interest. Second, the shifting-interest structure pays all
interest generated on the assets to the bonds and does not provide
for any excess spread.
Complete rating actions are as follows:
Issuer: Citigroup Mortgage Loan Trust 2022-INV2
Cl. A-1, Assigned (P)Aaa (sf)
Cl. A-1-IO*, Assigned (P)Aaa (sf)
Cl. A-1-IOX*, Assigned (P)Aaa (sf)
Cl. A-1A, Assigned (P)Aaa (sf)
Cl. A-1-IOW*, Assigned (P)Aaa (sf)
Cl. A-1W, Assigned (P)Aaa (sf)
Cl. A-2, Assigned (P)Aaa (sf)
Cl. A-2-IO*, Assigned (P)Aaa (sf)
Cl. A-2-IOX*, Assigned (P)Aaa (sf)
Cl. A-2A, Assigned (P)Aaa (sf)
Cl. A-2-IOW*, Assigned (P)Aaa (sf)
Cl. A-2W, Assigned (P)Aaa (sf)
Cl. A-3, Assigned (P)Aaa (sf)
Cl. A-3-IO*, Assigned (P)Aaa (sf)
Cl. A-3-IOX*, Assigned (P)Aaa (sf)
Cl. A-3A, Assigned (P)Aaa (sf)
Cl. A-3-IOW*, Assigned (P)Aaa (sf)
Cl. A-3W, Assigned (P)Aaa (sf)
Cl. A-4, Assigned (P)Aa1 (sf)
Cl. A-4-IO*, Assigned (P)Aa1 (sf)
Cl. A-4-IOX*, Assigned (P)Aa1 (sf)
Cl. A-4A, Assigned (P)Aa1 (sf)
Cl. A-4-IOW*, Assigned (P)Aa1 (sf)
Cl. A-4W, Assigned (P)Aa1 (sf)
Cl. A-5, Assigned (P)Aaa (sf)
Cl. A-5-IO*, Assigned (P)Aa1 (sf)
Cl. A-5-IOX*, Assigned (P)Aa1 (sf)
Cl. A-5A, Assigned (P)Aaa (sf)
Cl. A-5-IOW*, Assigned (P)Aa1 (sf)
Cl. A-5W, Assigned (P)Aaa (sf)
Cl. A-6, Assigned (P)Aaa (sf)
Cl. A-6-IO*, Assigned (P)Aaa (sf)
Cl. A-6-IOX*, Assigned (P)Aaa (sf)
Cl. A-6A, Assigned (P)Aaa (sf)
Cl. A-6-IOW*, Assigned (P)Aaa (sf)
Cl. A-6W, Assigned (P)Aaa (sf)
Cl. A-7, Assigned (P)Aaa (sf)
Cl. A-7-IO*, Assigned (P)Aaa (sf)
Cl. A-7-IOX*, Assigned (P)Aaa (sf)
Cl. A-7A, Assigned (P)Aaa (sf)
Cl. A-7-IOW*, Assigned (P)Aaa (sf)
Cl. A-7W, Assigned (P)Aaa (sf)
Cl. A-8, Assigned (P)Aaa (sf)
Cl. A-8-IO*, Assigned (P)Aaa (sf)
Cl. A-8-IOX*, Assigned (P)Aaa (sf)
Cl. A-8A, Assigned (P)Aaa (sf)
Cl. A-8-IOW*, Assigned (P)Aaa (sf)
Cl. A-8W, Assigned (P)Aaa (sf)
Cl. A-11, Assigned (P)Aaa (sf)
Cl. A-11-IO*, Assigned (P)Aaa (sf)
Cl. A-12, Assigned (P)Aaa (sf)
Cl. B-1, Assigned (P)Aa3 (sf)
Cl. B-1-IO*, Assigned (P)Aa3 (sf)
Cl. B-1-IOX*, Assigned (P)Aa3 (sf)
Cl. B-1-IOW*, Assigned (P)Aa3 (sf)
Cl. B-1W, Assigned (P)Aa3 (sf)
Cl. B-2, Assigned (P)A3 (sf)
Cl. B-2-IO*, Assigned (P)A3 (sf)
Cl. B-2-IOX*, Assigned (P)A3 (sf)
Cl. B-2-IOW*, Assigned (P)A3 (sf)
Cl. B-2W, Assigned (P)A3 (sf)
Cl. B-3, Assigned (P)Baa3 (sf)
Cl. B-3-IO*, Assigned (P)Baa3 (sf)
Cl. B-3-IOX*, Assigned (P)Baa3 (sf)
Cl. B-3-IOW*, Assigned (P)Baa3 (sf)
Cl. B-3W, Assigned (P)Baa3 (sf)
Cl. B-4, Assigned (P)Ba3 (sf)
Cl. B-5, Assigned (P)B3 (sf)
*Reflects Interest Only Classes
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected loss for this pool in a baseline scenario-mean is
0.94%, in a baseline scenario-median is 0.67%, and reaches 6.40% at
a stress level consistent with Moody's Aaa ratings.
Moody's base its ratings on the certificates on the credit quality
of the mortgage loans, the structural features of the transaction,
Moody's assessments of the origination quality and servicing
arrangement, the strength of the TPR and the R&W framework of the
transaction.
Collateral Description
As of the cut-off date, the mortgage loans will consist of 1,364
conforming mortgage loans with an aggregate stated principal
balance of approximately $473,970,311. The mortgage loans will
consist of conventional, fixed-rate, fully amortizing mortgage
loans, which will have original terms to maturity of up to 30
years. All of the mortgage loans will be secured by first liens on
single-or two-to-four family residential properties, planned unit
developments, Multi-Family, condominiums, or townhouse. All loans
are current as of the cut-off date. Overall, the credit quality of
the mortgage loans backing this transaction is in-line with
recently issued prime jumbo transactions Moody's have rated, with
average length of employment of 9.0 years, primary borrower wage
income and all borrower wage income of $10,508 and $12,714,
respectively. Furthermore, the average liquid/cash reserves is
$252,441 with approximately 83.5% of borrowers by UPB have more
than 24 months of liquid/cash reserves. The average monthly
residual income is approximately $13,167.
The pool has clean pay history and weighted average (WA) seasoning
of approximately 7.5 months. All mortgage loans are current as of
the cut-off date. The weighted average (WA) FICO for the aggregate
pool is 771 with a WA original LTV of 64.1% and WA original CLTV of
64.1%.
Approximately 4.6% of the mortgage loans (by UPB) are "Appraisal
Waiver" (AW) loans, whereby the sponsor obtained an AW for each
such mortgage loan from Fannie Mae or Freddie Mac through their
respective programs. In each case, neither Fannie Mae nor Freddie
Mac required an appraisal of the related mortgaged property as a
condition of approving the related mortgage loan for purchase by
Fannie Mae or Freddie Mac, as applicable.
Aggregation and Origination Quality
Citigroup Global Markets Realty Corp. (CGMRC) aggregated 100% of
the pool. Based on the available information related to CGMRC's
valuation and risk management practices, the 100% TPR, and the
transparent R&W framework in this transaction, Moody's did not make
any adjustments to Moody's losses based on Moody's review of
CGMRC's aggregation quality.
The mortgage loan seller acquired approximately 39.5%, 23.2% and
21.7% of the loans (by UPB) from CitiMortgage, CMG and Homepoint
(the initial sellers). No other seller or affiliated group of
sellers sold more than 10% of the mortgage loans in the aggregate.
Moody's consider CitiMortgage and CMG to have adequate origination
quality of conforming mortgages. As a result, Moody's did not make
any adjustments to Moody's base case and Aaa stress loss
assumptions based on Moody's review of the aforementioned
originator's loan performance and origination practices. Moody's
maintain a higher base case and Aaa loss assumption for loans
originated by Homepoint due to worse performance than average GSE
investor loans, and lack of strong controls and uneven production
quality.
Servicing Arrangement
Moody's consider the overall servicing arrangement for this pool as
adequate, and as a result Moody's did not make any adjustments to
Moody's base case and Aaa stress loss assumptions.
Fay Servicing (Fay) and CitiMortgage (subserviced by Cenlar FSB )
will be the servicers on the deal, servicing 60.5% and 39.5% (by
loan balance) of the loans respectively. There is no master
servicer for this transaction. However did not apply any adjustment
to Moody's expected losses for the lack of master servicer due to
the following: (i) Cenlar has acted as sub-servicer for
CitiMortgage since 2018, and CitiMortgage has satisfactory
sub-servicing oversight policy and process in place (ii) Fay and
Cenlar FSB are experienced servicers (iii) The complexity of the
loan product is relatively low, reducing the complexity of
servicing and reporting; and (iv) U.S. Bank Trust Company, as the
trust administrator, will be responsible for aggregating the
reports from the servicers and reporting to investors, and
appointing a replacement servicer at the direction of the
controlling holder.
CMI will be responsible for P&I advances for loans they service,
and CGMRC, as the advancing party, will be responsible for making
P&I advances for Fay. U.S. Bank Trust Company, N.A. (U.S. Bank
Trust Company, long term issuer rating A1), as the trust
administrator will act as the backup to the advancing party. U.S.
Bank Trust National Association will act as the trustee.
Third-Party Review
The transaction benefits from a TPR on 100% of the loans for
regulatory compliance, credit and property valuation. The due
diligence results confirm compliance with the applicable
underwriting guidelines for the vast majority of loans, no material
regulatory compliance issues. The loans that had exceptions to the
applicable underwriting guidelines had significant compensating
factors that were documented.
Representations & Warranties
An effective R&W framework protects a transaction against the risk
of loss from fraudulent or defective loans. Moody's assessed CMLTI
2022-INV2's R&W framework for this transaction as adequate,
consistent with that of other private label transactions for which
the breach review process is thorough, transparent and objective,
and the costs and manner of review are clearly outlined at
issuance.
The transaction requires mandatory independent reviews of loans
that become 120 days delinquent (other than certain loans in FEMA
disaster areas and those in forbearance as a result of a pandemic
or national disaster) and those that liquidate at a loss to
determine if any of the R&Ws are breached. The R&Ws are
comprehensive and the R&W provider is CGMRC, an affiliate of
Citigroup Inc. (rated A3). The R&W provider will be obligated to
cure or repurchase loans found to have material breaches of R&Ws,
or pay for any loss if that loan was liquidated.
Transaction Structure
CMLTI 2022-INV2 has one pool with a shifting interest structure
that benefits from a subordination floor. Funds collected,
including principal, are first used to make interest payments and
then principal payments to the senior bonds, and then interest and
principal payments to each subordinate bond. As in all transactions
with shifting interest structures, the senior bonds benefit from a
cash flow waterfall that allocates all prepayments to the senior
bond for a specified period of time, and increasing amounts of
prepayments to the subordinate bonds thereafter, but only if loan
performance satisfies delinquency and loss tests.
Tail Risk & Subordination Floor
The transaction cash flows follow a shifting interest structure
that allows subordinated bonds to receive principal payments under
certain defined scenarios. Because a shifting interest structure
allows subordinated bonds to pay down over time as the loan pool
balance declines, senior bonds are exposed to eroding credit
enhancement over time, and increased performance volatility as a
result. To mitigate this risk, the transaction provides for a
senior subordination floor of 1.00% of the cut-off date pool
balance, and as subordination lock-out amount of 1.00% of the
cut-off date pool balance. The floors are consistent with the
credit neutral floors for the assigned ratings according to Moody's
methodology.
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 rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in February 2022.
CITIGROUP MORTGAGE 2022-INV2: Moody's Gives '(P)B3' to B-5 Certs
-----------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to 68
classes of residential mortgage-backed securities (RMBS) issued by
Citigroup Mortgage Loan Trust (CMLTI) 2022-INV2. The ratings range
from (P)Aaa (sf) to (P)B3 (sf).
CMLTI 2022-INV2 securitization is backed by a pool of prime
conforming, investment property mortgage loans acquired by
Citigroup Global Markets Realty Corp. (CGMRC), the sponsor of this
transaction. CGMRC acquired the loans in the pool from five initial
sellers. Approximately 39.5%, 23.2% and 21.7% of the mortgage loans
(by UPB) were acquired by the mortgage loan sellers from
CitiMortgage, Inc ("CitiMortgage"), CMG Mortgage, Inc. d/b/a CMG
Financial ("CMG") and Home Point Financial Corporation
("Homepoint") respectively. No other seller or affiliated group of
sellers sold more than 10% of the mortgage loans in the aggregate.
This deal represents the second CMLTI securitization of prime,
conforming residential mortgage loans in 2022 and the twelfth rated
issue from the shelf since its inception in 2019. Approximately
97.8% of the loans (by UPB) are underwritten in accordance with
Freddie Mac or Fannie Mae guidelines, which take into
consideration, among other factors, the income, assets, employment
and credit score of the borrower as well as loan-to-value (LTV).
These loans were run through one of the government sponsored
enterprises' (GSE) automated underwriting systems (AUS) and
received an "Approve" or "Accept" recommendation. Each mortgage
loan is either 1) an extension of credit primarily for a business
purpose and is not a "covered transaction" as defined in Section
1026.43(b)(1) of Regulation Z, or 2) for purposes of the ATR Rules,
relies on the exception for eligible loan contained in 12 C.F.R.
1026.43(e)(4) (ie, the "QM patch"). As of the closing date, the
sponsor or a majority- owned affiliate of the sponsor will retain
at least 5% of the initial certificate principal balance or
notional amount of each class of certificates issued by the trust
to satisfy U.S. risk retention rules.
Fay Servicing, LLC (Fay) and CitiMortgage will be the servicers on
the deal, servicing 60.5% and 39.5% of the loans (by UPB)
respectively. There is no master servicer in this transaction.
CGMRC as Advancing Party for Fay, and CitiMortgage will be
responsible for making P&I advances. U.S. Bank Trust Company,
National Association (U.S. Bank Trust Company, long term issuer
rating'A1') will be the trust administrator and will act as the
backup advancing party, and U.S. Bank Trust National Association
will be the trustee.
One third-party review (TPR) firm, AMC Diligence, LLC, verified the
accuracy of the loan level information that Moody's received from
the sponsor. The firm conducted detailed credit, property
valuation, data accuracy and compliance reviews on 100% of the
mortgage loans in the collateral pool. The TPR results indicate
that there are no material compliance, credit, valuation or data
issues defects
Moody's analysed the underlying mortgage loans using Moody's
Individual Loan Analysis (MILAN) model.
In this transaction, the Class A-11 and A-11-IO coupons are indexed
to SOFR. However, based on the transaction's structure, the
particular choice of benchmark has no credit impact. First,
interest payments to the notes, including the floating rate notes,
are subject to the net WAC cap, which prevents the floating rate
notes from incurring interest shortfalls as a result of increases
in the benchmark index above the fixed rates at which the assets
bear interest. Second, the shifting-interest structure pays all
interest generated on the assets to the bonds and does not provide
for any excess spread.
Complete rating actions are as follows:
Issuer: Citigroup Mortgage Loan Trust 2022-INV2
Cl. A-1, Assigned (P)Aaa (sf)
Cl. A-1-IO*, Assigned (P)Aaa (sf)
Cl. A-1-IOX*, Assigned (P)Aaa (sf)
Cl. A-1A, Assigned (P)Aaa (sf)
Cl. A-1-IOW*, Assigned (P)Aaa (sf)
Cl. A-1W, Assigned (P)Aaa (sf)
Cl. A-2, Assigned (P)Aaa (sf)
Cl. A-2-IO*, Assigned (P)Aaa (sf)
Cl. A-2-IOX*, Assigned (P)Aaa (sf)
Cl. A-2A, Assigned (P)Aaa (sf)
Cl. A-2-IOW*, Assigned (P)Aaa (sf)
Cl. A-2W, Assigned (P)Aaa (sf)
Cl. A-3, Assigned (P)Aaa (sf)
Cl. A-3-IO*, Assigned (P)Aaa (sf)
Cl. A-3-IOX*, Assigned (P)Aaa (sf)
Cl. A-3A, Assigned (P)Aaa (sf)
Cl. A-3-IOW*, Assigned (P)Aaa (sf)
Cl. A-3W, Assigned (P)Aaa (sf)
Cl. A-4, Assigned (P)Aa1 (sf)
Cl. A-4-IO*, Assigned (P)Aa1 (sf)
Cl. A-4-IOX*, Assigned (P)Aa1 (sf)
Cl. A-4A, Assigned (P)Aa1 (sf)
Cl. A-4-IOW*, Assigned (P)Aa1 (sf)
Cl. A-4W, Assigned (P)Aa1 (sf)
Cl. A-5, Assigned (P)Aaa (sf)
Cl. A-5-IO*, Assigned (P)Aa1 (sf)
Cl. A-5-IOX*, Assigned (P)Aa1 (sf)
Cl. A-5A, Assigned (P)Aaa (sf)
Cl. A-5-IOW*, Assigned (P)Aa1 (sf)
Cl. A-5W, Assigned (P)Aaa (sf)
Cl. A-6, Assigned (P)Aaa (sf)
Cl. A-6-IO*, Assigned (P)Aaa (sf)
Cl. A-6-IOX*, Assigned (P)Aaa (sf)
Cl. A-6A, Assigned (P)Aaa (sf)
Cl. A-6-IOW*, Assigned (P)Aaa (sf)
Cl. A-6W, Assigned (P)Aaa (sf)
Cl. A-7, Assigned (P)Aaa (sf)
Cl. A-7-IO*, Assigned (P)Aaa (sf)
Cl. A-7-IOX*, Assigned (P)Aaa (sf)
Cl. A-7A, Assigned (P)Aaa (sf)
Cl. A-7-IOW*, Assigned (P)Aaa (sf)
Cl. A-7W, Assigned (P)Aaa (sf)
Cl. A-8, Assigned (P)Aaa (sf)
Cl. A-8-IO*, Assigned (P)Aaa (sf)
Cl. A-8-IOX*, Assigned (P)Aaa (sf)
Cl. A-8A, Assigned (P)Aaa (sf)
Cl. A-8-IOW*, Assigned (P)Aaa (sf)
Cl. A-8W, Assigned (P)Aaa (sf)
Cl. A-11, Assigned (P)Aaa (sf)
Cl. A-11-IO*, Assigned (P)Aaa (sf)
Cl. A-12, Assigned (P)Aaa (sf)
Cl. B-1, Assigned (P)Aa3 (sf)
Cl. B-1-IO*, Assigned (P)Aa3 (sf)
Cl. B-1-IOX*, Assigned (P)Aa3 (sf)
Cl. B-1-IOW*, Assigned (P)Aa3 (sf)
Cl. B-1W, Assigned (P)Aa3 (sf)
Cl. B-2, Assigned (P)A3 (sf)
Cl. B-2-IO*, Assigned (P)A3 (sf)
Cl. B-2-IOX*, Assigned (P)A3 (sf)
Cl. B-2-IOW*, Assigned (P)A3 (sf)
Cl. B-2W, Assigned (P)A3 (sf)
Cl. B-3, Assigned (P)Baa3 (sf)
Cl. B-3-IO*, Assigned (P)Baa3 (sf)
Cl. B-3-IOX*, Assigned (P)Baa3 (sf)
Cl. B-3-IOW*, Assigned (P)Baa3 (sf)
Cl. B-3W, Assigned (P)Baa3 (sf)
Cl. B-4, Assigned (P)Ba3 (sf)
Cl. B-5, Assigned (P)B3 (sf)
*Reflects Interest Only Classes
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected loss for this pool in a baseline scenario-mean is
0.94%, in a baseline scenario-median is 0.67%, and reaches 6.40% at
a stress level consistent with Moody's Aaa ratings.
Moody's base its ratings on the certificates on the credit quality
of the mortgage loans, the structural features of the transaction,
Moody's assessments of the origination quality and servicing
arrangement, the strength of the TPR and the R&W framework of the
transaction.
Collateral Description
As of the cut-off date, the mortgage loans will consist of 1,364
conforming mortgage loans with an aggregate stated principal
balance of approximately $473,970,311. The mortgage loans will
consist of conventional, fixed-rate, fully amortizing mortgage
loans, which will have original terms to maturity of up to 30
years. All of the mortgage loans will be secured by first liens on
single-or two-to-four family residential properties, planned unit
developments, Multi-Family, condominiums, or townhouse. All loans
are current as of the cut-off date. Overall, the credit quality of
the mortgage loans backing this transaction is in-line with
recently issued prime jumbo transactions Moody's have rated, with
average length of employment of 9.0 years, primary borrower wage
income and all borrower wage income of $10,508 and $12,714,
respectively. Furthermore, the average liquid/cash reserves is
$252,441 with approximately 83.5% of borrowers by UPB have more
than 24 months of liquid/cash reserves. The average monthly
residual income is approximately $13,167.
The pool has clean pay history and weighted average (WA) seasoning
of approximately 7.5 months. All mortgage loans are current as of
the cut-off date. The weighted average (WA) FICO for the aggregate
pool is 771 with a WA original LTV of 64.1% and WA original CLTV of
64.1%.
Approximately 4.6% of the mortgage loans (by UPB) are "Appraisal
Waiver" (AW) loans, whereby the sponsor obtained an AW for each
such mortgage loan from Fannie Mae or Freddie Mac through their
respective programs. In each case, neither Fannie Mae nor Freddie
Mac required an appraisal of the related mortgaged property as a
condition of approving the related mortgage loan for purchase by
Fannie Mae or Freddie Mac, as applicable.
Aggregation and Origination Quality
Citigroup Global Markets Realty Corp. (CGMRC) aggregated 100% of
the pool. Based on the available information related to CGMRC's
valuation and risk management practices, the 100% TPR, and the
transparent R&W framework in this transaction, Moody's did not make
any adjustments to Moody's losses based on its review of CGMRC's
aggregation quality.
The mortgage loan seller acquired approximately 39.5%, 23.2% and
21.7% of the loans (by UPB) from CitiMortgage, CMG and Homepoint
(the initial sellers). No other seller or affiliated group of
sellers sold more than 10% of the mortgage loans in the aggregate.
Moody's consider CitiMortgage and CMG to have adequate origination
quality of conforming mortgages. As a result, Moody's did not make
any adjustments to Moody's base case and Aaa stress loss
assumptions based on Moody's review of the aforementioned
originator's loan performance and origination practices. Moody's
maintain a higher base case and Aaa loss assumption for loans
originated by Homepoint due to worse performance than average GSE
investor loans, and lack of strong controls and uneven production
quality.
Servicing Arrangement
Moody's consider the overall servicing arrangement for this pool as
adequate, and as a result Moody's did not make any adjustments to
Moody's base case and Aaa stress loss assumptions.
Fay Servicing (Fay) and CitiMortgage (subserviced by Cenlar FSB )
will be the servicers on the deal, servicing 60.5% and 39.5% (by
loan balance) of the loans respectively. There is no master
servicer for this transaction. However did not apply any adjustment
to Moody's expected losses for the lack of master servicer due to
the following: (i) Cenlar has acted as sub-servicer for
CitiMortgage since 2018, and CitiMortgage has satisfactory
sub-servicing oversight policy and process in place (ii) Fay and
Cenlar FSB are experienced servicers (iii) The complexity of the
loan product is relatively low, reducing the complexity of
servicing and reporting; and (iv) U.S. Bank Trust Company, as the
trust administrator, will be responsible for aggregating the
reports from the servicers and reporting to investors, and
appointing a replacement servicer at the direction of the
controlling holder.
CMI will be responsible for P&I advances for loans they service,
and CGMRC, as the advancing party, will be responsible for making
P&I advances for Fay. U.S. Bank Trust Company, N.A. (U.S. Bank
Trust Company, long term issuer rating A1), as the trust
administrator will act as the backup to the advancing party. U.S.
Bank Trust National Association will act as the trustee.
Third-Party Review
The transaction benefits from a TPR on 100% of the loans for
regulatory compliance, credit and property valuation. The due
diligence results confirm compliance with the applicable
underwriting guidelines for the vast majority of loans, no material
regulatory compliance issues. The loans that had exceptions to the
applicable underwriting guidelines had significant compensating
factors that were documented.
Representations & Warranties
An effective R&W framework protects a transaction against the risk
of loss from fraudulent or defective loans. Moody's assessed CMLTI
2022-INV2's R&W framework for this transaction as adequate,
consistent with that of other private label transactions for which
the breach review process is thorough, transparent and objective,
and the costs and manner of review are clearly outlined at
issuance.
The transaction requires mandatory independent reviews of loans
that become 120 days delinquent (other than certain loans in FEMA
disaster areas and those in forbearance as a result of a pandemic
or national disaster) and those that liquidate at a loss to
determine if any of the R&Ws are breached. The R&Ws are
comprehensive and the R&W provider is CGMRC, an affiliate of
Citigroup Inc. (rated A3). The R&W provider will be obligated to
cure or repurchase loans found to have material breaches of R&Ws,
or pay for any loss if that loan was liquidated.
Transaction Structure
CMLTI 2022-INV2 has one pool with a shifting interest structure
that benefits from a subordination floor. Funds collected,
including principal, are first used to make interest payments and
then principal payments to the senior bonds, and then interest and
principal payments to each subordinate bond. As in all transactions
with shifting interest structures, the senior bonds benefit from a
cash flow waterfall that allocates all prepayments to the senior
bond for a specified period of time, and increasing amounts of
prepayments to the subordinate bonds thereafter, but only if loan
performance satisfies delinquency and loss tests.
Tail Risk & Subordination Floor
The transaction cash flows follow a shifting interest structure
that allows subordinated bonds to receive principal payments under
certain defined scenarios. Because a shifting interest structure
allows subordinated bonds to pay down over time as the loan pool
balance declines, senior bonds are exposed to eroding credit
enhancement over time, and increased performance volatility as a
result. To mitigate this risk, the transaction provides for a
senior subordination floor of 1.00% of the cut-off date pool
balance, and as subordination lock-out amount of 1.00% of the
cut-off date pool balance. The floors are consistent with the
credit neutral floors for the assigned ratings according to Moody's
methodology.
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 rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in February 2022.
CITIGROUP MORTGAGE 2022-INV2: Moody's Gives B3 Rating to B-5 Certs
------------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to 68
classes of residential mortgage-backed securities (RMBS) issued by
Citigroup Mortgage Loan Trust (CMLTI) 2022-INV2. The ratings range
from Aaa (sf) to B3 (sf).
CMLTI 2022-INV2 securitization is backed by a pool of prime
conforming, investment property mortgage loans acquired by
Citigroup Global Markets Realty Corp. (CGMRC), the sponsor of this
transaction. CGMRC acquired the loans in the pool from five initial
sellers. Approximately 39.5%, 23.2% and 21.7% of the mortgage loans
(by UPB) were acquired by the mortgage loan sellers from
CitiMortgage, Inc ("CitiMortgage"), CMG Mortgage, Inc. d/b/a CMG
Financial ("CMG") and Home Point Financial Corporation
("Homepoint") respectively. No other seller or affiliated group of
sellers sold more than 10% of the mortgage loans in the aggregate.
This deal represents the second CMLTI securitization of prime,
conforming residential mortgage loans in 2022 and the twelfth rated
issue from the shelf since its inception in 2019. Approximately
97.8% of the loans (by UPB) are underwritten in accordance with
Freddie Mac or Fannie Mae guidelines, which take into
consideration, among other factors, the income, assets, employment
and credit score of the borrower as well as loan-to-value (LTV).
These loans were run through one of the government sponsored
enterprises' (GSE) automated underwriting systems (AUS) and
received an "Approve" or "Accept" recommendation. Each mortgage
loan is either 1) an extension of credit primarily for a business
purpose and is not a "covered transaction" as defined in Section
1026.43(b)(1) of Regulation Z, or 2) for purposes of the ATR Rules,
relies on the exception for eligible loan contained in 12 C.F.R.
1026.43(e)(4) (ie, the "QM patch"). As of the closing date, the
sponsor or a majority- owned affiliate of the sponsor will retain
at least 5% of the initial certificate principal balance or
notional amount of each class of certificates issued by the trust
to satisfy U.S. risk retention rules.
Fay Servicing, LLC (Fay) and CitiMortgage will be the servicers on
the deal, servicing 60.5% and 39.5% of the loans (by UPB)
respectively. There is no master servicer in this transaction.
CGMRC as Advancing Party for Fay, and CitiMortgage will be
responsible for making P&I advances. U.S. Bank Trust Company,
National Association (U.S. Bank Trust Company, long term issuer
rating' A1') will be the trust administrator and will act as the
backup advancing party, and U.S. Bank Trust National Association
will be the trustee.
One third-party review (TPR) firm, AMC Diligence, LLC, verified the
accuracy of the loan level information that Moody's received from
the sponsor. The firm conducted detailed credit, property
valuation, data accuracy and compliance reviews on 100% of the
mortgage loans in the collateral pool. The TPR results indicate
that there are no material compliance, credit, valuation or data
issues defects
Moody's analysed the underlying mortgage loans using Moody's
Individual Loan Analysis (MILAN) model.
In this transaction, the Class A-11 and A-11-IO coupons are indexed
to SOFR. However, based on the transaction's structure, the
particular choice of benchmark has no credit impact. First,
interest payments to the notes, including the floating rate notes,
are subject to the net WAC cap, which prevents the floating rate
notes from incurring interest shortfalls as a result of increases
in the benchmark index above the fixed rates at which the assets
bear interest. Second, the shifting-interest structure pays all
interest generated on the assets to the bonds and does not provide
for any excess spread.
The complete rating action are as follows.
Issuer: Citigroup Mortgage Loan Trust 2022-INV2
Cl. A-1, Definitive Rating Assigned Aaa (sf)
CI. A-1-IO*, Definitive Rating Assigned Aaa (sf)
CI. A-1-IOX*, Definitive Rating Assigned Aaa (sf)
CI. A-1A, Definitive Rating Assigned Aaa (sf)
CI. A-1-IOW*, Definitive Rating Assigned Aaa (sf)
CI. A-1W, Definitive Rating Assigned Aaa (sf)
CI. A-2, Definitive Rating Assigned Aaa (sf)
CI. A-2-IO*, Definitive Rating Assigned Aaa (sf)
CI. A-2-IOX*, Definitive Rating Assigned Aaa (sf)
CI. A-2A, Definitive Rating Assigned Aaa (sf)
CI. A-2-IOW*, Definitive Rating Assigned Aaa (sf)
CI. A-2W, Definitive Rating Assigned Aaa (sf)
CI. A-3, Definitive Rating Assigned Aaa (sf)
CI. A-3-IO*, Definitive Rating Assigned Aaa (sf)
CI. A-3-IOX*, Definitive Rating Assigned Aaa (sf)
CI. A-3A, Definitive Rating Assigned Aaa (sf)
CI. A-3-IOW*, Definitive Rating Assigned Aaa (sf)
CI. A-3W, Definitive Rating Assigned Aaa (sf)
CI. A-4, Definitive Rating Assigned Aa1 (sf)
CI. A-4-IO*, Definitive Rating Assigned Aa1 (sf)
CI. A-4-IOX*, Definitive Rating Assigned Aa1 (sf)
CI. A-4A, Definitive Rating Assigned Aa1 (sf)
CI. A-4-IOW*, Definitive Rating Assigned Aa1 (sf)
CI. A-4W, Definitive Rating Assigned Aa1 (sf)
CI. A-5, Definitive Rating Assigned Aaa (sf)
CI. A-5-IO*, Definitive Rating Assigned Aa1 (sf)
CI. A-5-IOX*, Definitive Rating Assigned Aa1 (sf)
CI. A-5A, Definitive Rating Assigned Aaa (sf)
CI. A-5-IOW*, Definitive Rating Assigned Aa1 (sf)
CI. A-5W, Definitive Rating Assigned Aaa (sf)
CI. A-6, Definitive Rating Assigned Aaa (sf)
CI. A-6-IO*, Definitive Rating Assigned Aaa (sf)
CI. A-6-IOX*, Definitive Rating Assigned Aaa (sf)
CI. A-6A, Definitive Rating Assigned Aaa (sf)
CI. A-6-IOW*, Definitive Rating Assigned Aaa (sf)
CI. A-6W, Definitive Rating Assigned Aaa (sf)
CI. A-7, Definitive Rating Assigned Aaa (sf)
CI. A-7-IO*, Definitive Rating Assigned Aaa (sf)
CI. A-7-IOX*, Definitive Rating Assigned Aaa (sf)
CI. A-7A, Definitive Rating Assigned Aaa (sf)
CI. A-7-IOW*, Definitive Rating Assigned Aaa (sf)
CI. A-7W, Definitive Rating Assigned Aaa (sf)
CI. A-8, Definitive Rating Assigned Aaa (sf)
CI. A-8-IO*, Definitive Rating Assigned Aaa (sf)
CI. A-8-IOX*, Definitive Rating Assigned Aaa (sf)
CI. A-8A, Definitive Rating Assigned Aaa (sf)
CI. A-8-IOW*, Definitive Rating Assigned Aaa (sf)
CI. A-8W, Definitive Rating Assigned Aaa (sf)
CI. A-11, Definitive Rating Assigned Aaa (sf)
CI. A-11-IO*, Definitive Rating Assigned Aaa (sf)
CI. A-12, Definitive Rating Assigned Aaa (sf)
CI. B-1, Definitive Rating Assigned Aa3 (sf)
CI. B-1-IO*, Definitive Rating Assigned Aa3 (sf)
CI. B-1-IOX*, Definitive Rating Assigned Aa3 (sf)
CI. B-1-IOW*, Definitive Rating Assigned Aa3 (sf)
CI. B-1W, Definitive Rating Assigned Aa3 (sf)
CI. B-2, Definitive Rating Assigned A3 (sf)
CI. B-2-IO*, Definitive Rating Assigned A3 (sf)
CI. B-2-IOX*, Definitive Rating Assigned A3 (sf)
CI. B-2-IOW*, Definitive Rating Assigned A3 (sf)
CI. B-2W, Definitive Rating Assigned A3 (sf)
CI. B-3, Definitive Rating Assigned Baa3 (sf)
CI. B-3-IO*, Definitive Rating Assigned Baa3 (sf)
CI. B-3-IOX*, Definitive Rating Assigned Baa3 (sf)
CI. B-3-IOW*, Definitive Rating Assigned Baa3 (sf)
CI. B-3W, Definitive Rating Assigned Baa3 (sf)
CI. B-4, Definitive Rating Assigned Ba3 (sf)
CI. B-5, Definitive Rating Assigned B3 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected loss for this pool in a baseline scenario-mean is
0.94%, in a baseline scenario-median is 0.67%, and reaches 6.40% at
a stress level consistent with Moody's Aaa ratings.
Moody's base its ratings on the certificates on the credit quality
of the mortgage loans, the structural features of the transaction,
Moody's assessments of the origination quality and servicing
arrangement, the strength of the TPR and the R&W framework of the
transaction.
Collateral Description
As of the cut-off date, the mortgage loans will consist of 1,364
conforming mortgage loans with an aggregate stated principal
balance of approximately $473,970,311. The mortgage loans will
consist of conventional, fixed-rate, fully amortizing mortgage
loans, which will have original terms to maturity of up to 30
years. All of the mortgage loans will be secured by first liens on
single-or two-to-four family residential properties, planned unit
developments, Multi-Family, condominiums, or townhouse. All loans
are current as of the cut-off date. Overall, the credit quality of
the mortgage loans backing this transaction is in-line with
recently issued prime jumbo transactions Moody's have rated, with
average length of employment of 9.0 years, primary borrower wage
income and all borrower wage income of $10,508 and $12,714,
respectively. Furthermore, the average liquid/cash reserves is
$252,441 with approximately 83.5% of borrowers by UPB have more
than 24 months of liquid/cash reserves. The average monthly
residual income is approximately $13,167.
The pool has clean pay history and weighted average (WA) seasoning
of approximately 7.5 months. All mortgage loans are current as of
the cut-off date. The weighted average (WA) FICO for the aggregate
pool is 771 with a WA original LTV of 64.1% and WA original CLTV of
64.1%.
Approximately 4.6% of the mortgage loans (by UPB) are "Appraisal
Waiver" (AW) loans, whereby the sponsor obtained an AW for each
such mortgage loan from Fannie Mae or Freddie Mac through their
respective programs. In each case, neither Fannie Mae nor Freddie
Mac required an appraisal of the related mortgaged property as a
condition of approving the related mortgage loan for purchase by
Fannie Mae or Freddie Mac, as applicable.
Aggregation and Origination Quality
Citigroup Global Markets Realty Corp. (CGMRC) aggregated 100% of
the pool. Based on the available information related to CGMRC's
valuation and risk management practices, the 100% TPR, and the
transparent R&W framework in this transaction, Moody's did not make
any adjustments to Moody's losses based on Moody's review of
CGMRC's aggregation quality.
The mortgage loan seller acquired approximately 39.5%, 23.2% and
21.7% of the loans (by UPB) from CitiMortgage, CMG and Homepoint
(the initial sellers). No other seller or affiliated group of
sellers sold more than 10% of the mortgage loans in the aggregate.
Moody's consider CitiMortgage and CMG to have adequate origination
quality of conforming mortgages. As a result, Moody's did not make
any adjustments to Moody's base case and Aaa stress loss
assumptions based on Moody's review of the aforementioned
originator's loan performance and origination practices. Moody's
maintain a higher base case and Aaa loss assumption for loans
originated by Homepoint due to worse performance than average GSE
investor loans, and lack of strong controls and uneven production
quality.
Servicing Arrangement
Moody's consider the overall servicing arrangement for this pool as
adequate, and as a result Moody's did not make any adjustments to
Moody's base case and Aaa stress loss assumptions.
Fay Servicing (Fay) and CitiMortgage (subserviced by Cenlar FSB )
will be the servicers on the deal, servicing 60.5% and 39.5% (by
loan balance) of the loans respectively. There is no master
servicer for this transaction. However did not apply any adjustment
to Moody's expected losses for the lack of master servicer due to
the following: (i) Cenlar has acted as sub-servicer for
CitiMortgage since 2018, and CitiMortgage has satisfactory
sub-servicing oversight policy and process in place (ii) Fay and
Cenlar FSB are experienced servicers (iii) The complexity of the
loan product is relatively low, reducing the complexity of
servicing and reporting; and (iv) U.S. Bank Trust Company, as the
trust administrator, will be responsible for aggregating the
reports from the servicers and reporting to investors, and
appointing a replacement servicer at the direction of the
controlling holder.
CMI will be responsible for P&I advances for loans they service,
and CGMRC, as the advancing party, will be responsible for making
P&I advances for Fay. U.S. Bank Trust Company, N.A. (U.S. Bank
Trust Company, long term issuer rating A1), as the trust
administrator will act as the backup to the advancing party. U.S.
Bank Trust National Association will act as the trustee.
Third-Party Review
The transaction benefits from a TPR on 100% of the loans for
regulatory compliance, credit and property valuation. The due
diligence results confirm compliance with the applicable
underwriting guidelines for the vast majority of loans, no material
regulatory compliance issues. The loans that had exceptions to the
applicable underwriting guidelines had significant compensating
factors that were documented.
Representations & Warranties
An effective R&W framework protects a transaction against the risk
of loss from fraudulent or defective loans. Moody's assessed CMLTI
2022-INV2's R&W framework for this transaction as adequate,
consistent with that of other private label transactions for which
the breach review process is thorough, transparent and objective,
and the costs and manner of review are clearly outlined at
issuance.
The transaction requires mandatory independent reviews of loans
that become 120 days delinquent (other than certain loans in FEMA
disaster areas and those in forbearance as a result of a pandemic
or national disaster) and those that liquidate at a loss to
determine if any of the R&Ws are breached. The R&Ws are
comprehensive and the R&W provider is CGMRC, an affiliate of
Citigroup Inc. (rated A3). The R&W provider will be obligated to
cure or repurchase loans found to have material breaches of R&Ws,
or pay for any loss if that loan was liquidated.
Transaction Structure
CMLTI 2022-INV2 has one pool with a shifting interest structure
that benefits from a subordination floor. Funds collected,
including principal, are first used to make interest payments and
then principal payments to the senior bonds, and then interest and
principal payments to each subordinate bond. As in all transactions
with shifting interest structures, the senior bonds benefit from a
cash flow waterfall that allocates all prepayments to the senior
bond for a specified period of time, and increasing amounts of
prepayments to the subordinate bonds thereafter, but only if loan
performance satisfies delinquency and loss tests.
Tail Risk & Subordination Floor
The transaction cash flows follow a shifting interest structure
that allows subordinated bonds to receive principal payments under
certain defined scenarios. Because a shifting interest structure
allows subordinated bonds to pay down over time as the loan pool
balance declines, senior bonds are exposed to eroding credit
enhancement over time, and increased performance volatility as a
result. To mitigate this risk, the transaction provides for a
senior subordination floor of 1.00% of the cut-off date pool
balance, and as subordination lock-out amount of 1.00% of the
cut-off date pool balance. The floors are consistent with the
credit neutral floors for the assigned ratings according to Moody's
methodology.
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 rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in February 2022.
COMM 2010-C1: Moody's Lowers Rating on Class G Debt to Caa2
-----------------------------------------------------------
Moody's Investors Service has downgraded the ratings on five
classes in COMM 2010-C1 Mortgage Trust, Commercial Mortgage
Pass-Through Certificates, Series 2010-C1 as follows:
Cl. D, Downgraded to Baa2 (sf); previously on Oct 20, 2020
Confirmed at A3 (sf)
Cl. E, Downgraded to Ba3 (sf); previously on Oct 20, 2020 Confirmed
at Ba1 (sf)
Cl. F, Downgraded to B3 (sf); previously on Oct 20, 2020 Confirmed
at B1 (sf)
Cl. G, Downgraded to Caa2 (sf); previously on Oct 20, 2020
Confirmed at B3 (sf)
Cl. XW-B*, Downgraded to B3 (sf); previously on Oct 20, 2020
Confirmed at B1 (sf)
* Reflects Interest Only Classes
RATINGS RATIONALE
The ratings on the P&I classes were downgraded due to the pool's
exposure to an enclosed retail property (the remaining loan in the
pool) that experienced recent declines in net operating income
(NOI) and was modified after failing to pay-off at its original
maturity date. The remaining loan is the Fashion Outlets of Niagara
Falls with an extended maturity date of October 2023. As a result
of the exposure to this loan, the remaining classes are at
increased risk of interest shortfalls and the potential for higher
expected losses if the performance of this enclosed retail property
continues to decline and/or it is unable to pay off at its extended
maturity date.
The rating on the IO Class (Cl. XW-B) was downgraded due to a
decline in the credit quality of its referenced classes. The IO
Class references all P&I classes including Cl. H, which is not
rated by Moody's.
The action has considered how the coronavirus pandemic has reshaped
United States' economic environment and the way its aftershocks
will continue to reverberate and influence the performance of CMBS.
Moody's expect the public health situation to improve as
vaccinations against COVID-19 increase and societies continue to
adapt to new protocols. Still, the exit from the pandemic will
likely be bumpy and unpredictable and economic prospects will
vary.
Moody's regard the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Moody's rating action reflects a base expected loss plus realized
loss of 2.5% of the original pooled balance, compared to 1.8% at
the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include 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, 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 rating all classes except
interest-only classes was "Large Loan and Single Asset/Single
Borrower Commercial Mortgage-Backed Securitizations Methodology"
published November 2021.
Moody's analysis incorporated a loss and recovery approach in
rating the P&I classes in this deal since the remaining loan in the
pool has been identified as a troubled loan. In this approach,
Moody's determines a probability of default for each specially
serviced and troubled loan that it expects will generate a loss and
estimates a loss given default based on a review of broker's
opinions of value (if available), other information from the
special servicer, available market data and Moody's internal data.
The loss given default for each loan also takes into consideration
repayment of servicer advances to date, estimated future advances
and closing costs. Translating the probability of default and loss
given default into an expected loss estimate, Moody's then applies
the aggregate loss from and troubled loans to the most junior
class(es) and the recovery as a pay down of principal to the most
senior class(es).
DEAL PERFORMANCE
As of the March 11, 2022 distribution date, the transaction's
aggregate certificate balance has decreased by 89% to $94.9 million
from $857 million at securitization. The certificates are
collateralized by one remaining mortgage loan.
Moody's has assumed a high default probability for the remaining
loan in the pool, the Fashion Outlets of Niagara Falls ($94.9
million – 100% of the pool), which is secured by an enclosed
fashion outlet center located in Niagara, New York. The property is
located approximately five miles east of Niagara Falls and the
Canadian border. The loan sponsor is Macerich, which purchased the
property in 2011 for $200 million and assumed the loan. As of June
2021, the property was 81% leased, compared to 92% as of March
2020. Property performance has deteriorated since 2018 and NOI
declined 28% from 2018 to 2020, driven primarily by a significant
decline in revenues. However, the loan has amortized or paid down
22% from securitization. The center has benefitted from its
proximity to the Canadian border and Canadian visitors account for
a significant portion of demand. The property was impacted
significantly by the coronavirus pandemic and the resulting
US-Canadian border closure to non-essential traffic. The loan
transferred to special servicing in July 2020 for imminent maturity
default. Due to the coronavirus's impact on the property and
broader retail market, the borrower failed to payoff at its
maturity date and a 3-year loan extension was implemented. The loan
was returned to the master servicer in March 2021.
COMM 2013-CCRE12: Moody's Cuts Rating on Cl. C Certificates to Ba3
------------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on three classes
and downgraded the ratings on five classes in COMM 2013-CCRE12
Mortgage Trust, Commercial Pass-Through Certificates as follows:
Cl. A-3, Affirmed Aaa (sf); previously on Nov 5, 2020 Affirmed Aaa
(sf)
Cl. A-4, Affirmed Aaa (sf); previously on Nov 5, 2020 Affirmed Aaa
(sf)
Cl. A-M, Downgraded to Aa2 (sf); previously on Nov 5, 2020 Affirmed
Aaa (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Nov 5, 2020 Affirmed Aaa
(sf)
Cl. B, Downgraded to Baa1 (sf); previously on Nov 5, 2020
Downgraded to A2 (sf)
Cl. C, Downgraded to Ba3 (sf); previously on Nov 5, 2020 Downgraded
to Ba1 (sf)
Cl. X-A*, Downgraded to Aa1 (sf); previously on Nov 5, 2020
Affirmed Aaa (sf)
Cl. PEZ**, Downgraded to Baa3 (sf); previously on Nov 5, 2020
Downgraded to Baa1 (sf)
* Reflects Interest Only Classes
** Reflects Exchangeable Classes
RATINGS RATIONALE
The ratings on three P&I classes were affirmed because the
transaction's key metrics, including Moody's loan-to-value (LTV)
ratio, Moody's stressed debt service coverage ratio (DSCR) and the
transaction's Herfindahl Index (Herf), are within acceptable
ranges.
The ratings on three P&I classes were downgraded due to higher
realized and anticipated losses from specially serviced and
troubled loans. Specially serviced loans make up 23% of the pool
and additional troubled loans have been identified comprising 7% of
the pool.
The rating on the IO Class (Cl. X-A) was downgraded due to a
decline in the credit quality of its referenced classes.
The rating on the exchangeable class (Cl. PEZ) was downgraded due
to a decline in the credit quality of its exchangeable classes.
The action has considered how the coronavirus pandemic has reshaped
United States' economic environment and the way its aftershocks
will continue to reverberate and influence the performance of CMBS.
Moody's expect the public health situation to improve as
vaccinations against COVID-19 increase and societies continue to
adapt to new protocols. Still, the exit from the pandemic will
likely be bumpy and unpredictable and economic prospects will
vary.
Moody's regard the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Moody's rating action reflects a base expected loss of 14.4% of the
current pooled balance, compared to 11.2% at Moody's last review.
Moody's base expected loss plus realized losses is now 13.2% of the
original pooled balance, compared to 10.2% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected. Additionally, significant
changes in the 5-year rolling average of 10-year US Treasury rates
will impact the magnitude of the interest rate adjustment and may
lead to future rating actions.
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 rating all classes except interest-only
classes and exchangeable classes were "US and Canadian
Conduit/Fusion Commercial Mortgage-Backed Securitizations
Methodology" published in November 2021.
DEAL PERFORMANCE
As of the March 11, 2022 distribution date, the transaction's
aggregate certificate balance has decreased by 22% to $928 million
from $1.97 billion at securitization. The certificates are
collateralized by 51 mortgage loans ranging in size from less than
1% to 15% of the pool, with the top ten loans (excluding
defeasance) constituting 60% of the pool. Sixteen loans,
constituting 23% of the pool, have defeased and are secured by US
government securities.
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 10, compared to a Herf of 13 at Moody's last
review.
Fifteen loans, constituting 29% 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.
Five loans have been liquidated from the pool, resulting in an
aggregate realized loss of $24 million (for an average loss
severity of 52%). Five loans, constituting 23% of the pool, are
currently in special servicing.
The largest specially serviced loan is the 175 West Jackson Loan
($138 million – 14.8% of the pool), which represents a pari-passu
portion of a $257 million mortgage loan. The loan is secured by a
Class A, 22-story office building totaling 1.45 million square feet
(SF) and located within the CBD of Chicago, Illinois. Property
performance has declined steadily since 2015, with occupancy
declining to 65% in 2021 from 86% in 2015, and net operating income
(NOI) has declined by 68% during that period. The loan previously
transferred to special servicing in March 2018 for imminent
monetary default and was subsequently assumed by Brookfield
Property Group as the new sponsor, in connection with the purchase
of the property for $305 million, and returned to the master
servicer in August 2018. In November 2021, the loan transferred to
special servicing again for imminent monetary default.
The second largest specially serviced loan is the Harbourside North
Loan ($35.6 million – 3.8% of the pool), which is secured by the
leasehold interest in a Class A office building in the Georgetown
submarket of Washington D.C. The property operates subject to
ground lease payments. Ground lease payments have historically
represented a high share of the property's expenses. The loan
transferred to the special servicer in July 2018 due to delinquent
payments and became REO in March 2019. Property performance had
declined in 2018 due to reduced occupancy and rental revenues.
Property revenues have since increased in 2020 but were more than
offset by an increase in operating expenses. The property was
appraised at $7.3 million in December 2020, a significant decline
from the securitization appraisal of $53.9 million.
The third largest specially serviced loan is the MAve Hotel Loan
($19.1 million – 2.1% of the pool), which is secured by an
independent limited-service 12-story boutique hotel with 2,200 SF
of ground floor retail space located at 27th and Madison Avenue in
New York, New York. The property operated as a homeless shelter for
three years with a month to month contract with the DHS to rent out
100% of the hotel. DHS left at the end of 2020. The loan
transferred to special servicing in April 2021 due to delinquent
payments and the hotel remains closed. The remaining five specially
serviced loans are secured by a mix of property types. Moody's
estimates an aggregate $106 million loss for the specially serviced
loans (49% expected loss on average).
Moody's has also assumed a high default probability for three
poorly performing loans, constituting 7% of the pool, and has
estimated an aggregate loss of $21 million (a 33% expected loss on
average) from these troubled loans. The largest troubled loan is
the Oglethorpe Mall Loan ($56.0 million – 6.0% of the pool),
which represents the fourth largest loan in the pool and is secured
by a regional mall located in Savannah, Georgia. At securitization
the mall included four anchor tenants, Macy's, JC Penney, Belk and
Sears. Both the Belk and Sears space were non-collateral. However,
in 2018 Sears vacated and the anchor space remains vacant. The
property's historical performance generally improved through 2016,
but NOI has since declined annually due to both lower rental
revenue, higher expenses, and recently the pandemic. The December
2020 NOI was 22% below 2018 and declined to below the property's
underwritten NOI. The property represents the dominant mall in the
greater area of Savannah however, it faces competition from the
Savannah Outlet Mall, approximately 15 miles southeast of the
subject. In-line sales (10,000 SF) in 2020 were $311 PSF compared
to $368 PSF in 2019 and $433 PSF at securitization. The loan has
now amortized 7% since securitization after an initial 5-year
interest only period. Due to the property's decline in performance,
Moody's has identified this as a troubled loan.
As of the March 11, 2022 remittance statement cumulative interest
shortfalls were $11.7 million. Moody's anticipates interest
shortfalls will continue because of the exposure to specially
serviced loans and/or modified loans. Interest shortfalls are
caused by special servicing fees, including workout and liquidation
fees, appraisal entitlement reductions (ASERs), loan modifications
and extraordinary trust expenses.
The credit risk of loans is determined primarily by two factors: 1)
Moody's assessment of the probability of default, which is largely
driven by each loan's DSCR, and 2) Moody's assessment of the
severity of loss upon a default, which is largely driven by each
loan's loan-to-value ratio, referred to as the Moody's LTV or MLTV.
As described in the CMBS methodology used to rate this transaction,
Moody's make various adjustments to the MLTV. Moody's adjust the
MLTV for each loan using a value that reflects capitalization (cap)
rates that are between Moody's sustainable cap rates and market cap
rates. Moody's also use an adjusted loan balance that reflects each
loan's amortization profile. The MLTV reported in this publication
reflects the MLTV before the adjustments described in the
methodology.
Moody's received full year 2020 operating results for 100% of the
pool, and full or partial year 2021 operating results for 85% of
the pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 86%, compared to 101% 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 10% to the most recently
available net operating income (NOI), excluding hotel properties
that had significantly depressed NOI in 2020. Moody's value
reflects a weighted average capitalization rate of 9.1%.
Moody's actual and stressed conduit DSCRs are 1.55X and 1.27X,
respectively, compared to 1.35X and 1.06X 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 25% of the pool balance. The
largest loan is the Miracle Mile Shops Loan ($138 million – 14.8%
of the pool), which represents a pari-passu portion of a $551
million mortgage loan. The loan is secured by a 450,000 SF regional
mall located on the Las Vegas Strip in Las Vegas, Nevada. The
collateral property is located at the base of the Planet Hollywood
Hotel and draws from non-traditional anchors, three performing arts
theaters and the Las Vegas Strip itself. The collateral was 89%
leased as of September 2021, compared to 98% leased as of December
2019. Moody's LTV and stressed DSCR are 91% and 0.92X,
respectively, compared to 93% and 0.92X at the last review.
The second largest loan is the 9 Northeastern Boulevard Loan ($48.6
million - 5.2% of the pool), which is secured by an
office/industrial property located in Salem, New Hampshire. The
property has been 100% occupied since 2015, compared to 93% at
securitization. The property has significant lease rollover over
the next two years. Moody's LTV and stressed DSCR are 88% and
1.16X, respectively, compared to 91% and 1.17X at the last review.
The third largest loan is the U-Haul Storage Portfolio Loan ($43.0
million - 4.6% of the pool), which is secured by 27 self-storage
properties located in various cities. Property performance has
improved dramatically since securitization. Occupancy has increased
to 98% as of September 2021, up from 90% in December 2020 and 77%
at securitization. Moody's LTV and stressed DSCR are 42% and 2.56X,
respectively, compared to 51% and 2.22X at the last review.
COMM 2013-CCRE9: Fitch Lowers Rating on Class D Debt to B-
----------------------------------------------------------
Fitch Ratings has downgraded the ratings for three classes and
affirmed the ratings for six classes of COMM 2013-CCRE9 Mortgage
Trust. Class B was assigned a Stable Outlook following the
downgrade.
DEBT RATING PRIOR
---- ------ -----
COMM 2013-CCRE9
A-4 12625UBF9 LT AAAsf Affirmed AAAsf
A-M 12625UAC7 LT AAAsf Affirmed AAAsf
A-SB 12625UBA0 LT AAAsf Affirmed AAAsf
B 12625UAE3 LT Asf Downgrade AA-sf
C 12625UAG8 LT BBBsf Downgrade A-sf
D 12625UAJ2 LT B-sf Downgrade BB-sf
E 12625UAL7 LT CCsf Affirmed CCsf
F 12625UAN3 LT Csf Affirmed Csf
X-A 12625UBC6 LT AAAsf Affirmed AAAsf
KEY RATING DRIVERS
Increased Loss Expectations: Loss expectations increased since the
last rating action primarily due to declining performance at
Northridge Mall and concerns about the loan's ability to refinance
as it approaches its 2023 maturity date. In addition, higher
expected losses were applied pool-wide to address the majority of
loans' maturities in 2Q and 3Q 2023. There are 15 Fitch Loans of
Concern (FLOCs; 28.6% of the pool), including four loans (10.9%) in
special servicing primarily due to declining performance from the
coronavirus pandemic.
Fitch's ratings assume a base case loss expectation of 11.3%. The
Negative Outlooks reflect the pool's 43.9% retail concentration,
which includes two regional malls (Northridge Mall and Valley Hills
Mall; 15.4%). The ratings address the potential for FLOCs,
including the malls, to be the last remaining loans in the pool.
The largest contributor to loss expectations is the specially
serviced loan Valley Hills Mall (6.8%). It is secured by 936,682-sf
regional mall (325,166-sf collateral) located in Hickory, NC. The
property is anchored by Belk, JCPenney and Dillard's, none of which
are part of the collateral. Former anchor tenant Sears closed in
2020. Occupancy declined to 74% at YE 2017 from 90% at YE 2016
following the loss of large tenants. Occupancy rebounded and has
remained in the low 80s since 2018. As of the December YE 2021 rent
roll collateral occupancy was 81%.
The loan transferred to special servicing in September 2020 due to
payment default. Fitch's loss expectations of 57.8% consider the
uncertainty of the property's ability to perform back in line with
prior historical levels. Fitch's expected losses are based on a
stress to the most recent potential sale price, which reflects an
implied cap rate of 24%. This is consistent with similar defaulted
mall properties and is in-line with the most recent appraisal that
Fitch received on the asset.
The second largest contributor to loss expectations, Northridge
Mall (8.6%), is secured by 1 million-sf enclosed regional mall
(587,484-sf collateral) located in Salinas, CA. The property is
anchored by JCPenney and non-collateral tenant Macy's. Additional
large non-collateral tenants include Century Theatres, Big Lots and
Big 5 Sporting Goods. Collateral occupancy declined to 77% as of
September 2021 compared to 98.4% at YE 2020. Servicer reported NOI
DSCR was 2.76x as of YTD Sept. 30, 2022 compared to 2.96x at YE
2020. Comparable in-line sales as of TTM Dec 2021 were $575 psf,
and total inline sales were $411psf. Fitch modeled a 23.8% loss
severity based on a 15% cap rate and an annualized September 2021
NOI.
The third largest contributor to loss expectations, North Oaks
(2.8%), is secured by a 448,740-sf power center located in Houston,
TX. The property is anchored by Hobby Lobby, Ross Dress for Less
and Big Lots. The property has been Real Estate Owned (REO) since
June 2021. Occupancy has been declining over the past several
years: 88% (YE 2016), 80% (YE 2017), 69% (YE 2018),72% (YE 2019)
and 58% (January 2022 rent roll). Fitch's loss expectations of
40.4% are based on a discount to the most recent appraisal value
and reflects an implied cap rate of 15%.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- An increase in pool-level losses from underperforming or
specially serviced loans.
-- Downgrades of the 'AAAsf' rated classes are not likely due to
their strong credit enhancement and upcoming loan maturities.
-- Downgrades of the 'Asf' rated class would occur should
expected losses for the pool increase substantially.
-- Downgrades of the 'BBBsf' rated class would occur if the
expected losses on the specially serviced loans become greater
than expected and/or should the sale of the Valley Hills Mall
not occur and performance worsens.
-- Downgrades of the 'B-sf' and below rated classes would occur
should additional loans transfer to special servicing,
certainty of losses increase or as losses are realized.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Stable to improved asset performance coupled with pay down
and/or defeasance.
-- Upgrades of 'Asf' rated class would only occur with
significant improvement in CE and/or defeasance and with the
stabilization of performance on the FLOCs, particularly the
regional malls and North Oaks. Classes would not be upgraded
above 'Asf' if there is likelihood for interest shortfalls.
-- An upgrade to the 'BBBsf' rated class is not likely as the
class is reliant on the malls to pay off.
-- An upgrade of the 'B-sf' rated class is not likely and would
only occur if the performance of the remaining pool is stable
and/or properties impacted by the coronavirus return to pre-
pandemic levels and there is sufficient CE to the class.
-- Upgrades to the 'Csf' and 'CCsf' categories are unlikely
absent significant performance improvement on the FLOCs an
substantially higher recoveries than expected on the specially
serviced loans.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
ESG CONSIDERATIONS
COMM 2013-CCRE9 has an ESG Relevance Score of '4' for Exposure to
Social Impacts due to sustained structural shifts in secular
preferences affecting consumer and occupancy trends. This has a
negative impact on the credit profile and is relevant to the
ratings in conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
COMM 2014-CCRE20: DBRS Lowers Class F Certs Rating to C
-------------------------------------------------------
DBRS, Inc. downgraded its ratings on four classes of Commercial
Mortgage Pass-Through Certificates, Series 2014-CCRE20 issued by
COMM 2014-CCRE20 Commercial Mortgage Trust as follows:
-- Class X-C to BBB (low) (sf) from BBB (sf)
-- Class D to BB (high) (sf) from BBB (low) (sf)
-- Class E to CCC (sf) from B (sf)
-- Class F to C (sf) from CCC (sf)
DBRS Morningstar confirmed its ratings on the remaining classes as
follows:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-M at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (sf)
-- Class X-B at A (sf)
-- Class C at A (low) (sf)
-- Class PEZ at A (low) (sf)
-- Class G at C (sf)
In addition, DBRS Morningstar discontinued its rating on Class X-D
as it references a class rated CCC (sf) or below. Class D continues
to carry a Negative trend, and Classes E, F, and G, have ratings
that do not carry trends. All other trends are Stable. As interest
shortfalls were repaid for Class E, DBRS Morningstar removed the
Interest in Arrears designation for that class; shortfalls remain
outstanding for Classes F and G, which continue to carry the
Interest in Arrears designation.
The downgrades and Negative trend generally reflect a variety of
factors, including the overall weakened performance of pivotal
loans within the pool since the last review, the liquidation of
three loans in 2021 that resulted in $33.7 million of losses to the
trust, and the increased likelihood of further losses to the trust
upon the resolution of two of the remaining specially serviced
loans, as further detailed below.
As of the January 2022 remittance, there has been collateral
reduction since issuance of 21.2%, with 53 of the original 64 loans
remaining in the pool. In addition to the paydown, the pool
benefits from defeasance, with 13 loans, representing 18.7% of the
current pool balance, fully defeased. There were 11 loans,
representing 21.0% of the current pool balance, on the servicer's
watchlist, including two loans in the top 10. Four loans,
representing 14.9% of the pool, are in special servicing, including
two top 10 loans that combine for 9.1% of the current pool balance
and are both secured by collateral now owned by the trust.
The largest specially serviced loan is Harwood Center (Prospectus
ID#4, 6.0% of the pool), secured by the fee-simple interest in a
high-rise office building in Dallas' downtown core. The sponsor's
troubles with this loan followed the downsizing of a major tenant
and the loan transferred to special servicing in May 2020, with a
foreclosure ultimately filed and the title to the property
transferred to the trust in November 2021. The most recent
appraisal on file is dated July 2021, with an as-is value of $78.0
million, a 37.1% decrease from the issuance appraised value of $124
million. Based on this updated value, a liquidation scenario with a
loss approaching $19.0 million (loss severity of approximately 34%)
was assumed in the analysis for this review.
Crowne Plaza Houston Katy Freeway (Prospectus ID#9, 3.1% of the
pool) is the third-largest specially serviced loan, secured by a
full-service hotel in Houston, approximately five miles north of
the Houston Galleria mall. The hotel's cash flow struggles preceded
the Coronavirus Disease (COVID-19) pandemic, which compounded those
issues, and the borrower ultimately walked away from the property,
with the trust taking title in June 2021 via a deed in lieu of
foreclosure. An updated appraisal completed in June 2021 valued the
property at $24.9 million, which represents a 48.2% decrease from
the issuance appraised value of $48.1 million, implying a current
loan-to-value ratio (LTV) of 116.4%. The liquidation scenario for
this loan assumed a loss of approximately $13.0 million (loss
severity of 45%) at resolution.
There is another top 10 loan in special servicing in the Beverly
Connection pari passu loan (Prospectus ID#7, 4.7% of the pool),
secured by an anchored retail property in Los Angeles. The loan has
been in special servicing since August 2020 and is severely
delinquent. The borrower initially cited cash flow difficulties
tied to the pandemic, but the servicer has reported that an
acceptable proposal for a loan modification has yet to be produced.
While the extended delinquency and the lack of movement on the
discussions regarding a loan modification are indicative of
increased risks, DBRS Morningstar notes that two appraisals
obtained by the special servicer since the 2020 transfer show an
as-is value that is only $18 million below the issuance figure of
$260 million, suggesting the as-is LTV remains generally healthy.
Notes: All figures are in U.S. dollars unless otherwise noted.
COMM 2015-CCRE24: Fitch Affirms CCC Rating on Class F Debt
----------------------------------------------------------
Fitch Ratings has affirmed 11 classes of Deutsche Bank Securities,
Inc.'s COMM 2015-CCRE24 Mortgage Trust (COMM 2015-CCRE24). Fitch
has also revised the Rating Outlook to Stable from Negative for
four classes.
DEBT RATING PRIOR
---- ------ -----
COMM 2015-CCRE24
A-4 12593JBE5 LT AAAsf Affirmed AAAsf
A-5 12593JBF2 LT AAAsf Affirmed AAAsf
A-M 12593JBH8 LT AAAsf Affirmed AAAsf
A-SB 12593JBC9 LT AAAsf Affirmed AAAsf
B 12593JBJ4 LT AA-sf Affirmed AA-sf
C 12593JBK1 LT A-sf Affirmed A-sf
D 12593JBL9 LT BBB-sf Affirmed BBB-sf
E 12593JAL0 LT B-sf Affirmed B-sf
F 12593JAN6 LT CCCsf Affirmed CCCsf
X-A 12593JBG0 LT AAAsf Affirmed AAAsf
X-C 12593JAC0 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Decreased Loss Expectations: Fitch's base case loss expectations
have decreased since Fitch's last rating action. The majority of
the pool has experienced better than expected performance in 2020
and/or 2021 during the pandemic. Fitch's loss expectations have
decreased for several Fitch Loans of Concern (FLOCs). Eight loans
(22.2% of the pool), including four (10.2%) in special servicing,
were designated FLOCs.
Fitch's current ratings incorporate a base case loss of 6.40%. The
Negative Outlook on class E reflects greater certainty of losses
for loans in Special Servicing. The revision to Stable Outlooks
reflects improved valuations and stabilization of several loans
that experienced pandemic related declines along with sufficient
credit enhancement (CE) and the expectation of paydown from
continued amortization.
Fitch Loans of Concern:
The largest contributor to loss is the Westin Portland (4.2%),
secured by a 205-unit full service hotel located in downtown
Portland, OR. The loan transferred to special servicing in June
2020 due to payment default and has remained delinquent since the
April 2020 payment. The Oregon foreclosure moratorium has been
lifted since Fitch's last rating action and the lender is now dual
tracking foreclosure as talks with the borrower continue. The
borrower has requested a loan modification and indicated that they
will not be able to make monthly debt service payments despite
previously indicating that they would begin making payments once
the moratorium was lifted.
The hotel, which no longer operates under the Westin flag,
underwent an eight-month renovation and re-opened in August 2017
under a new boutique name: The Dossier Hotel. Occupancy declined as
rooms were taken offline during construction, but never rebounded
to pre-renovation levels. Market conditions in Portland remain soft
due to new supply combined with the coronavirus pandemic.
This loan was a FLOC prior to the coronavirus outbreak and the
reduced foot traffic as a result of the pandemic has further
contributed to the property's performance challenges. The YE 2019
NOI debt service coverage ratio (DSCR) was 0.81x with an occupancy
of 77.8%, a decrease from the YE 2018 NOI DSCR of 1.02x and
occupancy of 80%. Updated performance information was requested but
not received. Fitch's analysis applied a haircut to a recent
appraisal value.
The largest FLOC is Eden Roc loan (7.5%), which is secured by a
631-key, full-service hotel in Miami Beach, FL. The property was
closed from March to early June 2020 due to the pandemic which
significantly impacted performance as the event space at the hotel
has historically attracted events and group bookings. The YE 2020
NOI declined 63% from YE 2019 NOI; however, performance metrics
reflect the property has begun to rebound in 2021.
The annualized June 2021 NOI is up 23% over the YE 2019 NOI. As of
YTD September 2020, occupancy, ADR and RevPAR were 36%, $294 and
$106, respectively, compared with 72.7%, $277 and $201 at YE 2019.
Fitch's analysis included a 26% stress to the YE 2019 NOI to
reflect the impact of the pandemic on performance.
The second largest FLOC, and the largest specially serviced loan,
is Palazzo Verdi (5.1%), secured by a 302,245 square foot office
building in Greenwood Village, CO. The former largest tenant which
occupied 72% of net rentable area vacated their space upon
expiration in October 2020. The loan transferred to the special
servicer in November 2020 due to monetary default.
In December 2021 the loan was assumed, paid down by $10 million and
reinstated. The loan is expected to transfer back to the master
servicer in the next couple months. Currently, the property is
approximately 25% occupied by two tenants. A prospective lease has
been signed for an additional 30% of NRA with the tenant scheduled
to take occupancy in July 2022 and rent beginning in January 2024.
Embassy Suites Denver Tech Center (2.28%) has been flagged as a
FLOC due to declining performance metrics, primarily attributable
to reduced travel related to the coronavirus pandemic. Performance
metrics as of YE 2021 have improved from YE 2020 but remain well
below pre-pandemic metrics. YE 2021 occupancy and net cash flow
(NCF) DSCR were 60% and 0.80x, respectively compared with YE 2020
occupancy of 35% and NCF DSCR of -0.08x and YE 2019 occupancy of
78% and NCF DSCR of 1.70x. Fitch's analysis included a 26% stress
to the YE 2019 NOI to reflect the impact of the pandemic on
performance.
Minimal Changes to Credit Enhancement: As of the March 2022
distribution date, the pool's aggregate principal balance was paid
down by 11.7% to $1.226 billion from $1.388 billion at issuance.
Nine loans (6.4% of the pool) are fully defeased. Since the last
rating action, one loan (issuance balance of $4.85 million) was
repaid in full prior to maturity. There have been no realized
losses since issuance.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- An increase in pool-level losses from underperforming or
specially serviced loans/assets. Downgrades to classes rated
'AAAsf' and 'AA-sf' while considered unlikely, may occur
should interest shortfalls affect these classes.
-- Downgrades to classes B, C and D are possible should
additional loans become FLOC's. Classes E and F may be
downgraded should loss expectations increase due to further
performance decline for the FLOCs or, should additional loans
transfer to special servicing.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Stable to improved asset performance, particularly on the
FLOCs, coupled with additional paydown and/or defeasance.
Upgrades to classes B and C would only occur with significant
improvement in credit enhancement and/or defeasance and with
the stabilization of performance on the FLOCs. Classes would
not be upgraded above 'Asf' if there is a likelihood of
interest shortfalls.
-- An upgrade of class D is not likely until the later years in
the transaction and only if performance of the FLOCs have
stabilized and the performance of the remaining pool is
stable. Classes E and F are unlikely to be upgraded absent
significant performance improvement for the FLOCs and higher
recoveries than expected on the specially serviced loans.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
COMM 2015-LC21: DBRS Lowers Class X-D Certs Rating to BB(low)
-------------------------------------------------------------
DBRS, Inc. downgraded two classes of the Commercial Mortgage
Pass-Through Certificates, Series 2015-LC21 issued by COMM
2015-LC21 Mortgage Trust as follows:
-- Class E to B (high) (sf) from BB (low) (sf)
-- Class X-D to BB (low) (sf) from BB (sf)
DBRS Morningstar also confirmed the remaining classes as follows:
-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-M at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class X-B at A (sf)
-- Class C at A (low) (sf)
-- Class X-C at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class F at CCC (sf)
DBRS Morningstar changed the trends on Classes D, E, and X-D to
Negative from Stable. The trends on all other classes are Stable.
The downgrades and Negative trends are reflective of a loss
incurred by the trust since the last rating action, as well as
increased projected losses for several specially serviced loans. In
May 2021, the $17.3 million 350 East Fordham Road (Prospectus
ID#28, 1.7% of pool) was liquidated from the pool at a loss of $8.6
million. Although the loan was resolved with a greater than
expected loss, the loss was still absorbed by the non-rated Class
G.
As of the January 2022 remittance, 93 of the original 104 loans
remain in the pool, with a collateral reduction of 21.1% since
issuance as a result of loan amortization, loan repayments, and the
liquidation of one loan. Four loans, representing 4.0% of the
current trust balance, have been fully defeased.
There are nine loans in special servicing (8.5% of the current pool
balance). Since DBRS Morningstar's last rating action, the $17.1
million Honeywell Building loan (Prospectus ID#27; 1.6% of pool),
which is secured by a 156,784-square-foot (sf) Class B office
property within the Westchase submarket of downtown Houston,
transferred to special servicing due to imminent monetary default.
Occupancy decreased to the current level of 7% after the property's
former largest tenant, Honeywell, representing 84.8% the net
rentable area, vacated upon its lease expiration. The special
servicer is reportedly pursuing foreclosure.
The largest loan in special servicing, Anchorage Business Park
(Prospectus ID#11, 2.1% of the pool), is secured by a 176,799 sf
Class C office property in Anchorage, Alaska. Performance of the
underlying property has declined, as has occupancy, which decreased
to its current level of 59.4% as of year-end 2021. The asset was
foreclosed in October 2021 and is now real estate owned. A June
2021 appraisal valued the property at $14.5 million, which reflects
a 51.1% decrease from the at-issuance appraisal of $33.8 million.
DBRS Morningstar's stressed valuation is indicative of a loss
severity in excess of 50% upon liquidation.
There are 24 loans, representing 31.0% of the pool, on the
servicer's watchlist. The largest watchlist loan, Courtyard by
Marriott Pasadena (Prospectus ID#2, 6.3% of the pool), is secured
by a 314-room limited-service hotel in Pasadena, California. The
loan was transferred to the special servicing in April 2020 due to
Coronavirus Disease (COVID-19) pandemic-related default and was
later returned to the master servicer as a corrected loan following
the approval of a forbearance agreement.
The pool's second-largest loan, 155 Mercer Street Pasadena
(Prospectus ID#4, 3.9% of the pool), is being monitored on the
servicer's watchlist for vacancy concerns after the property's
single tenant, Dolce & Gabbana, vacated prior its November 2022
lease expiration. The loan is secured by a 14,589 sf single tenant
retail property within the SoHo submarket of Lower Manhattan. The
previous tenant, which continues to pay rent through its lease
expiration, vacated during the initial shut down of the pandemic.
Notes: All figures are in U.S. dollars unless otherwise noted.
DEEPHAVEN RESIDENTIAL 2022-2: S&P Assigns 'B-' Rating on B-2 Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to Deephaven Residential
Mortgage Trust 2022-2's mortgage-backed pass-through notes series
2022-2.
The note issuance is an RMBS transaction backed by first-lien,
fixed- and adjustable-rate mortgage loans secured by single-family
residences, planned-unit developments, condominiums, two- to
four-family homes, and one townhouse. The pool consists of 587
loans backed by 609 properties that are primarily non-qualified
mortgage loans and ability-to-repay exempt loans; of the 587 loans,
seven are cross collateralized, which were broken down to their
constituents at the property level (making up 29 properties).
S&P said, "Since we assigned the preliminary ratings and published
our presale report on March 23, 2022, the sponsor (RCF II Loan
Acquisition L.P.) decreased the size of the class M-1 and B-1 notes
and increased the size of the class B-3 notes, resulting in an
increase in the credit enhancement of the class M-1, B-1, and B-2
notes. The re-sizing did not affect our ratings, which are the same
as the preliminary ratings."
The ratings reflect S&P's view of:
-- The pool's collateral composition;
-- The credit enhancement provided for this transaction;
-- The transaction's associated structural mechanics;
-- The mortgage aggregator, Deephaven Mortgage LLC;
-- The transaction's representation and warranty framework;
-- The geographic concentration;
-- The 100% due diligence results consistent with represented loan
characteristics; and
-- The impact the COVID-19 pandemic will likely have on the
performance of the mortgage borrowers in the pool and liquidity
available in the transaction.
Ratings Assigned
Deephaven Residential Mortgage Trust 2022-2
Class A-1, $182,322,000: AAA (sf)
Class A-2, $23,583,000: AA (sf)
Class A-3, $37,880,000: A (sf)
Class M-1, $16,360,000: BBB (sf)
Class B-1, $12,823,000: BB (sf)
Class B-2, $12,528,000: B- (sf)
Class B-3, $9,286,473: NR
Class XS, Notional(i): NR
Class A-IO-S, Notional(i): NR
Class R: NR
(i)Notional amount equals the loans' aggregate stated principal
balance, initially, $294,782,473.
NR--Not rated.
DT AUTO 2022-1: DBRS Gives Prov. BB Rating on Class E Notes
-----------------------------------------------------------
DBRS, Inc. assigned provisional ratings to the following classes of
notes (the Notes) to be issued by DT Auto Owner Trust 2022-1 (the
Issuer or DTAOT 2022-1):
-- $218,770,000 Class A Notes at AAA (sf)
-- $26,810,000 Class B Notes at AA (sf)
-- $54,260,000 Class C Notes at A (sf)
-- $67,350,000 Class D Notes at BBB (sf)
-- $29,170,000 Class E Notes at BB (sf)
The provisional ratings are based on DBRS Morningstar's review of
the following analytical considerations:
(1) Transaction capital structure, proposed ratings, and form and
sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization,
subordination, amounts held in the reserve fund, and excess spread.
Credit enhancement levels are sufficient to support the DBRS
Morningstar-projected cumulative net loss (CNL) assumption under
various stress scenarios.
-- The ability of the transaction to withstand stressed cash flow
assumptions and repay investors according to the terms in which
they have invested. For this transaction, the ratings address the
payment of timely interest on a monthly basis and principal by the
legal final maturity date.
(2) DTAOT 2022-1 provides for Classes A, B, C, D, and E coverage
multiples that are slightly below the DBRS Morningstar range of
multiples set forth in the criteria for this asset class. DBRS
Morningstar believes that this is warranted, given the magnitude of
expected loss, company history, and structural features of the
transaction.
(3) The DBRS Morningstar CNL assumption is 25.15% based on the
expected pool composition.
(4) The transaction assumptions consider DBRS Morningstar's
baseline macroeconomic scenarios for rated sovereign economies,
available in its commentary "Baseline Macroeconomic Scenarios For
Rated Sovereigns December 2021 Update", published on December 9,
2021. These baseline macroeconomic scenarios replace DBRS
Morningstar's moderate and adverse pandemic scenarios, which were
first published in April 2020. The baseline macroeconomic scenarios
reflect the view that recent pandemic-related developments,
particularly the new omicron variant with subsequent restrictions,
combined with rising inflation pressures in some regions, may
dampen near-term growth expectations in coming months. However,
DBRS Morningstar expects the baseline projections will continue to
point to an ongoing, gradual recovery.
(5) The transaction parties' capabilities with regard to
originations, underwriting, and servicing.
(6) The quality and consistency of historical static pool data for
DriveTime originations and performance of the DriveTime auto loan
portfolio.
(7) The legal structure and presence of legal opinions that will
address the true sale of the assets to the Issuer, the
nonconsolidation 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 Morningstar Legal
Criteria for U.S. Structured Finance."
The 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
primarily on the sale and financing of vehicles to the subprime
market.
The rating on the Class A Notes reflects 50.50% of initial hard
credit enhancement provided by the subordinated Notes in the pool,
the reserve account (1.50%), and overcollateralization (7.60%). The
ratings on the Class B, C, D, and E Notes reflect 44.25%, 31.60%,
15.90%, and 9.10% of initial hard credit enhancement, respectively.
Additional credit support may be provided from excess spread
available in the structure.
Notes: All figures are in U.S. dollars unless otherwise noted.
EXETER AUTOMOBILE 2022-2: S&P Assigns Prelim BB Rating on E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Exeter
Automobile Receivables Trust 2022-2's automobile receivables-backed
notes.
The note issuance is an ABS transaction backed by subprime auto
loan receivables.
The preliminary ratings are based on information as of April 6,
2022. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings assigned to Exeter Automobile Receivables
Trust 2022-2's automobile receivables-backed notes reflect:
-- The availability of approximately 57.55%, 49.78%, 40.80%,
31.82%, and 26.65% credit support for the class A (classes A-1,
A-2, and A-3), B, C, D, and E notes, respectively, based on
stressed cash flow scenarios (including excess spread). This credit
support provides coverage of approximately 3.05x, 2.60x, 2.10x,
1.60x, and 1.30x S&P's 18.25%-19.25% expected cumulative net loss
(CNL) range. These break-even scenarios withstand cumulative gross
losses (CGLs) of approximately 88.54%, 76.58%, 65.28%, 50.91%, and
42.64%, respectively.
-- S&P's expectation for timely interest and principal payments on
the notes, based on stressed cash flow modeling scenarios, which,
in its view, are appropriate for the assigned preliminary ratings.
-- S&P's expectation that under a moderate ('BBB') stress scenario
(1.60x its expected loss level), all else being equal, its
preliminary ratings will be within the credit stability limits
specified by section A.4 of the Appendix in "S&P Global Ratings
Definitions," published Nov. 9, 2021.
-- The collateral characteristics of the subprime automobile loans
securitized in this transaction.
-- The transaction's payment, credit enhancement, and legal
structures.
Preliminary Ratings Assigned
Exeter Automobile Receivables Trust 2022-2
-- Class A-1, $91.68 million ($120.50 million if upsized): A-1+
(sf)
-- Class A-2, $178.00 million ($234.00 million if upsized): AAA
(sf)
-- Class A-3, $153.54 million ($201.74 million if upsized): AAA
(sf)
-- Class B, $121.49 million ($159.68 million if upsized): AA
(sf)
-- Class C, $113.03 million ($148.56 million if upsized): A
(sf)
-- Class D, $109.93 million ($144.47 million if upsized): BBB
(sf)
-- Class E, $82.33 million ($108.21 million if upsized): BB
(sf)
FANNIE MAE 2022-R04: S&P Assigns Prelim 'BB-' Rating on 1B-1 Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Fannie Mae
Connecticut Avenue Securities Trust 2022-R04's notes.
The note issuance is an RMBS transaction in which the payments are
determined by a reference pool of residential mortgage loans, deeds
of trust, or similar security instruments encumbering mortgaged
properties acquired by Fannie Mae.
The preliminary ratings are based on information as of April 1,
2022. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The credit enhancement provided by the subordinated reference
tranches and the associated structural deal mechanics;
-- The REMIC structure, which reduces the counterparty exposure to
Fannie Mae for periodic principal and interest payments, but also
pledges the support of Fannie Mae (as a highly rated counterparty)
to cover any shortfalls on interest payments and make up for any
investment losses;
-- The issuer's aggregation experience and the alignment of
interests between the issuer and noteholders in the transaction's
performance, which enhances the notes' strength, in our view;
-- The enhanced credit risk management and quality control
processes Fannie Mae uses in conjunction with the underlying R&Ws
framework; and
-- The further impact that the COVID-19 pandemic is likely to have
on the U.S. economy and housing market, and the additional
structural provisions included to address corresponding forbearance
and subsequent defaults.
Preliminary Ratings Assigned
Fannie Mae Connecticut Avenue Securities Trust 2022-R04
Class 1A-H(i), $35,146,125,840: NR
Class 1M-1, $415,412,000: A- (sf)
Class 1M-1H(i), $21,864,838: NR
Class 1M-2A(ii), $115,392,000: BBB+ (sf)
Class 1M-AH(i), $6,073,788: NR
Class 1M-2B(ii), $115,392,000: BBB (sf)
Class 1M-BH(i), $6,073,788: NR
Class 1M-2C(ii), $115,392,000: BBB- (sf)
Class 1M-CH(i), $6,073,788: NR
Class 1M-2(ii), $346,176,000: BBB- (sf)
Class 1B-1A(ii), $95,198,000: BB+ (sf)
Class 1B-AH(i), $5,011,275: NR
Class 1B-1B(ii), $95,198,000: BB- (sf)
Class 1B-BH(i), $5,011,275: NR
Class 1B-1(ii), $190,395,000: BB- (sf)
Class 1B-2(ii), $190,397,000: NR
Class 1B-2H(i), $10,021,551: NR
Class 1B-3H(i)(iii), $91,099,342: NR
(i)Reference tranche only and will not have corresponding notes.
Fannie Mae retains the risk of these tranches.
(ii)The holders of the class 1M-2 notes may exchange all or part of
that class for proportionate interests in the class 1M-2A, 1M-2B,
and 1M-2C notes, and vice versa. The holders of the class 1B-1
notes may exchange all or part of that class for proportionate
interests in the class 1B-1A and 1B-1B notes, and vice versa. The
holders of the class 1M-2A, 1M-2B, 1M-2C, 1B-1A, 1B-1B, and 1B-2
notes may exchange all or part of those classes for proportionate
interests in the classes of RCR notes as specified in the offering
documents.
(iii)For the purposes of calculating modification gain or
modification loss amounts, class 1B-3H is deemed to bear interest
at SOFR plus 15%.
NR--Not rated.
Related Combinable And Recombinable Notes Exchangeable Classes
Fannie Mae Connecticut Avenue Securities Trust 2022-R04(i)
1M-2, $346,176,000: BBB- (sf)
1E-A1, $115,392,000: BBB+ (sf)
1A-I1, $115,392,000(ii): BBB+ (sf)
1E-A2, $115,392,000: BBB+ (sf)
1A-I2, $115,392,000(ii): BBB+ (sf)
1E-A3, $115,392,000: BBB+ (sf)
1A-I3, $115,392,000(ii): BBB+ (sf)
1E-A4, $115,392,000: BBB+ (sf)
1A-I4, $115,392,000(ii): BBB+ (sf)
1E-B1, $115,392,000: BBB (sf)
1B-I1, $115,392,000(ii): BBB (sf)
1E-B2, $115,392,000: BBB (sf)
1B-I2, $115,392,000(ii): BBB (sf)
1E-B3, $115,392,000: BBB (sf)
1B-I3, $115,392,000(ii): BBB (sf)
1E-B4, $115,392,000: BBB (sf)
1B-I4, $115,392,000(ii): BBB (sf)
1E-C1, $115,392,000: BBB- (sf)
1C-I1, $115,392,000(ii): BBB- (sf)
1E-C2, $115,392,000: BBB- (sf)
1C-I2, $115,392,000(ii): BBB- (sf)
1E-C3, $115,392,000: BBB- (sf)
1C-I3, $115,392,000(ii): BBB- (sf)
1E-C4, $115,392,000: BBB- (sf)
1C-I4, $115,392,000(ii): BBB- (sf)
1E-D1, $230,784,000: BBB (sf)
1E-D2, $230,784,000: BBB (sf)
1E-D3, $230,784,000: BBB (sf)
1E-D4, $230,784,000: BBB (sf)
1E-D5, $230,784,000: BBB (sf)
1E-F1, $230,784,000: BBB- (sf)
1E-F2, $230,784,000: BBB- (sf)
1E-F3, $230,784,000: BBB- (sf)
1E-F4, $230,784,000: BBB- (sf)
1E-F5, $230,784,000: BBB- (sf)
1-X1, $230,784,000(ii): BBB (sf)
1-X2, $230,784,000(ii): BBB (sf)
1-X3, $230,784,000(ii): BBB (sf)
1-X4, $230,784,000(ii): BBB (sf)
1-Y1, $230,784,000(ii): BBB- (sf)
1-Y2, $230,784,000(ii): BBB- (sf)
1-Y3, $230,784,000(ii): BBB- (sf)
1-Y4, $230,784,000(ii): BBB- (sf)
1-J1, $115,392,000: BBB- (sf)
1-J2, $115,392,000: BBB- (sf)
1-J3, $115,392,000: BBB- (sf)
1-J4, $115,392,000: BBB- (sf)
1-K1, $230,784,000: BBB- (sf)
1-K2, $230,784,000: BBB- (sf)
1-K3, $230,784,000: BBB- (sf)
1-K4, $230,784,000: BBB- (sf)
1M-2Y, $346,176,000: BBB- (sf)
1M-2X, $346,176,000(ii): BBB- (sf)
1B-1, $190,396,000: BB- (sf)
1B-1Y, $190,396,000: BB- (sf)
1B-1X, $190,396,000(ii): BB- (sf)
1B-2Y, $190,396,000: NR
1B-2X, $190,396,000(ii): NR
(i)See the offering documents for more detail on possible
combinations.
(ii)Notional amount.
NR--Not rated.
FINANCE OF AMERICA 2022-HB1: DBRS Gives Prov. B Rating on M5 Notes
------------------------------------------------------------------
DBRS, Inc. assigned provisional ratings to the following
Asset-Backed Notes to be issued by Finance of America HECM Buyout
2022-HB1:
-- $439.6 million Class A at AAA (sf)
-- $59.0 million Class M1 at AA (low) (sf)
-- $41.9 million Class M2 at A (low) (sf)
-- $34.3 million Class M3 at BBB (low) (sf)
-- $30.7 million Class M4 at BB (low) (sf)
-- $20.5 million Class M5 at B (sf)
The AAA (sf) rating reflects 31.3% of credit enhancement. The AA
(low) (sf), A (low) (sf), BBB (low) (sf), BB (low) (sf), and B (sf)
ratings reflect 22.1%, 15.5%, 10.2%, 5.4%, and 2.2% of credit
enhancement, respectively.
Other than the specified classes above, DBRS Morningstar did not
rate any other classes in this transaction.
Lenders typically offer reverse mortgage loans to people who are at
least 62 years old. Through reverse mortgage loans, borrowers have
access to home equity through a lump sum amount or a stream of
payments without periodically repaying principal or interest,
allowing the loan balance to accumulate over a period of time until
a maturity event occurs. Loan repayment is required (1) if the
borrower dies, (2) if the borrower sells the related residence, (3)
if the borrower no longer occupies the related residence for a
period (usually a year), (4) if it is no longer the borrower's
primary residence, (5) if a tax or insurance default occurs, or (6)
if the borrower fails to properly maintain the related residence.
In addition, borrowers must be current on any homeowners
association dues if applicable. Reverse mortgages are typically
nonrecourse; borrowers do not have to provide additional assets in
cases where the outstanding loan amount exceeds the property's
value (the crossover point). As a result, liquidation proceeds will
fall below the loan amount in cases where the outstanding balance
reaches the crossover point, contributing to higher loss severities
for these loans.
As of the November 30, 2021, Statistical Cut-Off Date, the
collateral had approximately $667.4 million in unpaid principal
balance (UPB) from 2,892 performing and nonperforming home equity
conversion mortgage reverse mortgage loans secured by first liens
typically on single-family residential properties, condominiums,
multifamily (two- to four-family) properties, manufactured homes,
and planned unit developments. Of the total loans, 1,576 have
fixed-rate interest (58.8% of the balance) with a weighted-average
coupon (WAC) of 5.03%. The remaining 1,316 loans have floating-rate
interest (41.2% of the balance) with a WAC of 2.75%, bringing the
entire collateral pool to a WAC of 4.09%.
As of the Statistical Cut-Off Date, the loans in this transaction
are both performing and nonperforming (i.e., inactive). There are
618 performing loans comprising 24.7% of the total UPB. As for the
2,274 nonperforming loans, 1,378 loans are referred for foreclosure
(47.4% of the balance), 83 are in bankruptcy status (2.9%), 269 are
called due following recent maturity (9.1%), 142 are real estate
owned (4.3%), one is referred (
GS MORTGAGE 2012-GCJ7: DBRS Lowers Class F Certs Rating to D
------------------------------------------------------------
DBRS, Inc. downgraded the rating for a class of Commercial Mortgage
Pass-Through Certificates, Series 2012-GCJ7 issued by GS Mortgage
Securities Trust, Series 2012-GCJ7 as follows:
-- Class F to D (sf) from C (sf)
The downgrade reflects a principal loss following the liquidation
of the Shoppes on Main loan (Prospectus ID#12) that was reflected
in the December 2021 remittance report. The liquidation resulted in
a loss severity of 95.3%, which was in line with DBRS Morningstar's
expectation, and equated to a $30.0 million loss to the trust. The
loss fully reduced the balance of the unrated Class G certificate
and reduced the balance of the Class F certificate by 65.9%.
In addition, DBRS Morningstar confirmed the following classes:
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (sf)
-- Class D at BB (sf)
-- Class E at CCC (sf)
DBRS Morningstar discontinued the rating on Class A-4 as the class
was fully repaid as of the February 2022 remittance report. The
trend for Class D remains Negative and Classes E and F have no
trends given their ratings. All other trends are Stable.
The Negative trend on Class D is driven by ongoing concerns with
the largest loan, Bellis Fair Mall (Prospectus ID#3 – 27.5% of
the trust balance), which did not pay off at loan maturity. The
rating confirmations reflect sufficient credit support relative to
DBRS Morningstar's overall recovery expectations for the pool's
remaining loans. Three other loans, totaling 4.0% of the trust
balance, are in special servicing. These loans are all secured by
limited-service hotel properties in Anchorage, Alaska, that
transferred to the special servicer in June 2020. The three loans
are all cross-collateralized and cross-defaulted with the same
sponsor and the most recent appraised values remain above the
aggregate loan exposures.
Bellis Fair Mall is secured by the in-line portion and two anchor
boxes of a regional mall in Bellingham, Washington. The collateral
is just south of the Canadian border and sales have been
historically dependent on traffic from Canadian consumers, which
was severely limited for most of 2020 and 2021 because of the
Coronavirus Disease (COVID-19) restrictions. The loan was scheduled
to mature on February 6, 2022, but has not repaid as of the date of
this writing. The mall is owned and operated by affiliates of
Brookfield Property Partners, which acquired the original sponsor
in 2018. DBRS Morningstar requested updates from the servicer
regarding the borrower's plan for the retirement of the subject
debt; however, the borrower has been unresponsive.
The loan's performance has been in decline since 2018 with a near
breakeven debt service coverage ratio as of Q3 2021. The decline
has been driven by decreases in base rental income, which was
exacerbated during the pandemic. No coronavirus-related relief
requests have been processed to date. Remaining borrower equity is
believed to be limited and DBRS Morningstar expects the underlying
collateral value has also declined since issuance. DBRS Morningstar
will closely monitor the workout of the loan and potential impacts
to the trust's interest obligations. A delayed resolution of the
outstanding debt would likely result in increased loan exposure as
well as an increase of DBRS Morningstar's loss projections for the
pool.
The trust is in the process of winding down as all but one loan
have scheduled maturity dates in Q1 or Q2 2022. At issuance, the
trust comprised 79 fixed-rate loans secured by 175 commercial
properties with a trust balance of $1.62 billion. According to the
February 2022 remittance, 21 loans remain in the trust with a trust
balance of $279.7 million, representing an 82.8% collateral
reduction since issuance.
Notes: All figures are in U.S. dollars unless otherwise noted.
GS MORTGAGE 2013-GC10: DBRS Lowers Class F Certs Rating to CCC
--------------------------------------------------------------
DBRS Limited downgraded its ratings on two classes of Commercial
Mortgage Pass-Through Certificates, Series 2013-GC10 issued by GS
Mortgage Securities Trust 2013-GC10 as follows:
-- Class E to B (sf) from BB (sf)
-- Class F to CCC (sf) from B (sf)
In addition, DBRS Morningstar confirmed the ratings on the
remaining classes as follows:
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class X-B at AA (low) (sf)
-- Class C at A (high) (sf)
-- Class D at BBB (sf)
DBRS Morningstar changed the trends on Classes X-B and C to
Negative from Stable, while the trends on Classes D and E remain
Negative. Class F does not carry a trend given the distressed
rating, and DBRS Morningstar also maintained the Interest in
Arrears designation on Class F. Classes A-4, A-5, A-AB, A-S, X-A,
and B have Stable trends.
The rating downgrades and Negative trends are reflective of DBRS
Morningstar's increased loss expectations for loans in special
servicing and on the DBRS Morningstar Hotlist. According to the
January 2022 remittance, 53 of the original 61 loans remain in the
pool with a total trust balance of $645.8 million, representing a
collateral reduction of 24.9% since issuance. There are two loans
in special servicing, representing 17.9% of the pool balance, and
this includes the largest loan in the pool, Empire Hotel & Retail
(Prospectus ID#1, 15.9% of the pool balance). There are eight loans
on the servicer's watchlist, representing 10.5% of the pool
balance, and 21 loans that are fully defeased, representing 22.2%
of the pool balance.
The Empire Hotel & Retail loan is secured by a full-service hotel
and ground-floor retail space located in New York City. The loan
had a history of declining performance prior to the Coronavirus
Disease (COVID-19) pandemic and prior to its transfer to special
servicing in June 2021 for payment default. The borrower had
requested relief as a result of the pandemic and a loan
modification is reportedly near finalization. The terms of
modification include an extension option, a conversion to
interest-only payments for the remainder of the term, and a
reduction in interest rate for a period of 18 months, conditional
upon a substantial borrower-funded equity infusion. The subject was
closed for an extended period of time throughout the pandemic.
While it appears to have reopened as of Q3 2021, certain areas are
expected to become unavailable as the borrower completes a planned
$6.5 million renovation project. The August 2021 appraisal value of
$137.0 million reflects a 65.1% decline from the issuance value of
$393.0 million and a loan-to-value ratio of 122.8% based on the
outstanding whole-loan balance. DBRS Morningstar notes the
increased propensity for interest shortfalls based on the loan's
reduced note rate. Given the increased risks, DBRS Morningstar's
analysis included a probability of default penalty to reflect
increased loss expectations associated with this loan.
The One Technology Plaza loan (Prospectus ID#13, 2.0% of the pool
balance) is secured by an office property in Peoria, Illinois, and
was transferred to special servicing in December 2021 for imminent
monetary default. This loan is on the DBRS Morningstar Hotlist
because of historic underperformance with year-over-year declines
to occupancy. The property was 75.0% occupied as of the December
2021 rent roll, but DBRS Morningstar expects this figure to decline
further with the scheduled departure of the largest tenant, Robert
Morris University (20.6% of net rentable area (NRA)), whose lease
expired in December 2021, and Illinois State Government Department
(13.2% of NRA), which is expected to vacate in March 2022. There is
also significant tenant rollover risk in the near term, with leases
representing an additional 25.9% of the NRA scheduled to expire in
2022.
Notes: All figures are in U.S. dollars unless otherwise noted.
GS MORTGAGE 2022-GR2: Moody's Assigns B3 Rating to Cl. B-5 Certs
----------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to 21
classes of residential mortgage-backed securities (RMBS) issued by
GS Mortgage-Backed Securities Trust (GSMBS) 2022-GR2. The ratings
range from Aaa (sf) to B3 (sf).
GS Mortgage-Backed Securities Trust 2022-GR2 (GSMBS 2022-GR2) is
the second investment property transaction in 2022 backed by
Guaranteed Rate collateral issued by Goldman Sachs Mortgage Company
(GSMC), the sponsor and the mortgage loan seller. GSMC is a wholly
owned subsidiary of Goldman Sachs Bank USA and Goldman Sachs. The
certificates are backed by 2,324 first lien, primarily 30-year,
fully-amortizing fixed-rate, conforming mortgage loans on
residential investment properties with an aggregate unpaid
principal balance (UPB) of $690,095,702 as of the March1, 2022
cut-off date. All loans in the pool are originated by Guaranteed
Rate, Inc. (72.9%), Guaranteed Rate Affinity, LLC (11.4%),
collectively, Guaranteed Rate parties, and Stearns Lending, LLC
(15.7%), which is wholly owned by Guaranteed Rate, Inc. Overall,
pool strengths include the high credit quality of the underlying
borrowers, indicated by high FICO scores, strong reserves, loans
with fixed interest rates and no interest-only loans. As of the
cut-off date, all of the mortgage loans are current, and no
borrower has entered into a COVID-19 related forbearance plan with
the servicer.
Approximately 1.5% of the mortgage loans by stated principal
balance as of the cut-off date were subject to debt consolidation
in which the related funds were used by the related mortgagor for
consumer, family or household purposes (personal-use loans). Vast
majority of the personal-use loans are "qualified mortgages" under
Regulation Z as a result of the temporary provision allowing
qualified mortgage status for loans eligible for purchase,
guaranty, or insurance by Fannie Mae and Freddie Mac (and certain
other federal agencies). With the exception of personal-use loans,
all other mortgage loans in the pool are not subject to the federal
Truth-in-Lending Act (TILA) because each such mortgage loan is an
extension of credit primarily for a business purpose and is not a
"covered transaction" as defined in Section 1026.43(b)(1) of
Regulation Z. As of the closing date, the sponsor or a majority-
owned affiliate of the sponsor will retain at least 5% of the
initial certificate principal balance or notional amount of each
class of certificates (other than Class A-R certificates) issued by
the trust to satisfy U.S. risk retention rules.
NewRez LLC d/b/a Shellpoint Mortgage Servicing (Shellpoint) will
service all of the loans in the pool. Computershare Trust Company,
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 (R&W)
breach reviewer.
Evolve Mortgage Services (Evolve) is the third-party reviewer and
verified the accuracy of the loan level information. Evolve
conducted detailed credit, property valuation, data accuracy and
compliance reviews on 30.6% (by loan count) of the mortgage loans
in the collateral pool.
Moody's analyzed the underlying mortgage loans using Moody's
Individual Loan Analysis (MILAN) model. In addition, Moody's
adjusted its losses based on qualitative attributes, including
origination quality, the strength of the R&W framework and
third-party review (TPR) results.
Distributions of principal and interest and loss allocations are
based on a typical shifting interest structure with a five-year
lockout period that benefits from a senior and subordination floor.
Moody's coded the cash flow to each of the certificate classes
using Moody's proprietary cash flow tool.
The complete rating actions are as follows:
Issuer: GS Mortgage-Backed Securities Trust 2022-GR2
Cl. A-1, Definitive Rating Assigned Aaa (sf)
Cl. A-2, Definitive Rating Assigned Aaa (sf)
Cl. A-3, Definitive Rating Assigned Aa1 (sf)
Cl. A-4, Definitive Rating Assigned Aa1 (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-X-1*, Definitive Rating Assigned Aa1 (sf)
Cl. A-X-2*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-3*, Definitive Rating Assigned Aa1 (sf)
Cl. A-X-5*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-7*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-10*, Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Definitive Rating Assigned A3 (sf)
Cl. B-3, Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Definitive Rating Assigned Ba3 (sf)
Cl. B-5, Definitive Rating Assigned B3 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected loss for this pool in a baseline scenario-mean is
1.04%, in a baseline scenario-median is 0.78%, and reaches 5.79% at
stress level consistent with Moody's Aaa rating.
Moody's base its ratings on the certificates on the credit quality
of the mortgage loans, the structural features of the transaction,
Moody's assessments of the origination quality and servicing
arrangement, strength of the TPR and the R&W framework of the
transaction.
Collateral Description
Moody's assessed the collateral pool as of March 1, 2022, the
cut-off date. The aggregate collateral pool as of the cut-off date
consists of 2,324 first lien, primarily 30-year, fully-amortizing
fixed-rate, conforming mortgage loans on residential investment
properties with an aggregate unpaid principal balance (UPB) of
$690,095,702 and a weighted average mortgage rate of 3.6%.
All of the mortgage loans are secured by first liens on one-to-four
family residential properties, planned unit developments,
condominiums and townhouses. 2,281 mortgage loans have original
terms to maturity of 30 years, one loan has maturity of 29 years,
seven loans have maturity of 25 years, one loan has maturity of 22
years, and 34 loans have maturity of 20 years.
The WA current FICO score of the borrowers in the pool is 771. The
WA Original LTV ratio of the mortgage pool is 66.7%, which is in
line with that of comparable transactions.
The mortgage loans in the pool were originated mostly in California
(27.9% by loan balance) and Massachusetts(10.6% by loan balance),
and in high cost metropolitan statistical areas (MSAs) of Boston
(9.7%), Los Angeles (8.8%), Chicago (8.4%), San Francisco (5.4%)
and New York (3.9%). The high geographic concentration in high cost
MSAs is reflected in the high average balance of the pool
($296,943). Moody's made adjustments to its losses to account for
this geographic concentration risk. Top 10 MSAs comprise 48.9% of
the pool, by loan balance. Approximately 18.0% of the pool balance
is related to borrowers with two or more mortgages in the pool.
Aggregator/Origination Quality
GSMC is the loan aggregator and the mortgage seller for the
transaction. GSMC's general partner is Goldman Sachs Real Estate
Funding Corp. and its limited partner is Goldman Sachs Bank USA.
Goldman Sachs Real Estate Funding Corp. is a wholly owned
subsidiary of Goldman Sachs Bank USA. GSMC is an affiliate of
Goldman Sachs & Co. LLC. GSMC is overseen by the mortgage capital
markets group within Goldman Sachs. Senior management averages 16
years of mortgage experience and 15 years of Goldman Sachs tenure.
The mortgage loans for this transaction were acquired by GSMC, the
sponsor and the mortgage loan seller from Guaranteed Rate, Inc
,Guaranteed Rate Affinity, LLC and Stearns Lending, LLC. The
mortgage loan seller does not originate any mortgage loans,
including the mortgage loans included in the mortgage pool.
Instead, the mortgage loan seller acquired the mortgage loans
pursuant to contracts with the originators.
Overall, Moody's consider GSMC's aggregation platform to be
comparable to that of peer aggregators and therefore did not apply
a separate loss-level adjustment for aggregation quality.
Servicing Arrangement
Moody's consider the overall servicing arrangement for this pool to
be adequate, and as a result Moody's did not make any adjustments
to Moody's base case and Aaa stress loss assumptions based on the
servicing arrangement.
Shellpoint will be the named primary servicer for this transaction
and will service 100% of the pool. Shellpoint is an approved
servicer in good standing with Ginnie Mae, Fannie Mae and Freddie
Mac. Shellpoint's primary servicing location is in Greenville,
South Carolina. Shellpoint services residential mortgage assets for
investors that include banks, financial services companies, GSEs
and government agencies. Computershare Trust Company, N.A.
(Computershare) will act as master servicer and securities
administrator under the sale and servicing agreement and as
custodian under the custodial agreement. Computershare is a
national banking association and a wholly-owned subsidiary of
Computershare Ltd (Baa2, long term rating), an Australian financial
services company with over $5 billion (USD) in assets as of June
30, 2021. Computershare Ltd and its affiliates have been engaging
in financial service activities, including stock transfer related
services since 1997, and corporate trust related services since
2000.
Third-party Review
Evolve Mortgage Services (Evolve), the TPR firm, reviewed 30.6% (by
loan count) of the loans for regulatory compliance, credit,
property valuation and data accuracy. The due diligence results
confirm compliance with the originators' underwriting guidelines
for many mortgage loans, no material compliance issues, and no
material valuation defects. The mortgage loans that had exceptions
to the originators' underwriting guidelines had significant
compensating factors that were documented.
Representations & Warranties
GSMBS 2022-GR2's R&W framework is in line with that of prior GSMBS
transactions Moody's have rated where an independent reviewer is
named at closing, and costs and manner of review are clearly
outlined at issuance. Moody's review of the R&W framework takes
into account the financial strength of the R&W providers, scope of
R&Ws (including qualifiers and sunsets) and the R&W enforcement
mechanism. The loan-level R&Ws meet or exceed the baseline set of
credit-neutral R&Ws Moody's have identified for US RMBS. R&W
breaches are evaluated by an independent third-party using a set of
objective criteria. The transaction requires mandatory independent
reviews of mortgage loans that become 120 days delinquent and those
that liquidate at a loss to determine if any of the R&Ws are
breached. 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.
The creditworthiness of the R&W providers determines the
probability that the R&W provider will be available and have the
financial strength to repurchase defective loans upon identifying a
breach. An investment-grade rated R&W provider lends substantial
strength to its R&Ws. Moody's analyze the impact of less
creditworthy R&W providers case by case, in conjunction with other
aspects of the transaction. Here, because the R&W providers are
unrated and/or exhibit limited financial flexibility, Moody's
applied an adjustment to the mortgage loans for which these
entities provided R&Ws.
Tail Risk and Locked Out Percentage
The transaction cash flows follow a shifting interest structure
that allows subordinated bonds to receive principal payments under
certain defined scenarios. Because a shifting interest structure
allows subordinated bonds to pay down over time as the loan pool
balance declines, senior bonds are exposed to eroding credit
enhancement over time, and increased performance volatility as a
result. To mitigate this risk, the transaction provides for a
senior subordination floor of 0.65% of the cut-off date pool
balance, and a subordination lock-out amount of 0.65% of the
cut-off date pool balance. The floors are consistent with the
credit neutral floors for the assigned ratings according to Moody's
methodology.
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 rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in February 2022.
GS MORTGAGE 2022-PJ3: Moody's Assigns B3 Rating to Cl. B-5 Certs
----------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to 57
classes of residential mortgage-backed securities (RMBS) issued by
GS Mortgage-Backed Securities Trust 2022-PJ3. The ratings range
from Aaa (sf) to B3 (sf).
GS Mortgage-Backed Securities Trust 2022-PJ3 (GSMBS 2022-PJ3) is
the fifth prime jumbo transaction in 2022 issued by Goldman Sachs
Mortgage Company (GSMC), the sponsor and the primary mortgage loan
seller. Overall, pool strengths include the high credit quality of
the underlying borrowers, indicated by high FICO scores, strong
reserves for prime jumbo borrowers, mortgage loans with fixed
interest rates and no interest-only loans.
GSMC is a wholly owned subsidiary of Goldman Sachs Bank USA and
Goldman Sachs. The mortgage loans for this transaction were
acquired by GSMC, the sponsor and the primary mortgage loan seller
(approximately 98.0% by UPB), and MCLP Asset Company, Inc. (MCLP)
(approximately 2.0% by UPB), the mortgage loan sellers, from
certain of the originators or the aggregator, MAXEX Clearing LLC
(which aggregated 3.4% of the mortgage loans by UPB).
NewRez LLC d/b/a Shellpoint Mortgage Servicing (Shellpoint) will
service approximately 82.8% (by UPB) of the mortgage loans and
United Wholesale Mortgage, LLC (UWM) will service approximately
17.2% (by UPB) of the mortgage loans in the pool. Wells Fargo Bank,
N.A. will be the master servicer. Computershare Trust Company, N.A.
(Computershare) will be the securities administrator and the
custodian for this transaction.
Distributions of principal and interest and loss allocations are
based on a typical shifting interest structure with a five-year
lockout period that benefits from a senior and subordination floor.
Moody's coded the cash flow to each of the certificate classes
using Moody's proprietary cash flow tool.
The complete rating actions are as follows:
Issuer: GS Mortgage-Backed Securities Trust 2022-PJ3
Cl. A-1, Definitive Rating Assigned Aaa (sf)
Cl. A-1-X*, 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-4A, Definitive Rating Assigned Aaa (sf)
Cl. A-4-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-5, Definitive Rating Assigned Aaa (sf)
Cl. A-6, Definitive Rating Assigned Aaa (sf)
Cl. A-6A, Definitive Rating Assigned Aaa (sf)
Cl. A-7, Definitive Rating Assigned Aaa (sf)
Cl. A-7-X*, 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-10-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-11, Definitive Rating Assigned Aaa (sf)
Cl. A-12, Definitive Rating Assigned Aaa (sf)
Cl. A-13, Definitive Rating Assigned Aaa (sf)
Cl. A-13-X*, 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-16-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-17, Definitive Rating Assigned Aaa (sf)
Cl. A-18, Definitive Rating Assigned Aaa (sf)
Cl. A-19, Definitive Rating Assigned Aaa (sf)
Cl. A-19-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-20, Definitive Rating Assigned Aaa (sf)
Cl. A-21, Definitive Rating Assigned Aaa (sf)
Cl. A-22, Definitive Rating Assigned Aaa (sf)
Cl. A-22-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-23, Definitive Rating Assigned Aaa (sf)
Cl. A-24, Definitive Rating Assigned Aaa (sf)
Cl. A-25, Definitive Rating Assigned Aaa (sf)
Cl. A-25-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-26, Definitive Rating Assigned Aaa (sf)
Cl. A-27, Definitive Rating Assigned Aaa (sf)
Cl. A-28, Definitive Rating Assigned Aaa (sf)
Cl. A-28-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-29, Definitive Rating Assigned Aaa (sf)
Cl. A-30, Definitive Rating Assigned Aaa (sf)
Cl. A-31, Definitive Rating Assigned Aaa (sf)
Cl. A-31-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-32, Definitive Rating Assigned Aaa (sf)
Cl. A-33, Definitive Rating Assigned Aaa (sf)
Cl. A-34, Definitive Rating Assigned Aaa (sf)
Cl. A-34-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-35, Definitive Rating Assigned Aaa (sf)
Cl. A-36, Definitive Rating Assigned Aaa (sf)
Cl. B-1, Definitive Rating Assigned Aa2 (sf)
Cl. B-2, Definitive Rating Assigned A1 (sf)
Cl. B-3, Definitive Rating Assigned Baa2 (sf)
Cl. B-4, Definitive Rating Assigned Ba2 (sf)
Cl. B-5, Definitive Rating Assigned B3 (sf)
Cl. A-X*, Definitive Rating Assigned Aaa (sf)
Cl. PT, Definitive Rating Assigned Aaa (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected loss for this pool in a baseline scenario-mean is
0.58%, in a baseline scenario-median is 0.38% and reaches 4.19% at
stress level consistent with Moody's Aaa rating.
Moody's base its ratings on the certificates on the credit quality
of the mortgage loans, the structural features of the transaction,
Moody's assessments of the origination quality and servicing
arrangement, strength of the third-party review (TPR) and the
representation and warranties (R&W) framework of the transaction.
Collateral Description
As of the March 1, 2022 cut-off date, the aggregate collateral pool
comprises 647 (98.89% by UPB) prime jumbo (non-conforming) and 22
(1.11% by UPB) conforming, 30-year loan-term, fully-amortizing
fixed-rate mortgage loans, none of which have the benefit of
primary mortgage guaranty insurance, with an aggregate stated
principal balance (UPB) of approximately $705,757,011 and a
weighted average (WA) mortgage rate of 3.1%. The WA current FICO
score of the borrowers in the pool is 769. The WA Original LTV
ratio of the mortgage pool is 71.2%, which is in line with GSMBS
2022-PJ2 and also with other prime jumbo transactions. Top 10 MSAs
comprise 58.6% of the pool, by UPB. The high geographic
concentration in high cost MSAs is reflected in the high average
balance of the pool ($1,054,943). As of the cut-off date, none of
the mortgage loans are subject to a COVID-19 related forbearance
plan.
All the mortgage loans in the aggregate pool are Qualified Mortgage
(QM) loans some of which meeting the requirements of the QM-Safe
Harbor rule (Appendix Q) or the new General QM rule. A portion of
the loans purchased from various sellers into the pool were
originated pursuant to the new general QM rule (91.76% by UPB). The
majority of these loans are UWM loans underwritten to AUS
underwriting guidelines. As part of the origination quality review
and in consideration of the detailed loan-level TPR reports,
Moody's concluded that these loans were full documentation loans,
for purposes of Moody's analysis. However, Moody's increased its
Aaa and expected loss assumptions for the new General QM rule
non-conforming loans due to the lack of performance information,
track record of originating such loans through AUS, and notable AUS
overlays. The other characteristics of the mortgage loans in the
pool are generally comparable to that of GSMBS 2022-PJ2 and recent
prime jumbo transactions.
Aggregator/Origination Quality
GSMC is the loan aggregator and the primary mortgage seller for the
transaction. GSMC's general partner is Goldman Sachs Real Estate
Funding Corp., and its limited partner is Goldman Sachs Bank USA.
Goldman Sachs Real Estate Funding Corp. is a wholly owned
subsidiary of Goldman Sachs Bank USA. GSMC is an affiliate of
Goldman Sachs & Co. LLC. GSMC is overseen by the mortgage capital
markets group within Goldman Sachs. Senior management averages 16
years of mortgage experience and 15 years of Goldman Sachs tenure.
The mortgage loans for this transaction were acquired by GSMC, the
sponsor and the primary mortgage loan seller (98.0% by UPB), and
MCLP (2.0% by UPB), the mortgage loan sellers, from certain of the
originators or the aggregator, MAXEX Clearing LLC (which aggregated
3.4% of the mortgage loans by UPB). The mortgage loans in the pool
are underwritten to either GSMC's underwriting guidelines, or
seller's applicable guidelines. The mortgage loan sellers do not
originate any mortgage loans, including the mortgage loans included
in the mortgage pool. Instead, the mortgage loan sellers acquired
the mortgage loans pursuant to contracts with the originators or
the aggregator.
Overall, Moody's consider GSMC's aggregation platform to be
comparable to that of peer aggregators and therefore did not apply
a separate loss-level adjustment for aggregation quality. In
addition to reviewing GSMC's aggregation quality, Moody's have also
reviewed the origination quality of each of the originators which
contributed at least approximately 10% of the mortgage loans (by
UPB) to the transaction. For such originators, Moody's reviewed
their underwriting guidelines, performance history, and quality
control and audit processes and procedures (to the extent
available, respectively). Approximately 54.5% of the mortgage
loans, by UPB as of the cut-off date, were originated by United
Wholesale Mortgage, LLC (UWM). No other originator or group of
affiliated originators originated more than 10% of the mortgage
loans. Moody's increased its base case and Aaa loss expectations
for certain originators of non-conforming loans where Moody's do
not have clear insight into the underwriting practices, quality
control and credit risk management (neutral for CrossCountry
Mortgage, Guaranteed Rate, loanDepot.com, LLC, NewRez LLC, Caliber
Homes and Proper Rate under the old QM guidelines). Moody's did not
make an adjustment for GSE-eligible loans, regardless of the
originator, since those loans were underwritten in accordance with
GSE guidelines. Moody's made an adjustment to Moody's losses for
loans originated by UWM primarily due to the fact that underwriting
prime jumbo loans mainly through AUS is fairly new and no
performance history has been provided to Moody's on these types of
loans. More time is needed to assess UWM's ability to consistently
produce high-quality prime jumbo residential mortgage loans under
this program. Also, Moody's applied an adjustment for loanDepot
loans originated under the new QM rules as more time is needed to
fully evaluate this origination program.
Servicing Arrangement
Moody's consider the overall servicing arrangement for this pool to
be adequate, and as a result Moody's did not make any adjustments
to Moody's base case and Aaa stress loss assumptions based on the
servicing arrangement. Shellpoint and UWM will act as the
servicer's for this transaction and will service all the loans in
the pool. Cenlar FSB will act as a sub-servicer for UWM.
Furthermore, Wells Fargo Bank, N.A. will be the master servicer and
Computershare will be the securities administrator and the
custodian. Moody's consider the presence of an experienced master
servicer such as Wells Fargo to be a mitigant for any servicing
disruptions.
Third-party Review
The transaction benefits from TPR on 100% of the mortgage loans for
regulatory compliance, credit and property valuation. The TPR
results confirm compliance with the originator's underwriting
guidelines for the vast majority of loans, no material regulatory
compliance issues, and no material property valuation issues. The
loans that had exceptions to the originator's underwriting
guidelines had significant compensating factors that were
documented.
Representations & Warranties
GSMBS 2022-PJ3's R&W framework is generally in line with that of
prior GSMBS transactions Moody's have rated where an independent
reviewer is named at closing, and costs and manner of review are
clearly outlined at issuance except for certain carve-outs. The
loan-level R&Ws meet or exceed the baseline set of credit-neutral
R&Ws Moody's have identified for US RMBS. R&W breaches are
evaluated by an independent third-party using a set of objective
criteria. The transaction requires mandatory independent reviews of
loans that become 120 days delinquent and those that liquidate at a
loss to determine if any of the R&Ws are breached. However, because
most of the R&W providers in this transaction are unrated and/or
exhibit limited financial flexibility, Moody's applied an
adjustment to the mortgage loans for which these entities provided
R&Ws.
Tail Risk and Locked Out Percentage
The transaction cash flows follow a shifting interest structure
that allows subordinated bonds to receive principal payments under
certain defined scenarios. Because a shifting interest structure
allows subordinated bonds to pay down over time as the loan pool
balance declines, senior bonds are exposed to eroding credit
enhancement over time, and increased performance volatility as a
result. To mitigate this risk, the transaction provides for a
senior subordination floor of 1.20% of the cut-off date pool
balance, and as subordination lock-out amount of 0.90% of the
cut-off date pool balance. The floors are consistent with the
credit neutral floors for the assigned ratings according to Moody's
methodology.
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 rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in February 2022.
GS MORTGAGE-BACKED 2022-PJ3: Fitch Rates Class B-5 Certs 'B+'
-------------------------------------------------------------
Fitch Ratings rates the residential mortgage-backed certificates
issued by GS Mortgage-Backed Securities Trust 2022-PJ3 (GSMBS
2022-PJ3). The certificates are supported by 669 prime-jumbo and
agency conforming loans with a total balance of approximately $706
million, as of the cut-off date. The transaction is expected to
close on March 31, 2022.
DEBT RATING PRIOR
---- ------ -----
GSMBS 2022-PJ3
A-1 LT AA+sf New Rating AA+(EXP)sf
A-1-X LT AA+sf New Rating AA+(EXP)sf
A-10 LT AAAsf New Rating AAA(EXP)sf
A-10-X LT AAAsf New Rating AAA(EXP)sf
A-11 LT AAAsf New Rating AAA(EXP)sf
A-12 LT AAAsf New Rating AAA(EXP)sf
A-13 LT AAAsf New Rating AAA(EXP)sf
A-13-X LT AAAsf New Rating AAA(EXP)sf
A-14 LT AAAsf New Rating AAA(EXP)sf
A-15 LT AAAsf New Rating AAA(EXP)sf
A-16 LT AAAsf New Rating AAA(EXP)sf
A-16-X LT AAAsf New Rating AAA(EXP)sf
A-17 LT AAAsf New Rating AAA(EXP)sf
A-18 LT AAAsf New Rating AAA(EXP)sf
A-19 LT AAAsf New Rating AAA(EXP)sf
A-19-X LT AAAsf New Rating AAA(EXP)sf
A-2 LT AA+sf New Rating AA+(EXP)sf
A-20 LT AAAsf New Rating AAA(EXP)sf
A-21 LT AAAsf New Rating AAA(EXP)sf
A-22 LT AAAsf New Rating AAA(EXP)sf
A-22-X LT AAAsf New Rating AAA(EXP)sf
A-23 LT AAAsf New Rating AAA(EXP)sf
A-24 LT AAAsf New Rating AAA(EXP)sf
A-25 LT AAAsf New Rating AAA(EXP)sf
A-25-X LT AAAsf New Rating AAA(EXP)sf
A-26 LT AAAsf New Rating AAA(EXP)sf
A-27 LT AAAsf New Rating AAA(EXP)sf
A-28 LT AAAsf New Rating AAA(EXP)sf
A-28-X LT AAAsf New Rating AAA(EXP)sf
A-29 LT AAAsf New Rating AAA(EXP)sf
A-3 LT AA+sf New Rating AA+(EXP)sf
A-30 LT AAAsf New Rating AAA(EXP)sf
A-31 LT AAAsf New Rating AAA(EXP)sf
A-31-X LT AAAsf New Rating AAA(EXP)sf
A-32 LT AAAsf New Rating AAA(EXP)sf
A-33 LT AAAsf New Rating AAA(EXP)sf
A-34 LT AA+sf New Rating AA+(EXP)sf
A-34-X LT AA+sf New Rating AA+(EXP)sf
A-35 LT AA+sf New Rating AA+(EXP)sf
A-36 LT AA+sf New Rating AA+(EXP)sf
A-4 LT AAAsf New Rating AAA(EXP)sf
A-4-X LT AAAsf New Rating AAA(EXP)sf
A-4A LT AAAsf New Rating AAA(EXP)sf
A-5 LT AAAsf New Rating AAA(EXP)sf
A-6 LT AAAsf New Rating AAA(EXP)sf
A-6A LT AAAsf New Rating AAA(EXP)sf
A-7 LT AAAsf New Rating AAA(EXP)sf
A-7-X LT AAAsf New Rating AAA(EXP)sf
A-8 LT AAAsf New Rating AAA(EXP)sf
A-9 LT AAAsf New Rating AAA(EXP)sf
A-IO-S LT NRsf New Rating NR(EXP)sf
A-R LT NRsf New Rating NR(EXP)sf
A-X LT AA+sf New Rating AA+(EXP)sf
B-1 LT AAsf New Rating AA(EXP)sf
B-2 LT Asf New Rating A(EXP)sf
B-3 LT BBBsf New Rating BBB(EXP)sf
B-4 LT BBsf New Rating BB(EXP)sf
B-5 LT B+sf New Rating B+(EXP)sf
B-6 LT NRsf New Rating NR(EXP)sf
PT LT AA+sf New Rating AA+(EXP)sf
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 11.2% above a long-term sustainable level (versus
10.6% on a national level). Underlying fundamentals are not keeping
pace with growth in prices, which is a result of a supply/demand
imbalance driven by low inventory, low mortgage rates and new
buyers entering the market. These trends have led to significant
home price increases over the past year, with home prices rising
18.6% yoy nationally as of December 2021.
High Quality Mortgage Pool (Positive): The collateral consists of
30-year, fixed-rate mortgage fully amortizing loans seasoned
approximately four months in aggregate. The collateral comprises a
mix of prime-jumbo (98.9%) and agency conforming loans (1.1%). The
borrowers in this pool have strong credit profiles (a 764 model
FICO) and moderate leverage (a 78.8% sustainable loan-to-value
ratio [sLTV] and a 69.8% mark-to-market combined LTV).
Fitch treated 95.0% of the loans as full documentation collateral,
while almost 100% of the loans are safe-harbor qualified mortgages.
Of the pool, 94.0% are loans for which the borrower maintains a
primary residence, while 6.0% are for second homes. Additionally,
44.0% of the loans were originated through a retail channel or a
correspondent's retail channel.
Shifting-Interest Deal Structure (Mixed): 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 to 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. Due to the
leakage to the subordinate bonds, the shifting-interest structure
requires more CE. While there is only minimal leakage to the
subordinate bonds early in the life of the transaction, the
structure is more vulnerable to defaults occurring at a later stage
compared to a sequential or modified-sequential structure.
Subordination Floors (Positive): To help mitigate tail risk, which
arises as the pool seasons and fewer loans are outstanding, a
subordination floor of 1.20% of the original balance will be
maintained for the senior certificates, and a subordination floor
of 0.90% of the original balance will be maintained for the
subordinate certificates.
Servicer Advances (Mixed): Shellpoint Servicing and United
Wholesale Mortgage will provide full advancing for the life of the
transaction. The master servicer will serve as the ultimate
advancing backstop. While this helps the liquidity of the
structure, it also increases the expected loss due to unpaid
servicer advances.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- The defined negative rating sensitivity analysis demonstrates
how the ratings would react to steeper market value declines
(MVDs) at the national level. The analysis assumes MVDs of
10.0%, 20.0% and 30.0%, in addition to the model projected
42.3% at 'AAA'. The analysis indicates that there is some
potential rating migration with higher MVDs for all rated
classes, compared with the model projection. Specifically, a
10% additional decline in home prices would lower all rated
classes by one full category.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- The defined positive rating sensitivity analysis demonstrates
how the ratings would react to positive home price growth of
10% with no assumed overvaluation. Excluding the senior class,
which is already rated 'AAAsf', the analysis indicates there
is potential positive rating migration for all of the rated
classes. Specifically, a 10% gain in home prices would result
in a full category upgrade for the rated class excluding those
being assigned ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up- and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
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 AMC Diligence LLC, Opus Capital Market Consultants,
Consolidated Analytics Inc., Evolve Mortgage Services LLC, and
Infinity International Processing Services Inc. The third-party due
diligence described in Form 15E focused on a review of credit,
regulatory compliance and property valuation for each loan and is
consistent with Fitch criteria for RMBS loans.
Fitch considered this information in its analysis and, as a result,
Fitch made the following adjustment to its analysis: a 5% reduction
to each loan's probability of default. This adjustment resulted in
a 29bps reduction to the 'AAAsf' expected loss.
DATA ADEQUACY
Fitch relied in its analysis on an independent third-party due
diligence review performed on 100% of the pool. The third-party due
diligence was consistent with Fitch's "U.S. RMBS Rating Criteria."
AMC Diligence LLC, Opus Capital Market Consultants, Consolidated
Analytics Inc., Evolve Mortgage Services LLC, and Infinity
International Processing Services Inc were engaged to perform the
review. Loans reviewed under this engagement were given compliance,
credit and valuation grades and assigned initial grades for each
subcategory. Minimal exceptions and waivers were noted in the due
diligence reports.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
HERTZ VEHICLE III: Moody's Assigns Ba2 Rating to 3 Tranches
-----------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to the
Series 2022-3, Series 2022-4 and Series 2022-5 Rental Car Asset
Backed Notes issued by Hertz Vehicle Financing III LLC (HVF III or
the Issuer), Hertz's rental car ABS facility.
The Series 2022-3 Notes, the Series 2022-4 Notes and the Series
2022-5 Notes (the notes) have legal final maturity dates in March
2025, September 2026, and September 2028, respectively. The Issuer
is a Delaware limited liability company, which is a
bankruptcy-remote special purpose entity and direct subsidiary of
The Hertz Corporation (Hertz; B2 stable). The collateral backing
the notes is a fleet of vehicles and a single operating lease of
the fleet to Hertz for use in its rental car business, as well as
certain manufacturer and incentive rebate receivables owed to the
issuer by the original equipment manufacturers (OEMs).
Moody's also announced that the issuance of the notes, in and of
itself and at this time, will not result in a reduction,
withdrawal, or placement under review for possible downgrade of any
of the ratings currently assigned to the outstanding series of
notes issued by the Issuer.
The complete rating actions are as follows:
Issuer: Hertz Vehicle Financing III LLC
Series 2022-3 Rental Car Asset Backed Notes, Class A, Definitive
Rating Assigned Aaa (sf)
Series 2022-3 Rental Car Asset Backed Notes, Class B, Definitive
Rating Assigned A2 (sf)
Series 2022-3 Rental Car Asset Backed Notes, Class C, Definitive
Rating Assigned Baa2 (sf)
Series 2022-3 Rental Car Asset Backed Notes, Class D, Definitive
Rating Assigned Ba2 (sf)
Series 2022-4 Rental Car Asset Backed Notes, Class A, Definitive
Rating Assigned Aaa (sf)
Series 2022-4 Rental Car Asset Backed Notes, Class B, Definitive
Rating Assigned A2 (sf)
Series 2022-4 Rental Car Asset Backed Notes, Class C, Definitive
Rating Assigned Baa2 (sf)
Series 2022-4 Rental Car Asset Backed Notes, Class D, Definitive
Rating Assigned Ba2 (sf)
Series 2022-5 Rental Car Asset Backed Notes, Class A, Definitive
Rating Assigned Aaa (sf)
Series 2022-5 Rental Car Asset Backed Notes, Class B, Definitive
Rating Assigned A2 (sf)
Series 2022-5 Rental Car Asset Backed Notes, Class C, Definitive
Rating Assigned Baa2 (sf)
Series 2022-5 Rental Car Asset Backed Notes, Class D, Definitive
Rating Assigned Ba2 (sf)
RATINGS RATIONALE
The definitive ratings are based on (1) the credit quality of the
collateral in the form of rental fleet vehicles, which Hertz uses
in its rental car business, (2) the credit quality of Hertz as the
primary lessee and guarantor under the operating lease, (3) the
experience and expertise of Hertz as sponsor and administrator, (4)
credit enhancement, which will consist of subordination and
over-collateralization, (5) a required liquidity amount in the form
of cash and/or a letter of credit, (6) the transaction's legal
structure, including standard bankruptcy remoteness and security
interest provisions, and (7) vastly improved rental car market
conditions, owing to the tight supply and increasing demand.
The Series 2022-3, Series 2022-4 and Series 2022-5 Class A, Class
B, and Class C Notes benefit from subordination of 32.5%, 22.0%,
and 13.0% of the outstanding balance of the Series 2022-3, Series
2022-4 and Series 2022-5 Notes, respectively. Additionally, the
Series 2022-3, Series 2022-4 and Series 2022-5 Notes benefit from
overcollateralization and a liquidity reserve to cover at least six
months of interest on the notes, plus 50 basis points of expenses.
As in prior issuances, the transaction documents stipulate that the
required credit enhancement for the Series 2022-3, Series 2022-4
and Series 2022-5 Notes, sized as a percentage of the total assets,
will be a blended rate, which is a function of Moody's ratings on
the OEMs and defined asset categories as described below:
5.00% for eligible program vehicle and receivable amount from
investment grade manufacturers (any manufacturer that (i) has a
Moody's long-term senior unsecured rating or long-term corporate
family rating of at least Baa3 and (ii) does not have a Moody's
long-term corporate family rating and has a Moody's senior
unsecured rating of at least Ba1)
8.00% for eligible program vehicle amount from non-investment
grade manufacturers
15.00% for eligible non-program vehicle amount from investment
grade manufacturers
15.00% for eligible non-program vehicle amount from non-investment
grade manufacturers
8.00% for eligible program receivable amount from non-investment
grade (high) manufacturers (any manufacturer that (i) is not an
investment grade manufacturer and (ii) has a long-term senior
unsecured rating or long-term corporate family rating of at least
Ba3)
100.00% for eligible program receivable amount from non-investment
grade (low) manufacturers (any manufacturer that has a long-term
senior unsecured rating or long-term corporate family rating of
less than Ba3)
35.0% for medium-duty truck amount
0.00% for cash amount
100% for remainder Aaa amount
Consequently, the actual required amount of credit enhancement will
fluctuate based on the mix of vehicles and receivables in the
securitized fleet. Furthermore, the transaction documents dictate
that the total enhancement should include a minimum portion which
is liquid (in cash and/or letter of credit), sized as a percentage
of the aggregate Class A, B, C, and D principal amount, net of
cash.
Assumptions Moody's applied in the analysis of this transaction:
Risk of sponsor default: Moody's assumed a 60% decrease in the
probability of default (from Moody's idealized default probability
tables) implied by the B2 rating of the sponsor. This reduction
reflects Moody's view that, in the event of a bankruptcy, Hertz
would be more likely to reorganize under a Chapter 11 bankruptcy
filing, as it would likely realize more value as an ongoing
business concern than it would if it were to liquidate its assets
under a Chapter 7 filing. Furthermore, given the sponsor's
competitive position within the rental car industry and the size of
its securitized fleet relative to its overall fleet, the sponsor is
likely to affirm its lease payment obligations in order to retain
the use of the fleet and stay in business. Moody's arrive at the
60% decrease assuming a 80% probability Hertz would reorganize
under a Chapter 11 bankruptcy and a 75% probability Hertz would
affirm its lease payment obligations in the event of a Chapter 11
bankruptcy.
Disposal value of the fleet: Moody's assumed the following haircuts
to the net book value (NBV) of the vehicle fleet:
Non-Program Haircut upon Sponsor Default (Car): Mean: 19%
Non-Program Haircut upon Sponsor Default (Car): Standard Deviation:
6%
Non-Program Haircut upon Sponsor Default (Truck): Mean: 35%
Non-Program Haircut upon Sponsor Default (Truck): Standard
Deviation: 8%
Non-Program Haircut upon Sponsor Default (Tesla): Mean: 24%
Non-Program Haircut upon Sponsor Default (Tesla): Standard
Deviation: 10%
Fixed Program Haircut upon Sponsor Default: 10%
Additional Fixed Non-Program Haircut upon Manufacturer Default
(Car): 20%
Additional Fixed Non-Program Haircut upon Manufacturer Default
(Truck): 10%
Additional Fixed Non-Program Haircut upon Manufacturer Default
(Tesla): 50%
Fleet composition -- Moody's assumed the following fleet
composition (based on NBV of vehicle fleet):
Non-program Vehicles: 95%
Program Vehicles: 5%
Non-program Manufacturer Concentration (percentage, number of
manufacturers, assumed rating):
Aa/A Profile: 10.0%, 2, A3
Baa Profile: 45.0%, 2, Baa3
Ba/B Profile: 20.0%, 1, Ba3; 25.0%, 1, Ba1
Program Manufacturer Concentration (percentage, number of
manufacturers, assumed rating):
Aa/A Profile: 0.0%, 0, A3
Baa Profile: 50.0%, 1, Baa3
Ba/B Profile: 50.0%, 1, Ba3
Manufacturer Receivables: 10%; receivables distributed in the same
proportion as the program fleet (Program Manufacturer Concentration
and Manufacturer Receivables together should add up to 100%)
Correlation: Moody's applied the following correlation
assumptions:
Correlation among the sponsor and the vehicle manufacturers: 10%
Correlation among all vehicle manufacturers: 25%
Default risk horizon -- Moody's assumed the following default risk
horizon:
Sponsor: 5 years
Manufacturers: 1 year
A fixed set of time horizon assumptions, regardless of the
remaining term of the transaction, is used when considering sponsor
and manufacturer default probabilities and the expected loss of the
related liabilities, which simplifies Moody's modeling approach
using a standard set of benchmark horizons.
Detailed application of the assumptions are provided in the
methodology.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Rental Vehicle
Securitizations Methodology" published in October 2021.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the ratings of the Series 2022-3, 2022-4 and
2022-5 Notes if (1) the credit quality of the lessee improves, (2)
assumptions of the credit quality of the pool of vehicles
collateralizing the transaction were to improve, as reflected by a
stronger mix of program and non-program vehicles and stronger
credit quality of vehicle manufacturers, (3) the residual values of
the non-program vehicles collateralizing the transaction were to
increase materially relative to Moody's expectations.
Down
Moody's could downgrade the ratings of the Series 2022-3, 2022-4
and 2022-5 Notes if (1) the credit quality of the lessee
deteriorates or a corporate liquidation of the lessee were to occur
and introduce operational complexity in the liquidation of the
fleet, (2) assumptions of the credit quality of the pool of
vehicles collateralizing the transaction were to weaken, as
reflected by a weaker mix of program and non-program vehicles and
weaker credit quality of vehicle manufacturers, (3) reduced demand
for used vehicles results in lower sales volumes and sharp declines
in used vehicle prices above Moody's assumed depreciation, or (4)
the residual values of the non-program vehicles collateralizing the
transaction were to decrease materially relative to Moody's
expectations.
HIN TIMESHARE 2020-A: Fitch Affirms B Rating on Class E Debt
------------------------------------------------------------
Fitch Ratings has affirmed all the outstanding ratings of Orange
Lake Timeshare Trust (OLTT) series 2015-A, 2016-A, 2018-A and
2019-A and HIN Timeshare Trust (HINTT) 2020-A. Fitch notes that
across all the aforementioned transactions, the seller has
exercised the option to repurchase and substitute all defaults,
resulting in zero net losses to date.
DEBT RATING PRIOR
---- ------ -----
Orange Lake Timeshare Trust 2015-A
A 68504TAA2 LT Asf Affirmed Asf
B 68504TAB0 LT BBBsf Affirmed BBBsf
Orange Lake Timeshare Trust 2016-A
A 68504LAA9 LT Asf Affirmed Asf
B 68504LAB7 LT BBBsf Affirmed BBBsf
Orange Lake Timeshare Trust 2018-A
A 68504WAA5 LT AAAsf Affirmed AAAsf
B 68504WAB3 LT Asf Affirmed Asf
C 68504WAC1 LT BBBsf Affirmed BBBsf
Orange Lake Timeshare Trust 2019-A
A 68504UAA9 LT AAAsf Affirmed AAAsf
B 68504UAB7 LT Asf Affirmed Asf
C 68504UAC5 LT BBBsf Affirmed BBBsf
D 68504UAD3 LT BBsf Affirmed BBsf
HIN Timeshare Trust 2020-A
A 40439HAA7 LT AAAsf Affirmed AAAsf
B 40439HAB5 LT Asf Affirmed Asf
C 40439HAC3 LT BBBsf Affirmed BBBsf
D 40439HAD1 LT BBsf Affirmed BBsf
E 40439HAE9 LT Bsf Affirmed Bsf
KEY RATING DRIVERS
The affirmation of the notes reflects loss coverage levels
consistent with their current ratings. The Stable Rating Outlook
for all classes of notes reflects Fitch's expectation that loss
coverage levels will remain supportive of these ratings.
As of the March 2022 collection period, the 61+ day delinquency
rates for OLTT 2015-A, 2016-A, 2018-A, 2019-A, and HINTT 2020-A
were 1.09%, 1.70%, 1.51%, 2.82% and 2.75% respectively. Cumulative
gross defaults (CGD's) adjusted for substitutions are currently at
19.56%, 22.76%, 21.64%, 24.69% and 11.37% respectively. All
transactions are tracking above their initial base cases of 19.70%,
18.00%, 17.60%, 21.50% and 24.00% respectively. Due to optional
repurchases and substitutions by the seller, none of the
transactions have experienced a net loss to date.
While CGD's in 2019-A continue to remain elevated and above Fitch's
initial base case proxy, default pace has declined or stabilized
across all outstanding transactions. Given the more stable
performance trends and positive signs within the travel and tourism
industries that are highly correlated with timeshare ABS, all
outstanding notes in 2019-A have been affirmed (Outlooks Stable)
for classes A and B.
To account for recent performance in 2015-A, Fitch revised the
lifetime CGD proxy down from 22.00% to 21.00%, while maintaining
proxies from the prior review for OLTT 2016-A, 2018-A, 2019-A and
HINTT 2020-A at 24.50%, 25.00%, 30.00% and 24.00%. The updated base
case default proxy for 2015-A was conservatively derived using
extrapolations based on performance to date.
In certain cases, updated extrapolations were higher than the final
CGD proxies. However, Fitch's analysis does not give any explicit
credit to previously repurchased defaults, resulting in zero losses
on the outstanding transactions. When accounting for previously
repurchased defaults, the lifetime CGDs are materially lower than
the CGD proxies. As such, Fitch believes the CGD proxies are
appropriately conservative and account for the weaker performance.
Under Fitch's stressed cash flow assumptions, loss coverage for the
notes were consistent with the recommended multiples, any
shortfalls were considered nominal and are within the range of the
multiples for the current ratings.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Unanticipated increases in the frequency of defaults could
produce default levels higher than the projected base case
default proxy and impact available loss coverage and multiples
levels for the transactions;
-- Fitch ran a down sensitivity for each transaction that would
raise the CGD proxy by 2.0x the current proxy. This is
extremely stressful to the transactions and could result in
downgrades of up to three categories.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- Fitch applied an up sensitivity by reducing the base case
proxy by 20%. The impact of reducing the proxies by 20% from
the recommended proxies could result in one to two category
upgrades or affirmations of ratings with stronger multiples.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
JP MORGAN 2011-C3: Fitch Affirms C Rating on 2 Tranches
-------------------------------------------------------
Fitch Ratings affirms four classes of Deustche Bank Securities COMM
2010-C1 commercial mortgage pass-through certificates (COMM
2010-C1). The Rating Outlook for class D has been revised to Stable
from Negative.
Fitch Ratings has affirmed seven classes of J.P. Morgan Chase
Commercial Mortgage Securities Corp., Commercial Mortgage
Pass-Through Certificates, series 2011-C3 (JPMCC 2011-C3). The
Outlooks on classes B and C were revised to Stable from Negative.
DEBT RATING PRIOR
---- ------ -----
COMM 2010-C1
C 12622DAJ3 LT PIFsf Paid In Full Asf
D 12622DAK0 LT BBsf Affirmed BBsf
E 12622DAL8 LT CCCsf Affirmed CCCsf
F 12622DAM6 LT CCsf Affirmed CCsf
G 12622DAN4 LT CCsf Affirmed CCsf
JPMCC 2011-C3
B 46635TAU6 LT Asf Affirmed Asf
C 46635TAX0 LT BBBsf Affirmed BBBsf
D 46635TBA9 LT BBsf Affirmed BBsf
E 46635TBD3 LT CCCsf Affirmed CCCsf
G 46635TBK7 LT CCsf Affirmed CCsf
H 46635TBN1 LT Csf Affirmed Csf
J 46635TBR2 LT Csf Affirmed Csf
TRANSACTION SUMMARY
COMM 2010-C1:
There is one loan remaining in the pool, Fashion Outlets of Niagara
Falls, which transferred to special servicing in July 2020 for
imminent maturity default and is sponsored by The Macerich Company.
The loan is secured by an outlet mall with collateral originally
consisting of approximately 525,663 sf located in Niagara, NY near
the U.S. and Canada border. The property is heavily reliant on
tourism; prior to the pandemic the property suffered from
fluctuating occupancy and significantly lower sales since
issuance.
The loan was modified by the special servicer in December 2020.
Modification terms included an extension of the maturity date to
Oct. 6, 2023; as well as the borrower pledging an additional
181,447 sf in non-collateral (Expansion Property) to the loan. The
Expansion Property is connected to the main building of the
existing collateral, total collateral square feet is now 707,110
sf. No other payment terms were modified and the borrower is
responsible for all fees. The loan has been performing according to
the modified terms since March 2021.
As of June 2021, reported occupancy and debt service coverage ratio
are 81% and 1.35x. The YE 2019 sales were $305psf for the in-line
tenants; at issuance in-line sales were $520 psf. Fitch requested
updated sales, financial statements, including statements for the
Expansion Property, along with other updated performance details
but the borrower did not provide details.
Fitch's loss and recovery analysis considered the updated
valuations from the special servicer, as well as the continued
amortization of the loan through the extended maturity date. Loss
estimates were based on a broker opinion of value with an applied
stress which resulted in an implied cap rate of approximately 19%.
Recoveries were also reviewed using a sensitivity assumption
applying a 25% cap rate.
The revision of the Outlook of class D to Stable reflects the
improved recovery assumptions considering the de-levering of the
loan, the continued performance post-modification. At the current
loan balance, recoveries required to pay off class D using the
total pledged collateral of 707,110 sf are $63 psf. Losses on
classes F and G are still considered probable based on the updated
value of the asset.
JPMCC 2011-C3:
Two regional malls remain, both of which are sponsored by The
Pyramid Companies. The loans were modified in October 2020 which
extended their loan terms by 36 months to January/February 2024 and
converted the remaining payments to interest-only.
The Holyoke Mall loan is secured by a 1.3 million-sf portion of a
1.5 million-sf regional mall in Holyoke, MA, and was transferred to
special servicing in May 2020 due to imminent default.
Collateral occupancy declined to 73.6% as of the December 2020 rent
roll, from 78% at YE 2019, 73.6% at YE 2018 and 88.1% at YE 2017.
YE 2020 inline sales fell to $423 psf ($342 psf excluding Apple)
from $604 psf ($481 psf) in 2019 and $568 psf ($464 psf) in 2018.
Macy's reported estimated sales of $205 psf for 2020, down from
$275 at issuance. Target reported estimated sales of $289 psf for
2020, up slightly from $284 psf at issuance. JCPenney reported
actual sales of $47 psf in 2020, down from $161 psf at issuance.
Fitch requested updated performance information, including sales,
but did not receive any details.
Fitch's loss and recovery analysis was based on a discount to an
updated valuation provided by the special servicer with an implied
cap rate of approximately 17%. Recoveries were also reviewed using
a sensitivity assumption applying an outsize loss of 50%.
The Sangertown Square loan is secured by an 894,127 sf-regional
mall located in New Hartford, NY. The loan transferred to special
servicing in May 2020 due to imminent default.
Collateral occupancy fell to 58% as of September 2021 from 60% in
December 2020 and from 95% at YE 2019 after JCPenney (16.8% of NRA)
closed in September 2020 and Macy's (15.6%) closed in April 2021.
Sears previously vacated in 2015, but the space was backfilled by
Boscov's; however, cash flow has been negatively affected as Sears
paid approximately $1.2 million in expense reimbursements annually,
whereas Boscov's pays none.
YE 2020 inline sales fell to $238 psf from $326 psf as of TTM
September 2018, $319 psf at TTM October 2017 and an average $363
psf between 2007 and 2009. Anchor sales as of YE 2020 were as
follows: Boscov's ($112 psf down from $118 psf in 2018), Target
($306 psf estimated) and Dick's ($183 psf, up from $178 psf at
issuance). YE 2020 total mall sales decreased by 25.6% to $103.58
million from $139.16 million at YE 2019.
Fitch's loss and recovery analysis was based on an updated
valuation provided by the special servicer with an implied cap rate
of approximately 33%.
The revision of the Outlooks on classes B and C to Stable reflects
the continued performance post-modification of the two loans and
review of the recovery assumptions based on the updated valuations.
Recoveries on both properties combined to pay off classes B and C
are $14.4 psf and $37.6 psf, respectively. The Negative Outlook on
class D reflects the concerns with the lack of YE 2021 performance
data including sales updates and the potential for downgrades if
the loans re-default.
The Outlook may also be revised to Stable if updated information
indicating stable to improved performance is received. Recoveries
required on class D are $53.3 psf. Losses on classes E and G
through J are still considered possible, probable, or inevitable
based on the updated value of the assets.
KEY RATING DRIVERS
High Expected Losses; Insufficient Credit Enhancement to Junior
Classes: Both transactions' expected losses remain stable from the
previous Fitch rating actions. The transactions are concentrated
with either one or two mall assets remaining. All loans have been
modified and losses are expected to impact or significantly erode
credit enhancement to the junior classes with distressed ratings.
High Credit Enhancement to Senior Classes: Both transactions' most
senior bonds have a high likelihood of recovery given the
amortization and de-levering, and/or performance stabilization.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downgrades are possible if performance of the malls
deteriorate or the loans default prior to the extended
maturity dates.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrades are not expected, but possible with better than
expected performance of the remaining malls.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
JP MORGAN 2012-C8: DBRS Confirms B Rating on Class G Certs
----------------------------------------------------------
DBRS, Inc. confirmed its ratings on the following classes of
Commercial Mortgage Pass-Through Certificates, Series 2012-C8
issued by J.P. Morgan Chase Commercial Mortgage Securities Trust
2012-C8:
-- Class A-3 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AAA (sf)
-- Class C at AA (low) (sf)
-- Class EC at AA (low) (sf)
-- Class D at A (low) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (sf)
-- Class X-B at B (high) (sf)
-- Class G at B (sf)
DBRS Morningstar changed the trends for Classes E and F to Negative
from Stable, while the trends for Classes G and X-B remain
Negative. All other classes have Stable trends. The trend changes
reflect significant exposure to three of the largest loans in the
pool, which are at increased risk of maturity default based on low
occupancy and DBRS Morningstar's valuation projections.
The rating confirmations reflect sufficient credit support relative
to DBRS Morningar's overall recovery expectations for the pool's
remaining loans. There are no loans in special servicing as of the
January 2022 remittance report. In addition, defeasance increased
considerably over the past 12 months, representing 40.7% of the
trust balance as of January 2022. Since the last rating action, The
Battlefield Mall loan (Prospectus ID#1; 16.7% of the trust balance)
defeased, resulting in reduced credit risk for the trust.
At issuance, the trust comprised 43 fixed-rate loans secured by 84
commercial properties with a $1.14 billion trust balance. According
to the January 2022 remittance, 27 loans secured by 29 properties
remain in the trust with a trust balance of $657.0 million,
representing a 42.2% collateral reduction since issuance. Loans
representing 94.8% of the trust balance are scheduled to mature by
year-end (YE)2022 with most loan maturities occurring in the second
half of 2022. DBRS Morningstar has identified three loans with
increased maturity default risk: Gallery at Harborplace (Prospectus
ID#4; 10.4% of the trust balance), Ashford Office Complex
(Prospectus ID#5; 7.7% of the trust balance) and The Crossings
(Prospectus ID#9; 4.7% of the trust balance).
The Gallery at Harborplace loan is secured by a mixed-use property
consisting of office and retail space in downtown Baltimore. The
loan has been on the servicer's watchlist since November 2020
because of a low debt service coverage ratio (DSCR) primarily
driven by low occupancy and considerable increases in operating
costs. The property has been negatively affected by the Coronavirus
Disease (COVID-19) pandemic and the loss of several smaller retail
tenants, resulting in an occupancy decline to 41% as of June 2021
from 79% as of December 2019. The Baltimore Sun reported in
September 2021 that all retail tenants at the property have been
told to vacate by the end of the year while the borrower
reconsiders its plans for the building. The mayor of Baltimore
announced plans to work with the borrower on major upgrades to the
property in an effort to reinvigorate consumer traffic to the
downtown core. The loan sponsor, Brookfield Properties, has not
made public its plans for repositioning the subject.
The Ashford Office Complex loan is secured by three Class B office
buildings in the heart of the Energy Corridor of Houston. The loan
has been on the DBRS Morningstar Hotlist since March 2020 as
performance has been negatively affected amid volatility within the
oil and gas industry. Occupancy declined in 2018 to 51%, and soft
submarket conditions have been exacerbated by the pandemic, with
occupancy falling further to 47.2% as of September 2021. The
borrower has been covering operating shortfalls for several years
as well as funding various capex projects. DBRS Morningstar
believes the current collateral value is below the loan balance.
The Crossings is secured by two mid-rise, Class A office buildings
in Dallas and is being monitored for occupancy declines and low
DSCR. The property was 53.6% occupied as of September 2021, and net
cash flow has declined more than 70% since issuance. This
deterioration is attributed to the weak submarket market
conditions. The loan benefits from a modest 69.8% going-in
loan-to-value ratio and the continued loan amortization since
issuance. DBRS Morningstar believes the collateral value is
considerably below the appraised value at issuance and the borrower
has a limited amount of implied equity remaining in the subject.
Notes: All figures are in U.S. dollars unless otherwise noted.
JP MORGAN 2014-C25: Fitch Affirms CC Rating on 2 Tranches
---------------------------------------------------------
Fitch Ratings has affirmed 16 classes of J.P. Morgan Chase
Commercial Mortgage Securities Corp. (JPMBB) Commercial Mortgage
Pass-Through Certificates 2014-C25. The Rating Outlook remains
Negative on two classes.
DEBT RATING PRIOR
---- ------ -----
JPMBB 2014-C25
A-4A1 46643PBD1 LT AAAsf Affirmed AAAsf
A-4A2 46643PAA8 LT AAAsf Affirmed AAAsf
A-5 46643PBE9 LT AAAsf Affirmed AAAsf
A-S 46643PBJ8 LT AAAsf Affirmed AAAsf
A-SB 46643PBF6 LT AAAsf Affirmed AAAsf
B 46643PBK5 LT AA-sf Affirmed AA-sf
C 46643PBL3 LT A-sf Affirmed A-sf
D 46643PAN0 LT B-sf Affirmed B-sf
E 46643PAQ3 LT CCCsf Affirmed CCCsf
EC 46643PBM1 LT A-sf Affirmed A-sf
F 46643PAS9 LT CCsf Affirmed CCsf
X-A 46643PBG4 LT AAAsf Affirmed AAAsf
X-B 46643PBH2 LT AA-sf Affirmed AA-sf
X-D 46643PAE0 LT B-sf Affirmed B-sf
X-E 46643PAG5 LT CCCsf Affirmed CCCsf
X-F 46643PAJ9 LT CCsf Affirmed CCsf
KEY RATING DRIVERS
Stable Loss Expectations: The affirmations reflect the stable loss
expectations for the pool since Fitch's prior rating action.
Fitch's current ratings incorporate a base case loss of 8.80%.
Fitch has identified 13 loans (25.3% of the pool) as Fitch Loans of
Concern (FLOCs), which includes five loans (10.0%) in special
servicing.
The Stable Rating Outlooks reflect the increasing credit
enhancement (CE) and expected continued amortization. The Negative
Rating Outlooks on classes D and X-D reflect the potential for
downgrades due to performance and refinance concerns associated
with the FLOCs, primarily the Mall at Barnes Crossing and Market
Center Tupelo loan.
Regional Mall FLOC: The largest contributor to losses is the Mall
at Barnes Crossing and Market Center Tupelo loan (6.7% of the
pool), which is secured by a 608,533-sf collateral portion of a
709,487-sf regional mall and strip shopping center in Tupelo, MS.
The loan transferred to special servicing in December 2020 due to
payment default as a result of the pandemic, and transferred back
to the master servicer in July 2021 after the loan was brought
current with no modification of the loan.
Collateral occupancy has declined to 78.4% as of September 2021,
compared to 83% at YE 2019 and 96% in 2018. The total mall
occupancy was 81.5% as of September 2021. Occupancy had
significantly declined in February 2019 after collateral tenant
Sears (previously 13.1% NRA) vacated. Recent lease renewals include
Barnes and Noble (4.2%) through January 2025, and Belk Home and
Men's (14.2%) through October 2025. Also at the center is
collateral anchor JCPenney (14.2%), which had previously extended
its lease through March 2025, and a 100,954 non-collateral Belk.
Lease expirations in 2022 consists of 18.4% of the NRA, which
includes Dick's Sporting Goods (8.2%) whose lease expired in
January 2022 and an extension is currently under servicer review.
Prior to the pandemic, inline sales for tenants occupying less than
10,000 sf had declined to $353 psf as of TTM ended March 2020 from
$398 psf as of TTM June 2019 and $379 psf at issuance. Updated
tenant sales were not provided by the servicer. The
servicer-reported NOI DSCR fell to 1.41x as of YTD September 2021
from 1.73x as of YE 2020.
Fitch's base case loss expectation of approximately 55.5% is based
on 20% cap rate and 20% haircut to the YE 2020 NOI, due to concerns
about the tertiary regional mall location, declining occupancy and
lack of updated sales information. In addition, Fitch's analysis
reflects concerns about the sponsor's commitment and recent payment
default in addition to refinance concerns at the upcoming September
2024 maturity.
Specially Serviced Loans: The largest specially serviced loan and
second largest contributor to losses is the Hilton Houston Post Oak
(4.5% of the pool), which is secured by the leasehold interest in a
15-story, 448-key full-service hotel located in Houston, TX. The
loan transferred to special servicing in May 2020 at the borrower's
request due to pandemic-related performance declines. The borrower
has since filed Chapter-11 bankruptcy.
The property had sustained performance declines prior to the
pandemic due to the downturn in the energy sector, and Hurricane
Harvey disrupting the local economy. The servicer reported
occupancy, ADR, and RevPAR of 46%, $139, and $64 as of TTM January
2022, which compares to 74%, $147, and $108 at YE 2019,
respectively. Fitch's loss expectation of 35% reflects a discount
to the most recent servicer provided appraised value, and reflects
a stressed value of approximately $131,000 per key, which equates
to an 11.5% cap rate off the pre-pandemic YE 2019 NOI.
The second largest specially serviced loan is Southport Plaza (2.7%
of the pool), which is currently 90+ days delinquent and secured by
a mixed-use property in Staten Island, NY. The collateral has
remained at 82% occupancy since 2019 after First Data Corporation
(17.8% NRA) vacated at its May 2019 lease expiration. While NOI has
declined as a result, DSCR remains high at 2.98x as of YTD
September 2021. The most recent appraised values provided by the
servicer indicate a value significantly over the current debt
amount. Fitch modeled a minor loss to account for potential special
servicing fees.
The remaining three specially serviced loans account for less than
1.0% of the current pool balance with loss expectations ranging
from 2.5% up to 45.6%.
Increased Credit Enhancement: While the Credit Enhancement (CE) for
classes A-4A1 through C have increased since the prior rating
action due to amortization and proceeds from loan disposition and
payoff. The CE has declined for classes D through F due to incurred
losses in the pool. Since Fitch's prior rating action, two loans
were disposed while in special servicing with a combined loss of
$5.8 million absorbed by class NR. In addition, one loan (2.1% of
the prior pool balance) had prepaid with yield maintenance.
As of the March 2022 distribution date, the pool's aggregate
balance has been reduced by 22.3% to $919.8 million from $1,184.3
million, including 1.2% in realized losses. Eight loans (11.9%) are
fully defeased. Five loans (19.6% of the pool) are full-term,
interest-only and all loans that had partial interest-only periods
at issuance are currently amortizing. Loan maturities are
concentrated in 2024 (98.6%) and 2025 (1.4%).
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- An increase in pool level losses from underperforming or
specially serviced loans. Downgrades of classes A-4A1, A-4A2,
A-5, A-SB, A-S and X-A are not considered likely due to their
position in the capital structure, but may occur should
interest shortfalls affect these classes.
-- Downgrades of the 'Asf' and 'AAsf' categories would occur
should expected losses for the pool increase substantially,
all of the loans susceptible to the coronavirus pandemic
suffer losses, the Mall at Barnes Crossing and Market Center
Tupelo incur outsized losses and/or if interest shortfalls
occur.
-- A downgrade of the 'Bsf' category would occur should loss
expectations increase and if performance of the FLOCs or loans
vulnerable to the coronavirus pandemic fail to stabilize or
additional loans default and/or transfer to the special
servicer.
-- Further downgrades of the 'CCsf' and 'CCCsf' rated classes
would occur with increased certainty of losses or as losses
are realized.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Stable to improved asset performance coupled with pay down
and/or defeasance. Upgrades of the 'Asf' and 'AAsf' categories
would only occur with significant improvement in CE and/or
defeasance and with the stabilization of performance on the
FLOCs, particularly the Mall at Barnes Crossing and Market
Center Tupelo.
-- An upgrade to the 'Bsf' category is not likely until the later
years in a transaction and only if the performance of the
remaining pool is stable and/or properties vulnerable to the
coronavirus return to pre-pandemic levels, and there is
sufficient CE to the classes. Classes would not be upgraded
above 'Asf' if there is likelihood for interest shortfalls.
-- Upgrades to the 'CCsf' and 'CCCsf' categories are unlikely
absent significant performance improvement on the FLOCs and
substantially higher recoveries than expected on the specially
serviced loans.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
JP MORGAN 2017-JP6: Fitch Affirms B- Rating on Class G-RR Certs
---------------------------------------------------------------
Fitch Ratings has affirmed 14 classes of JP Morgan Chase Commercial
Mortgage Securities Trust (JPMCC) Commercial Mortgage Pass-Through
Certificates 2017-JP6. In addition, the Rating Outlooks for classes
F-RR and G-RR have been revised to Stable from Negative.
DEBT RATING PRIOR
---- ------ -----
JPMCC 2017-JP6
A-2 48128KAR2 LT AAAsf Affirmed AAAsf
A-3 48128KAS0 LT AAAsf Affirmed AAAsf
A-4 48128KAT8 LT AAAsf Affirmed AAAsf
A-5 48128KAU5 LT AAAsf Affirmed AAAsf
A-S 48128KAX9 LT AAAsf Affirmed AAAsf
A-SB 48128KBA8 LT AAAsf Affirmed AAAsf
B 48128KAY7 LT AA-sf Affirmed AA-sf
C 48128KAZ4 LT A-sf Affirmed A-sf
D 48128KAA9 LT BBB+sf Affirmed BBB+sf
E-RR 48128KAC5 LT BBB-sf Affirmed BBB-sf
F-RR 48128KAE1 LT BB-sf Affirmed BB-sf
G-RR 48128KAG6 LT B-sf Affirmed B-sf
X-A 48128KAV3 LT AAAsf Affirmed AAAsf
X-B 48128KAW1 LT A-sf Affirmed A-sf
KEY RATING DRIVERS
Improved Loss Expectations: Fitch's base case loss expectation have
declined since Fitch's prior rating action. Fitch's current ratings
incorporate a base case loss of 3.0%. The Outlook revision to
Stable on classes F-RR and G-RR reflects improved valuations and
stabilization of several loans that experienced pandemic-related
declines.
Ten loans (37% of the pool) have been identified as Fitch Loans of
Concern (FLOCs), including two specially serviced loans (18.5%).
This includes the largest loan in the pool, 245 Park Avenue (15%),
which transferred to special servicing due to sponsor bankruptcy.
Specially Serviced Loans: The largest loan in the pool, 245 Park
Avenue (14.9% of the pool), is secured by a 1,723,993-sf office
building located in midtown Manhattan. The loan transferred to
special servicing in November 2021 after the borrower, HNA of
China, filed for bankruptcy in October 2021. Per the special
servicer, the borrower and lender have agreed to a cash collateral
order which will require the borrower to remain current on its debt
service and reserve payments; the borrower is also required to pay
any legal and monthly servicer fees. As of March 2022, the loan
remains current and has a leasing reserve balance of $26.8
million.
Occupancy reported at 83.3% per the servicer YE 2021 reporting. The
property's major tenants include JPMorgan and Major League Baseball
(MLB), both of which have lease expirations in 2022 and sublet
their respective spaces. Houlihan Lokey, which was subleasing an
estimated 95,000 sf from J.P. Morgan, has signed a direct lease
with the borrower for a total of 148,000 sf (8.5% NRA) which will
commence in November 2022. MLB currently subleases approximately
147,000 sf (approximately 66.6% of its space) to four tenants;
Houlihan Lokey (temporary space through October 2022), National
Australia Bank and the Rockefeller Foundation at sublease rates,
which are significantly below direct lease rates for MLB. Updates
on direct leases for the MLB sub tenants were not provided by the
servicer.
The second largest specially serviced loan and largest reduction in
losses since Fitch's prior rating action is the Marriot Colorado
Springs loan (3.60%), secured by a 309-key full-service hotel
located in Colorado Springs, CO. The loan transferred to special
servicing in January 2020 for non-monetary default due to the
borrower completing a non-permitted transfer. Performance declines
followed due to the pandemic and the loan fell into payment
default, with occupancy and NOI debt service coverage ratio (DSCR)
dropping to 47% and 0.27x, respectively, by YE 2020. A forbearance
agreement has been executed with the borrower and the property
manager change and equity transfers have been addressed. The loan
was brought current and is expected to return back to the master
servicer.
Performance has improved at the property, with annualized YTD June
2021 revenues exceeding pre-pandemic levels. NOI DSCR remains low
at 0.60x due to high G&A expenses reported for YTD June 2021.
Fitch's analysis is based off the most recent servicer provided
appraised value as of June 2021, which exceeds the current exposure
for the loan. Fitch modeled a minor loss to account for special
servicing fees.
Improved Credit Enhancement: The credit enhancement (CE) for all
classes in the pool has increased due to amortization from loans
and stable loan performance. There have been no realized losses or
defeasance since issuance. Eight loans (40.8% of the pool) are
full-term, IO; 12 loans (20.6%) are currently amortizing; and 17
loans (38.6%) are still in their partial, IO periods. As of the
March 2022 distribution date, the pool's aggregate balance has been
reduced by 16.2% to $658.9 million from $786.6 million at issuance.
Cumulative interest shortfalls of $63,795 are affecting the
non-rated risk retention class.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- An increase in pool level losses from underperforming or
specially serviced loans. Downgrades to the senior classes, A-
2 through D, are not likely due to the position in the capital
structure and the high CE, but may occur at 'AAAsf' or 'AAsf'
should interest shortfalls occur.
-- Downgrades to classes D and E-RR would occur should overall
pool losses increase, or one or more large loans have an
outsized loss, which would erode CE.
-- Downgrades to class F-RR and G-RR would occur should loss
expectations increase due to an increase in specially serviced
loans, or a decline in the FLOCs' performance.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Stable to improved asset performance coupled with paydown
and/or defeasance. Upgrades of classes A-2 through C may occur
with significant improvement in CE or defeasance, but are
limited if the deal becomes susceptible to a concentration
whereby the underperformance of FLOCs cause this trend to
reverse. An upgrade to classes D and E-RR would also consider
these factors, but would be limited based on sensitivity to
concentrations or the potential for future concentration.
-- Classes would not be upgraded above 'Asf' if there were
likelihood for interest shortfalls. An upgrade to classes F-
RR, and G-RR is not likely until the later years in a
transaction, and only if the performance of the remaining pool
is stable, and if there is sufficient CE, which would likely
occur when the non-rated class is not eroded and the senior
classes payoff. Upgrades are not likely while uncertainty
surrounding the pandemic continues.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
JP MORGAN 2022-3: Fitch Gives Final B Rating to Class B-5 Debt
--------------------------------------------------------------
Fitch Ratings has assigned final ratings to J.P. Morgan Mortgage
Trust 2022-3 (JPMMT 2022-3).
DEBT RATING PRIOR
---- ------ -----
JPMMT 2022-3
A-1 LT AA+sf New Rating AA+(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
A-3 LT AAAsf New Rating AAA(EXP)sf
A-4 LT AAAsf New Rating AAA(EXP)sf
A-4-A LT AAAsf New Rating AAA(EXP)sf
A-5 LT AAAsf New Rating AAA(EXP)sf
A-5-A LT AAAsf New Rating AAA(EXP)sf
A-5-B LT AAAsf New Rating AAA(EXP)sf
A-5-C LT AAAsf New Rating AAA(EXP)sf
A-6 LT AAAsf New Rating AAA(EXP)sf
A-6-A LT AAAsf New Rating AAA(EXP)sf
A-7 LT AAAsf New Rating AAA(EXP)sf
A-7-A LT AAAsf New Rating AAA(EXP)sf
A-7-B LT AAAsf New Rating AAA(EXP)sf
A-7-C LT AAAsf New Rating AAA(EXP)sf
A-8 LT AAAsf New Rating AAA(EXP)sf
A-8-A LT AAAsf New Rating AAA(EXP)sf
A-9-A LT AAAsf New Rating AAA(EXP)sf
A-10 LT AAAsf New Rating AAA(EXP)sf
A-11 LT AAAsf New Rating AAA(EXP)sf
A-11-X LT AAAsf New Rating AAA(EXP)sf
A-11-A LT AAAsf New Rating AAA(EXP)sf
A-11-AI LT AAAsf New Rating AAA(EXP)sf
A-11-B LT AAAsf New Rating AAA(EXP)sf
A-11-BI LT AAAsf New Rating AAA(EXP)sf
A-11-C LT AAAsf New Rating AAA(EXP)sf
A-11-CI LT AAAsf New Rating AAA(EXP)sf
A-12 LT AAAsf New Rating AAA(EXP)sf
A-12-A LT AAAsf New Rating AAA(EXP)sf
A-13 LT AAAsf New Rating AAA(EXP)sf
A-13-A LT AAAsf New Rating AAA(EXP)sf
A-14 LT AAAsf New Rating AAA(EXP)sf
A-14-A LT AAAsf New Rating AAA(EXP)sf
A-15-A LT AAAsf New Rating AAA(EXP)sf
A-16-A LT AAAsf New Rating AAA(EXP)sf
A-17 LT AAAsf New Rating AAA(EXP)sf
A-17-X LT AAAsf New Rating AAA(EXP)sf
A-18 LT AAAsf New Rating AAA(EXP)sf
A-18-X LT AAAsf New Rating AAA(EXP)sf
A-19 LT AAAsf New Rating AAA(EXP)sf
A-19-X LT AAAsf New Rating AAA(EXP)sf
A-20 LT AAAsf New Rating AAA(EXP)sf
A-20-X LT AAAsf New Rating AAA(EXP)sf
A-21 LT AAAsf New Rating AAA(EXP)sf
A-21-X LT AAAsf New Rating AAA(EXP)sf
A-22 LT AAAsf New Rating AAA(EXP)sf
A-22-X LT AAAsf New Rating AAA(EXP)sf
A-23 LT AAAsf New Rating AAA(EXP)sf
A-23-X LT AAAsf New Rating AAA(EXP)sf
A-24 LT AAAsf New Rating AAA(EXP)sf
A-24-X LT AAAsf New Rating AAA(EXP)sf
A-25 LT AA+sf New Rating AA+(EXP)sf
A-25-A LT AA+sf New Rating AA+(EXP)sf
A-26 LT AA+sf New Rating AA+(EXP)sf
A-26-A LT AA+sf New Rating AA+(EXP)sf
A-27 LT AA+sf New Rating AA+(EXP)sf
A-27-A LT AA+sf New Rating AA+(EXP)sf
A-27-B LT AA+sf New Rating AA+(EXP)sf
A-X-1 LT AA+sf New Rating AA+(EXP)sf
A-X-4 LT AA+sf New Rating AA+(EXP)sf
A-X-4-A LT AA+sf New Rating AA+(EXP)sf
A-X-4-B LT AA+sf New Rating AA+(EXP)sf
B-1 LT AA-sf New Rating AA-(EXP)sf
B-1-A LT AA-sf New Rating AA-(EXP)sf
B-1-X LT AA-sf New Rating AA-(EXP)sf
B-2 LT A-sf New Rating A-(EXP)sf
B-2-A LT A-sf New Rating A-(EXP)sf
B-2-X LT A-sf New Rating A-(EXP)sf
B-3 LT BBB-sf New Rating BBB-(EXP)sf
B-4 LT BB-sf New Rating BB-(EXP)sf
B-5 LT Bsf New Rating B(EXP)sf
B-6 LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Fitch has assigned final ratings to the residential mortgage-backed
certificates issued by J.P. Morgan Mortgage Trust 2022-3 (JPMMT
2022-3) as indicated above. The certificates are supported by 891
loans with a total balance of approximately $1.003 billion as of
the cutoff date. The pool consists of prime-quality fixed-rate
mortgages from various mortgage originators.
NewRez LLC (f/k/a New Penn Financial, LLC), d/b/a Shellpoint
Mortgage Servicing (Shellpoint), will act as interim servicer for
approximately 31.3% of the pool from the closing date until the
servicing transfer date, which is expected to occur on or about
July 1, 2022. After the servicing transfer date, these mortgage
loans will be serviced by JPMorgan Chase Bank, National Association
(JPMCB). Since JPMCB will service these loans after the transfer
date, Fitch performed its analysis assuming JPMCB is the servicer
for these loans. Other servicers in the transaction include United
Wholesale Mortgage, LLC and loanDepot.com, LLC. Nationstar Mortgage
LLC (Nationstar) will be the master servicer.
All the loans qualify as safe-harbor qualified mortgage (SHQM),
agency SHQM or QM safe-harbor (average prime offer rate [APOR])
loans.
There is no exposure to Libor in this transaction. The collateral
comprises 100% fixed-rate loans, and the certificates are fixed
rate based off the net weighted average coupon (WAC) or
floating/inverse floating rate based off the SOFR index, and capped
at the net WAC. This is the 11th Fitch-rated JPMMT transaction
using SOFR as the index rate for floating/inverse floating-rate
certificates.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 11.0% above a long-term sustainable level (versus
10.6% on a national level). Underlying fundamentals are not keeping
pace with the growth in prices, which is the result of a
supply/demand imbalance driven by low inventory, low mortgage rates
and new buyers entering the market. These trends have led to
significant home price increases over the past year, with home
prices rising 19.7% YoY nationally as of September 2021.
High-Quality Mortgage Pool (Positive): The pool consists of very
high-quality, fixed-rate fully amortizing loans with maturities of
30 years. All the loans qualify as SHQM, agency SHQM or QM
safe-harbor (APOR) loans. The loans were made to borrowers with
strong credit profiles, relatively low leverage and large liquid
reserves. The loans are seasoned at an average of five months,
according to Fitch (three months per the transaction documents).
The pool has a weighted average (WA) original FICO score of 764 (as
determined by Fitch), which is indicative of very high
credit-quality borrowers. Approximately 70.0% (as determined by
Fitch) of the loans have a borrower with an original FICO score
equal to or above 750. In addition, the original WA combined loan
to value (CLTV) ratio of 71.0%, translating to a sustainable loan
to value (sLTV) ratio of 78.6%, represents substantial borrower
equity in the property and reduced default risk.
A 96.8% portion of the pool comprises non-conforming loans, while
the remaining 3.2% represents conforming loans. All the loans are
designated as QM loans, with 46.9% of the pool being originated by
a retail and correspondent channel.
The pool is comprised of 90.2% of loans where the borrower
maintains a primary residence, while 9.8% of the loans represent
second homes. Single-family homes and planned unit developments
(PUDs), townhouses, and single-family attached constitute 91.7% of
the pool, condominiums/cooperatives make up 6.8% and multifamily
homes make up 1.5%. The pool consists of loans with the following
loan purposes: purchases 46.4%), cash-out refinances (33.6%) and
rate-term refinances (19.9%).
A total of 453 loans in the pool are over $1 million, and the
largest loan is $2.99 million. Fitch determined that 19 of the
loans were made to nonpermanent residents.
Geographic Concentration (Negative): Of the loans, 49.1% of the
pool is concentrated in California. The largest MSA concentration
is in the Los Angeles-Long Beach-Santa Ana, CA MSA (20.8%),
followed by the San Francisco-Oakland-Fremont, CA MSA (9.9%) and
the Phoenix-Mesa-Scottsdale, AZ MSA (5.5%). The top three MSAs
account for 36% of the pool. As a result, there was a 1.2x PD
penalty applied for geographic concentration, which increased the
'AAAsf' loss by 0.09%.
Shifting-Interest Structure with Full Advancing (Mixed): 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 to 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.
The servicers will provide full advancing for the life of the
transaction (each servicer is expected to advance delinquent P&I on
loans that enter into a coronavirus forbearance plan). Although
full P&I advancing will provide liquidity to the certificates, it
will also increase the loan-level loss severity (LS) since the
servicer looks to recoup P&I advances from liquidation proceeds,
which results in less recoveries.
Nationstar is the master servicer and will advance if the servicer
is unable to do so. If the master servicer is unable to advance,
then the securities administrator (Citibank) will advance.
CE Floor (Positive): A CE or senior subordination floor of 0.90%
has been considered to mitigate potential tail-end risk and loss
exposure for senior tranches as the pool size declines and
performance volatility increases due to adverse loan selection and
small loan count concentration. Additionally, a junior
subordination floor of 0.60% has been considered to mitigate
potential tail-end risk and loss exposure for subordinate tranches
as the pool size declines and performance volatility increases due
to adverse loan selection and small loan count concentration.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Fitch incorporates a sensitivity analysis to demonstrate how
the ratings would react to steeper market value declines
(MVDs) than assumed at the MSA level. Sensitivity analyses was
conducted at the state and national levels to assess the
effect of higher MVDs for the subject pool as well as lower
MVDs, illustrated by a gain in home prices.
-- This defined negative rating sensitivity analysis demonstrates
how the ratings would react to steeper MVDs at the national
level. The analysis assumes MVDs of 10.0%, 20.0% and 30.0% in
addition to the model-projected 42.1% at 'AAA'. The analysis
indicates that there is some potential rating migration with
higher MVDs for all rated classes, compared with the model
projection. Specifically, a 10% additional decline in home
prices would lower all rated classes by one full category.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Fitch incorporates a sensitivity analysis to demonstrate how
the ratings would react to steeper MVDs than assumed at the
MSA level. Sensitivity analyses was conducted at the state and
national levels to assess the effect of higher MVDs for the
subject pool as well as lower MVDs, illustrated by a gain in
home prices.
-- This defined positive rating sensitivity analysis demonstrates
how the ratings would react to positive home price growth of
10% with no assumed overvaluation. Excluding the senior class,
which is already rated 'AAAsf', the analysis indicates there
is potential positive rating migration for all of the rated
classes. Specifically, a 10% gain in home prices would result
in a full category upgrade for the rated class excluding those
being assigned ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up- and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
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 SitusAMC, Clayton, Digital Risk, IngletBlair and Opus.
However, none of the loans included in the final population were
reviewed by IngletBlair. The third-party due diligence described in
Form 15E focused on four areas: compliance review, credit review,
valuation review and data integrity. Fitch considered this
information in its analysis and, as a result, Fitch decreased its
loss expectations by 0.28% at the 'AAAsf' stress due to 100% due
diligence with no material findings.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 100% of the pool. The third-party due diligence was
generally consistent with Fitch's "U.S. RMBS Rating Criteria."
SitusAMC, Clayton, Digital Risk, IngletBlair and Opus were engaged
to perform the review. However, none of the loans included in the
final population were reviewed by IngletBlair. Loans reviewed under
this engagement were given compliance, credit and valuation grades
and assigned initial grades for each subcategory. Minimal
exceptions and waivers were noted in the due diligence reports.
Refer to the "Third-Party Due Diligence" section for more detail.
Fitch also utilized data files provided by the issuer on its SEC
Rule 17g-5 designated website. Fitch received loan level
information based on the ResiPLS data layout format, and the data
are considered comprehensive. The data contained in the ResiPLS
layout data tape were reviewed by the due diligence companies, and
no material discrepancies were noted.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
JP MORGAN 2022-INV3: Fitch Gives Final B- Rating to B-5 Debt
------------------------------------------------------------
Fitch Ratings has assigned final ratings to J.P. Morgan Mortgage
Trust 2022-INV3 (JPMMT 2022-INV3).
DEBT RATING PRIOR
---- ------ -----
JPMMT 2022-INV3
A-1 LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
A-3 LT AAAsf New Rating AAA(EXP)sf
A-3-A LT AAAsf New Rating AAA(EXP)sf
A-3-B LT AAAsf New Rating AAA(EXP)sf
A-3-X LT AAAsf New Rating AAA(EXP)sf
A-4 LT AAAsf New Rating AAA(EXP)sf
A-4-A LT AAAsf New Rating AAA(EXP)sf
A-4-B LT AAAsf New Rating AAA(EXP)sf
A-4-X LT AAAsf New Rating AAA(EXP)sf
A-5 LT AAAsf New Rating AAA(EXP)sf
A-5-A LT AAAsf New Rating AAA(EXP)sf
A-5-B LT AAAsf New Rating AAA(EXP)sf
A-5-X LT AAAsf New Rating AAA(EXP)sf
A-6 LT AAAsf New Rating AAA(EXP)sf
A-6-A LT AAAsf New Rating AAA(EXP)sf
A-6-B LT AAAsf New Rating AAA(EXP)sf
A-6-X LT AAAsf New Rating AAA(EXP)sf
A-X-1 LT AAAsf New Rating AAA(EXP)sf
B-1 LT AA-sf New Rating AA-(EXP)sf
B-2 LT A-sf New Rating A-(EXP)sf
B-3 LT BBBsf New Rating BBB(EXP)sf
B-4 LT BB-sf New Rating BB-(EXP)sf
B-5 LT B-sf New Rating B-(EXP)sf
B-6 LT NRsf New Rating NR(EXP)sf
FB LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Fitch assigns final ratings to the residential mortgage-backed
certificates issued by J.P. Morgan Mortgage Trust 2022-INV3 (JPMMT
2022-INV3), as indicated. The certificates are supported by 1,024
loans with a total interest-bearing balance of approximately $622.0
million as of the cutoff date. The pool consists of prime-quality
fixed-rate mortgages (FRMs) on investor properties that were
originated by various mortgage originators.
NewRez LLC, f/k/a New Penn Financial, LLC d/b/a Shellpoint Mortgage
Servicing (Shellpoint), will act as interim servicer for
approximately 55.7% of the pool from the closing date until the
servicing transfer date, which is expected to occur on or about
July 1, 2022. After the servicing transfer date, these mortgage
loans will be serviced by JPMorgan Chase Bank, National Association
(JPMCB). Since JPMCB will be servicing these loans after the
transfer date, Fitch performed its analysis assuming JPMCB as the
servicer for these loans. Other servicers in the transaction
include United Wholesale Mortgage, LLC and loanDepot.com, LLC.
Nationstar Mortgage LLC (Nationstar) will be the master servicer.
The majority of the loans (85.5%) are exempt from qualified
mortgage (QM) rule standards, as they are investment property
mortgage loans that are for business purposes. The remaining 14.5%
are able to qualify as safe harbor qualified mortgage (SHQM),
agency SHQM, QM Agency Rebuttable Presumption or QM safe harbor
(Average Prime Offer Rate [APOR]) loans.
There is no exposure to LIBOR in this transaction. The collateral
comprises 100.0% fixed-rate loans, and the certificates are either
fixed rate or based off the net weighted average coupon (WAC).
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 11.1% above a long-term sustainable level (versus
10.6% on a national level). Underlying fundamentals are not keeping
pace with growth in prices, which is the result of a supply/demand
imbalance driven by low inventory, low mortgage rates and new
buyers entering the market. These trends have led to significant
home price increases over the past year, with home prices rising
19.7% yoy nationally as of September 2021.
High Quality Mortgage Pool (Positive): The pool consists of high
quality, fixed-rate fully amortizing loans with maturities of up to
30 years. All (100.0%) of the loans are on non-owner-occupied
properties. The loans were made to borrowers with strong credit
profiles, relatively low leverage and large liquid reserves. The
loans are seasoned at an average of six months, according to Fitch
(five months per the transaction documents). The pool has a
weighted average (WA) original FICO score of 768 (as determined by
Fitch), which is indicative of very high credit quality borrowers.
Approximately 75.8% (as determined by Fitch) of the loans have a
borrower with an original FICO score equal to or above 750.
In addition, the original WA combined loan-to-value (CLTV) ratio of
approximately 67.2% as determined by Fitch, translating to a
sustainable loan-to-value (sLTV) ratio of 73.7%, represents
substantial borrower equity in the property and reduced default
risk.
Nine loans in the pool had a COVID-19 deferred balance, which
totaled $201,865.66. The deferred balances are being allocated to a
non-rated class (class FB). As such, any deferred balances were
treated as a junior loan amount in Fitch's analysis and the CLTV
was increased for the loans with deferred balances. This resulted
in a higher loss severity for these loans.
A 63.5% portion of the pool comprises nonconforming loans, while
the remaining 36.5% represents conforming loans. The majority of
the loans (85.5%) are exempt from the QM rule standards, as they
are investment property mortgage loans that are for business
purposes. The remaining 14.5% are able to qualify as SHQM, agency
SHQM, QM Agency Rebuttable Presumption or QM safe harbor (APOR)
loans. A 45.0% portion of the pool were originated by a retail and
correspondent channel.
The pool consists of 100.0% investor properties. Single-family
homes (attached and detached), planned unit developments (PUDs),
and townhouses constitute 71.8% of the pool, condominiums make up
8.4% and multifamily homes make up 19.8%. The pool consists of
purchase loans (51.7%), cashout refinance loans (27.5%) and
rate-term refinance loans (20.9%).
A total of 184 loans in the pool are over $1 million, and the
largest loan is $2.04 million. Fitch determined that 29 of the
loans were made to nonpermanent residents. There are no loans made
to foreign nationals in the pool.
Roughly 48.9% of the pool is concentrated in California. The
largest MSA concentration is in the Los Angeles-Long Beach-Santa
Ana, CA MSA (15.1%), followed by the San Diego-Carlsbad-San Marcos,
CA MSA (9.6%) and the San Francisco-Oakland-Fremont, CA MSA (9.2%).
The top three MSAs account for 34% of the pool. As a result, there
was no PD penalty for geographic concentration.
Non-Owner-Occupied Loans (Negative): All (100.0%) of the loans in
the pool are investment property mortgage loans, and 36.5% of the
loans in the pool are conforming loans that were underwritten to
Fannie Mae's and Freddie Mac's guidelines and approved per Desktop
Underwriter (DU) or Loan Product Advisor (LPA), Fannie Mae's and
Freddie Mac's automated underwriting systems, respectively.
The remaining 63.5% of the loans were underwritten to the
underlying sellers' guidelines and were full documentation loans.
All loans were underwritten to the borrower's credit risk, unlike
investor cash flow loans, which are underwritten to the property's
income. Additionally, eight borrowers in the pool have multiple
loans in the pool. Fitch applies a 1.25x probability of default
(PD) penalty for agency investor loans and a 1.60x PD penalty for
investor loans underwritten to the borrower's credit risk.
Multifamily Loans (Negative): Approximately 19.8% of the loans in
the pool are multifamily homes, which Fitch views as riskier than
single-family homes since the borrower may be relying upon the
rental income to cover the mortgage payment on the property. To
account for this risk, Fitch adjusts the PD upwards by 25% from the
baseline for multifamily homes.
Shifting Interest Structure with Full Advancing (Mixed): 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 to 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. Due to the
leakage to the subordinate bonds, the shifting interest structure
requires more CE.
The servicers will provide full advancing for the life of the
transaction. While this helps the liquidity of the structure, it
also increases the expected loss due to unpaid servicer advances.
If the servicers are unable to advance, the master servicer will
provide advancing. If the master servicer is unable to advance, the
securities administrator will ultimately be responsible for
advancing.
CE Floor (Positive): A CE or senior subordination floor of 1.40%
has been considered to mitigate potential tail-end risk and loss
exposure for senior tranches as the pool size declines and
performance volatility increases due to adverse loan selection and
small loan count concentration. Additionally, a junior
subordination floor of 1.00% has been considered to mitigate
potential tail-end risk and loss exposure for subordinate tranches
as the pool size declines and performance volatility increases due
to adverse loan selection and small loan count concentration.
For the loss analysis of this pool, Fitch used a customized version
of the U.S. RMBS Loan Loss model that has a 1.25x PD penalty for
agency investor loans and a 1.60x PD penalty for investor loans
underwritten to the borrower's credit risk. The 1.25x PD penalty
was used only for the agency eligible loans (36.5%), with the
remaining loans receiving a 1.60x PD penalty for being investor
occupied. Post-crisis performance indicates that loans underwritten
to DU/LP guidelines have relatively lower default rates compared to
normal investor loans used in regression data with all other
attributes controlled. The implied penalty has been reduced to
approximately 25% for investor agency loans in the customized model
from approximately 60% for regular investor loans in production
model.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Fitch incorporates a sensitivity analysis to demonstrate how
the ratings would react to steeper market value declines
(MVDs) than assumed at the MSA level. Sensitivity analyses was
conducted at the state and national levels to assess the
effect of higher MVDs for the subject pool as well as lower
MVDs, illustrated by a gain in home prices.
-- This defined negative rating sensitivity analysis demonstrates
how the ratings would react to steeper MVDs at the national
level. The analysis assumes MVDs of 10.0%, 20.0% and 30.0% in
addition to the model-projected 42.2% at 'AAA'. The analysis
indicates that there is some potential rating migration with
higher MVDs for all rated classes, compared with the model
projection. Specifically, a 10% additional decline in home
prices would lower all rated classes by one full category.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Fitch incorporates a sensitivity analysis to demonstrate how
the ratings would react to steeper MVDs than assumed at the
MSA level. Sensitivity analyses was conducted at the state and
national levels to assess the effect of higher MVDs for the
subject pool as well as lower MVDs, illustrated by a gain in
home prices.
-- This defined positive rating sensitivity analysis demonstrates
how the ratings would react to positive home price growth of
10% with no assumed overvaluation. Excluding the senior class,
which is already rated 'AAAsf', the analysis indicates there
is potential positive rating migration for all of the rated
classes. Specifically, a 10% gain in home prices would result
in a full category upgrade for the rated class excluding those
being assigned ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up- and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
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 SitusAMC, Clayton, Digital Risk, Inglet Blair,
Consolidated Analytics and Opus. The third-party due diligence
described in Form 15E focused on four areas: compliance review,
credit review, valuation review and data integrity. Fitch
considered this information in its analysis and, as a result, Fitch
decreased its loss expectations by 0.36% at the 'AAAsf' stress due
to 100% due diligence with no material findings.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 100% of the pool. The third-party due diligence was
generally consistent with Fitch's "U.S. RMBS Rating Criteria."
SitusAMC, Clayton, Digital Risk, Consolidated Analytics, Inglet
Blair and Opus were engaged to perform the review. Loans reviewed
under this engagement were given compliance, credit and valuation
grades and assigned initial grades for each subcategory. Minimal
exceptions and waivers were noted in the due diligence reports.
Refer to the "Third-Party Due Diligence" section for more detail.
Fitch also utilized data files provided by the issuer on its SEC
Rule 17g-5 designated website. Fitch received loan level
information based on the ResiPLS data layout format, and the data
are considered comprehensive. The data contained in the ResiPLS
layout data tape were reviewed by the due diligence companies, and
no material discrepancies were noted.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
JPMDB COMMERCIAL 2018-C8: Fitch Affirms B- Rating on 2 Tranches
---------------------------------------------------------------
Fitch Ratings has affirmed JPMDB Commercial Mortgage Securities
Trust 2018-C8 commercial mortgage pass-through certificates. The
Rating Outlooks for two classes have been revised to Stable from
Negative while the Outlooks for five classes remain Negative.
DEBT RATING PRIOR
---- ------ -----
JPMDB 2018-C8
A-2 46591AAX3 LT AAAsf Affirmed AAAsf
A-3 46591AAZ8 LT AAAsf Affirmed AAAsf
A-4 46591ABA2 LT AAAsf Affirmed AAAsf
A-S 46591ABE4 LT AAAsf Affirmed AAAsf
A-SB 46591ABB0 LT AAAsf Affirmed AAAsf
B 46591ABF1 LT AA-sf Affirmed AA-sf
C 46591ABG9 LT A-sf Affirmed A-sf
D 46591AAG0 LT BBB-sf Affirmed BBB-sf
E 46591AAJ4 LT BB+sf Affirmed BB+sf
F 46591AAL9 LT BB-sf Affirmed BB-sf
G 46591AAN5 LT B-sf Affirmed B-sf
X-A 46591ABC8 LT AAAsf Affirmed AAAsf
X-B 46591ABD6 LT AA-sf Affirmed AA-sf
X-D 46591AAA3 LT BBB-sf Affirmed BBB-sf
X-EF 46591AAC9 LT BB-sf Affirmed BB-sf
X-G 46591AAE5 LT B-sf Affirmed B-sf
KEY RATING DRIVERS
Stable Performance: Overall pool performance and loss expectations
remain stable from the prior review and from issuance. Fitch has
identified eight Fitch Loans of Concerns (FLOCs, 30.3% of the pool
balance). None of the loans within the transaction are in special
servicing.
Fitch's current ratings incorporate a base case loss of 4.7%. An
additional sensitivity was incorporated with losses that could
reach 5.7% when factoring in additional stresses for two retail
assets including the Lakewood Forest Plaza and Lehigh Valley Mall
loans. The Negative Outlooks reflect the sensitivity and the
potential for Lakewood Forest Plaza to transfer to special
servicing due to occupancy issues.
Fitch Loans of Concern: The largest FLOC is the 1875 Atlantic
Avenue (6.3%) loan, which is secured by a 118-unit, mid-rise
multifamily property in Brooklyn, NY. The property was recently
built in 2018 and is located within two blocks of the A and C
subway lines, which provide transportation directly to Atlantic
Terminal, Prospect Park and into Manhattan. As of June 2021,
occupancy declined to 91.5% from 95.8% at issuance. Average
in-place rents remain in-line with rents from issuance, but
multiple delinquent tenants have resulted in lower monthly
collections over the course of the pandemic. Since the moratorium
has been lifted those tenants are in the process of being evicted.
Fitch's base case analysis incorporates the borrower-reported YE
2020 NOI reflecting a loss severity of 9%.
The next largest FLOC is the Embassy Suites Glendale (5.5%) loan,
which is secured by a 227-room, full-service hotel located in
Glendale, CA. The property consists of a 12-story hotel tower with
an underground three-level parking structure. The hotel has yet to
demonstrate a substantial recovery out of the pandemic with 2021
performance metrics in-line with that of 2020 and well below
performance in 2019.
As of TTM September 2021, occupancy, ADR, and RevPAR of 48.9%,
$154, $75 remains flat from TTM September 2020 figures of 47.1%,
$171 and $80, respectively, and remains below levels from the same
period in 2019 of 87.8%, $192 and $169. The hotel was ranked four
of seven in its competitive set with respect to RevPAR, posting a
102.6% penetration rate as of the TTM September 2021 STR report.
Fitch's analysis incorporates a 15% stress to YE 2019 NOI
reflecting a stressed value of $226,000 per key.
Regional Mall Exposure: Two loans outside of the top 15 (4.3%) are
secured by regional malls. The Twelve Oaks Mall loan (2.3%), which
is secured by a 716,771-sf portion of a 1.5 million-sf super
regional mall located in Novi, MI, has non-collateral anchor
tenants, including Macy's, J.C. Penney, Lord & Taylor and
Nordstrom. The non-collateral Sears store closed in March 2019.
Nordstrom, which owns its improvements, ground leases the land from
the sponsor.
Performance has declined since issuance, with the YE 2020 NOI
approximately 32% below the issuer's underwritten NOI. As a result,
NOI DSCR declined to 1.76x as of YE 2020 compared to 2.54x at YE
2019 and 2.61x at issuance. NOI has improved in 2021 with DSCR at
2.30x as of YTD September 2021. Occupancy is relatively in-line
with issuance at 93% as of September 2021.
Fitch's base case loss of 7% reflects a cap rate of 12% and a 5%
stress to the YE 2020 NOI, which was applied to account for
performance declines from issuance.
The Lehigh Valley Mall loan (2.8%) is secured by a 549,531-sf
portion of a regional mall located in Lehigh Valley, PA. The loan
is sponsored by Simon Properties and Pennsylvania Real Estate
Investment Trust. Anchors include Macy's (ground lessee), Boscov's
(non-collateral) and JC Penney (non-collateral); all three anchors
have been at the property since 1957. The largest collateral
tenants are Bob's Discount Furniture and Barnes & Noble.
Occupancy declined to 79% in June 2021 from 81% at YE 2020 and 84%
at YE 2019, primarily due to multiple tenants vacating upon lease
expiration or upon filing for bankruptcy, the largest of which was
Modell's (previously 2.6% of NRA), which filed for bankruptcy,
ahead of its 2022 lease expiration. As of the latest provided
figures as of TTM September 2020, inline sales for tenants under
10,000-sf (excluding Apple) were $435 psf, compared with $461 psf
at YE19 and $451 psf at issuance.
Fitch's base case loss of 10% reflects a cap rate of 12% and a 10%
haircut to the YE 2020 NOI, which was applied due to the recent
occupancy declines and near-term lease rollover concerns. Fitch
also applied an additional sensitivity whereby a potential outsized
loss of 22% was assumed on the balloon balance, which implies a 15%
cap rate and a 20% haircut to the YE 2020 NOI to reflect
sponsorship concerns and the potential for sustained
underperformance.
Increasing Credit Enhancement (CE): CE has increased since issuance
due to amortization and loan repayments, with 6.3% of the original
pool balance repaid. The transaction has incurred $3.47 million in
realized losses to date impacting the non-rated NR-RR class.
Additionally, 5.2% of the pool has been defeased. Interest
shortfalls are currently affecting the non-rated class NR-RR. Ten
loans (39.9%) are full-term IO, seven loans (14.9%) are in their
partial IO period and the remaining 22 loans (45.1%) are
amortizing.
Alternative Loss Consideration: Fitch applied additional
sensitivity scenarios on the Lakewood Forest Plaza to account for a
potential transfer to special should occupancy not stabilize and
Lehigh Valley Mall loan to reflect concerns with the weak anchors,
tertiary market, and challenges facing sponsorship, PREIT. The
Negative Outlooks reflect the sensitivity and potential transfer to
special.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downgrades would occur with an increase in pool level losses
from underperforming or specially serviced loans. Downgrades
to the 'AA-sf' and 'AAAsf' categories are not likely due to
their position in the capital structure but may occur should
interest shortfalls affect the classes.
-- Downgrades to the 'BBB-sf' and A-sf' category would occur
should overall pool losses increase significantly and/or one
or more large loans have an outsized loss, which would erode
CE.
-- Downgrades to the 'B-sf' to 'BBB-sf' categories would occur
should loss expectations increase and if performance of the
FLOCs fail to stabilize or loans default and/or transfer to
the special servicer.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Stable to improved asset performance coupled with pay down
and/or defeasance. Upgrades of the 'A-sf' and 'AA-sf'
categories would likely occur with significant improvement in
CE and/or defeasance; however, adverse selection, increased
concentrations and further underperformance of the FLOCs could
cause this trend to reverse.
-- Upgrades to the 'BBB-sf' category would be limited based on
sensitivity to concentrations or the potential for future
concentration. Classes would not be upgraded above 'Asf' if
there is likelihood for interest shortfalls. Upgrades to the
'B-sf' through 'BBB-sf' categories are not likely until the
later years in a transaction and only if the performance of
the remaining pool is stable and there is sufficient CE to the
classes.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
LSTAR COMMERCIAL 2015-3: DBRS Hikes F Certs Rating to BB(high)
--------------------------------------------------------------
DBRS Limited upgraded the ratings on the following classes of
Commercial Mortgage Pass-Through Certificates, Series 2015-3 issued
by LSTAR Commercial Mortgage Trust 2015-3:
-- Class C to AA (high) (sf) from AA (sf)
-- Class X-C to AA (sf) from A (high) (sf)
-- Class D to AA (low) (sf) from A (sf)
-- Class E to BBB (high) (sf) from BB (sf)
-- Class X-A to BBB (low) (sf) from B (high) (sf)
-- Class X-B to BBB (low) (sf) from B (high) (sf)
-- Class F to BB (high) (sf) from B (sf)
The remaining classes were confirmed as follows:
-- Class A-S at AAA (sf)
-- Class B at AAA (sf)
All trends are Stable.
The rating upgrades and trends reflect the significant paydowns
since issuance as well as the stable performance of the remaining
collateral, which has remained in line with DBRS Morningstar's
expectations. As of the January 2022 remittance, 11 of the original
62 loans remain in the pool, representing a collateral reduction of
63.3% since issuance with a current trust balance of $103.4
million. As of the most recent remittance, there are three loans on
the servicer's watchlist, representing only 6.0% of the current
pool balance. Two of those loans were added for low debt service
coverage ratios (DSCR) and one loan was added for a failure to
submit its financials. There are no loans in special servicing, nor
are any loans delinquent on debt service payments. To date, seven
loans have been liquidated from the trust, although the relatively
small $1.8 million in aggregate losses has been absorbed by the
unrated Class G.
The largest loan in the pool, 101 Redwood Shores (Prospectus ID#1,
35.8% of the current pool) is secured by a 100,000 square foot
office property in Redwood, California. At issuance, the property
was leased to a single tenant, Perfect World Entertainment (Perfect
World), with about half of its contractual space occupied and the
remainder subleased. After issuance, Perfect World sublet the
remainder of its space with a total of seven tenants on subleases
in the building. Perfect World's lease expired in February 2019 and
all subleased tenants vacated upon lease expiry. The space was
subsequently re-leased to Zuora, an enterprise software company, on
a lease that expires in January 2030. Although the loss of the
former single tenant has been a noteworthy development since
issuance, the sponsor's ability to quickly backfill the space with
another headquarters tenant paying market rental rates speaks to
the overall quality of the collateral and desirability within the
submarket.
The second-largest loan in the pool, InterContinental Hotel
Monterey (Prosectus ID#2, 34.2% of the pool) is secured by a
208-key full-service hotel in Monterey, California. The loan was
added to servicer's watchlist in October 2020 as performance
declined during the Coronavirus Disease (COVID-19) pandemic; the
loan was subsequently removed from the servicer's watchlist in
November 2021. The hotel is well located in Monterey Bay along
Central California's Pacific coast, adjacent to Monterey Bay
Aquarium and in proximity to several other demand drivers related
to tourism and leisure travel. The collateral has exhibited
significant signs of improvement in performance given the
increasing DSCR and strong 2021 STR metrics, specifically the
revenue per available room (RevPAR) penetration figure of 155.3% as
of the trailing 12 months ending November 2021. The property is in
a unique setting along Monterey Bay with high barriers to entry,
and DBRS Morningstar notes that the property is in a class by
itself and does not compete with the surrounding convention center
hotels.
Notes: All figures are in U.S. dollars unless otherwise noted.
MADISON PARK LIII: Moody's Assigns Ba3 Rating to $26MM Cl. E Notes
------------------------------------------------------------------
Moody's Investors Service has assigned ratings to two classes of
notes issued by Madison Park Funding LIII, Ltd. (the "Issuer" or
"Madison Park Funding LIII").
Moody's rating action is as follows:
US$416,000,000 Class A Floating Rate Senior Notes due 2035,
Assigned Aaa (sf)
US$26,000,000 Class E Deferrable Floating Rate Mezzanine Notes due
2035, Assigned Ba3 (sf)
The notes listed are referred to herein, collectively, as the
"Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
Madison Park Funding LIII is a managed cash flow CLO. The issued
notes will be collateralized primarily by broadly syndicated senior
secured corporate loans. At least 90% of the portfolio must consist
of senior secured loans and eligible investments, and up to 10% of
the portfolio may consist of assets that are not senior secured
loans. The portfolio is approximately 80% ramped as of the closing
date.
Credit Suisse Asset 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 five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the Rated Notes, the Issuer issued three other
classes of secured notes and one class 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 December 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $650,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 3186
Weighted Average Spread (WAS): 3mS + 3.50%
Weighted Average Coupon (WAC): 6.00%
Weighted Average Recovery Rate (WARR): 47.0%
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
December 2021.
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.
MAGNETITE XXXII: S&P Assigns BB- (sf) Rating on Class F Notes
-------------------------------------------------------------
S&P Global Ratings assigned its ratings to Magnetite XXXII
Ltd./Magnetite XXXII LLC's floating-rate notes.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by BlackRock Financial Management Inc.,
a subsidiary of Blackrock Inc.
The ratings reflect:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Magnetite XXXII Ltd./Magnetite XXXII LLC
Class A, $310.00 million: AAA (sf)
Class B, $70.00 million: AA (sf)
Class C (deferrable), $30.00 million: A (sf)
Class D (deferrable), $30.00 million: BBB- (sf)
Class E (deferrable), $18.75 million: BB- (sf)
Subordinated notes, $48.40 million: Not rated
MARBLE POINT XXIV: Moody's Assigns Ba3 Rating to $20MM Cl. E Notes
------------------------------------------------------------------
Moody's Investors Service has assigned ratings to four classes of
notes issued by Marble Point CLO XXIV Ltd. (the "Issuer" or "Marble
Point CLO XXIV").
Moody's rating action is as follows:
US$315,000,000 Class A-1 Senior Floating Rate Notes due 2035,
Definitive Rating Assigned Aaa (sf)
US$5,000,000 Class A-2a Senior Floating Rate Notes due 2035,
Definitive Rating Assigned Aaa (sf)
US$5,000,000 Class A-2b Senior Fixed Rate Notes due 2035,
Definitive Rating Assigned Aaa (sf)
US$20,000,000 Class E Junior Deferrable Floating Rate Notes due
2035, Definitive Rating Assigned Ba3 (sf)
The notes listed are referred to herein, collectively, as the
"Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
Marble Point CLO XXIV is a managed cash flow CLO. The issued notes
will be collateralized primarily by broadly syndicated senior
secured corporate loans. At least 90.0% of the portfolio must
consist of senior secured loans and eligible investments, and up to
10.0% of the portfolio may consist of second lien loans, unsecured
loans and permitted bond, provided no more than 5% of the portfolio
may consist of permitted bond. The portfolio is approximately 95%
ramped as of the closing date.
Marble Point 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 five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the Rated Notes, the Issuer issued six other classes
of secured notes and one class 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 December 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $500,000,000
Diversity Score: 60
Weighted Average Rating Factor (WARF): 2762
Weighted Average Spread (WAS): 3mS + 3.50%
Weighted Average Coupon (WAC): 5.00%
Weighted Average Recovery Rate (WARR): 46.5%
Weighted Average Life (WAL): 8.06 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
December 2021.
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.
MELLO MORTGAGE 2022-INV2: S&P Assigns B- (sf) Rating on B-5 Certs
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Mello Mortgage Capital
Acceptance 2022-INV2's mortgage pass-through certificates.
The certificate issuance is an RMBS transaction backed by
residential mortgage loans.
The ratings reflect:
-- The high-quality collateral in the pool;
-- The available credit enhancement;
-- The transaction's associated structural mechanics;
-- The representation and warranty framework;
-- The geographic concentration;
-- The experienced originator;
-- The statistically significant sample of due diligence results
consistent with represented loan characteristics; and
-- The impact that the economic stress brought on by the COVID-19
pandemic is likely to have on the performance of the mortgage
borrowers in the pool and available liquidity in the transaction.
Ratings Assigned
Mello Mortgage Capital Acceptance 2022-INV2
Class A-1, $390,158,000: AA+ (sf)
Class A-1-A, $390,158,000: AA+ (sf)
Class A-2, $263,032,000: AAA (sf)
Class A-2-A, $263,032,000: AAA (sf)
Class A-2-B, $375,760,000: AAA (sf)
Class A-3, $310,002,000: AAA (sf)
Class A-3-A, $310,002,000: AAA (sf)
Class A-3-B, $310,002,000: AAA (sf)
Class A-3-X, $310,002,000(i): AAA (sf)
Class A-4, $232,502,000: AAA (sf)
Class A-4-A, $232,502,000: AAA (sf)
Class A-4-B, $232,502,000: AAA (sf)
Class A-4-X, $232,502,000(i): AAA (sf)
Class A-5, $77,500,000: AAA (sf)
Class A-5-A, $77,500,000: AAA (sf)
Class A-5-X, $77,500,000(i): AAA (sf)
Class A-6, $195,135,000: AAA (sf)
Class A-6-A, $195,135,000: AAA (sf)
Class A-6-B, $195,135,000: AAA (sf)
Class A-6-X, $195,135,000(i): AAA (sf)
Class A-7, $114,867,000: AAA (sf)
Class A-7-A, $114,867,000: AAA (sf)
Class A-7-X, $114,867,000(i): AAA (sf)
Class A-8, $37,367,000: AAA (sf)
Class A-8-A, $37,367,000: AAA (sf)
Class A-8-X, $37,367,000(i): AAA (sf)
Class A-9, $23,901,000: AAA (sf)
Class A-9-A, $23,901,000: AAA (sf)
Class A-9-X, $23,901,000(i): AAA (sf)
Class A-10, $53,599,000: AAA (sf)
Class A-10-A, $53,599,000: AAA (sf)
Class A-10-X, $53,599,000(i): AAA (sf)
Class A-11, $65,758,000: AAA (sf)
Class A-11-X, $65,758,000(i): AAA (sf)
Class A-11-A, $65,758,000: AAA (sf)
Class A-11-AI, $65,758,000(i): AAA (sf)
Class A-11-B, $65,758,000: AAA (sf)
Class A-11-BI, $65,758,000(i): AAA (sf)
Class A-11-C, $65,758,000: AAA (sf)
Class A-12, $65,758,000: AAA (sf)
Class A-13, $65,758,000: AAA (sf)
Class A-14, $14,398,000: AA+ (sf)
Class A-15, $14,398,000: AA+ (sf)
Class A-16, $321,880,350: AA+ (sf)
Class A-17, $68,277,650: AA+ (sf)
Class A-X-1, $390,158,000(i): AA+ (sf)
Class A-X-2, $390,158,000(i): AA+ (sf)
Class A-X-3, $65,758,000(i): AAA (sf)
Class A-X-4, $14,398,000(i): AA+ (sf)
Class B-1, $14,810,000: AA- (sf)
Class B-2, $10,611,000: A- (sf)
Class B-3, $10,831,000: BBB- (sf)
Class B-4, $7,295,000: BB- (sf)
Class B-5, $5,084,000: B- (sf)
Class B-6, $3,316,485: Not rated
Class R, not applicable: Not rated
(i)Notional balance.
MORGAN STANLEY 2011-C3: Moody's Lowers Rating on Cl. G Debt to Ca
-----------------------------------------------------------------
Moody's Investors Service has affirmed the rating on one class and
downgraded the ratings on four classes in Morgan Stanley Capital I
Trust 2011-C3, Commercial Mortgage Pass-Through Certificates,
Series 2011-C3 as follows:
Cl. C, Affirmed A1 (sf); previously on Aug 4, 2021 Confirmed at A1
(sf)
Cl. D, Downgraded to Ba1 (sf); previously on Aug 4, 2021 Downgraded
to Baa2 (sf)
Cl. E, Downgraded to B1 (sf); previously on Aug 4, 2021 Downgraded
to Ba3 (sf)
Cl. F, Downgraded to Caa2 (sf); previously on Aug 4, 2021
Downgraded to Caa1 (sf)
Cl. G, Downgraded to Ca (sf); previously on Aug 4, 2021 Confirmed
at Caa3 (sf)
RATINGS RATIONALE
The rating on Cl. C was affirmed due to its seniority of payments
and significant credit support in conjunction with the Moody's
loan-to-value (LTV) ratio and Moody's stressed debt service
coverage ratio (DSCR) on the remaining loan in the pools. Cl. C has
already paid down 78% from its original balance and this class is
expected to receive monthly principal paydowns due to amortization
from the remaining loans in the pool.
The ratings on four P&I classes were downgraded due to the pool's
significant exposure to two regional mall properties (95% of the
pool) that experienced declines in net operating income in recent
years and have each been modified after failing to pay-off at their
original maturity dates. The two remaining loans are Oxmoor Center
(42% of the pool) with an extended maturity date of June 2023 and
Westfield Belden Village (53%) with an extended maturity date of
July 2026. As a result of the exposure to these loans, the
remaining classes are at increased risk of interest shortfalls and
the potential for higher expected losses if the performance of
these malls continues to decline and/or they are unable to pay off
at their extended maturity dates.
The action has considered how the coronavirus pandemic has reshaped
the US economic environment and the way its aftershocks will
continue to reverberate and influence the performance of commercial
real estate. Moody's expect the public health situation to improve
as vaccinations against COVID-19 increase and societies continue to
adapt to new protocols. Still, the exit from the pandemic will
likely be bumpy and unpredictable and economic prospects will
vary.
Moody's regard the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Moody's rating action reflects a base expected loss of 36.0% of the
current pooled balance, compared to 24.8% at Moody's last review.
Moody's base expected loss plus realized losses is now 4.7% of the
original pooled balance, compared to 5.4% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected. Additionally, significant
changes in the 5-year rolling average of 10-year US Treasury rates
will impact the magnitude of the interest rate adjustment and may
lead to future rating actions.
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, 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 "Large Loan and
Single Asset/Single Borrower Commercial Mortgage-Backed
Securitizations Methodology" published November 2021.
Moody's analysis incorporated a loss and recovery approach in
rating the P&I classes in this deal since 53% of the pool is in
special servicing and Moody's has identified an additional troubled
loan representing 42% of the pool. In this approach, Moody's
determines a probability of default for each specially serviced and
troubled loan that it expects will generate a loss and estimates a
loss given default based on a review of broker's opinions of value
(if available), other information from the special servicer,
available market data and Moody's internal data. The loss given
default for each loan also takes into consideration repayment of
servicer advances to date, estimated future advances and closing
costs. Translating the probability of default and loss given
default into an expected loss estimate, Moody's then applies the
aggregate loss from specially serviced and troubled loans to the
most junior classes and the recovery as a pay down of principal to
the most senior classes.
DEAL PERFORMANCE
As of the March 2022 distribution date, the transaction's aggregate
certificate balance has decreased by 88% to $174.7 million from
$1.49 billion at securitization. The certificates are
collateralized by five mortgage loans ranging in size from less
than 1% to 53% of the pool.
As of the March 2022 remittance report, all loans were current on
their debt service payments. However, two loans (representing
approximately 95% of the pool) have been previously modified
including maturity date extensions. Two loans have been liquidated
from the pool, resulting in an aggregate realized loss of $6.5
million (for an average loss severity of 24%).
The one specially serviced loan is the Westfield Belden Village
Loan ($91.8 million -- 52.5% of the pool), which is secured by a
419,000 square foot (SF) portion of an 818,000 SF regional mall
located 18 miles south of Akron in Canton, Ohio. The non-collateral
anchors are Dillard's, Dick's Sporting Goods and Dave & Busters.
Sears vacated in January 2020 and the space was redeveloped into a
Dick's Sporting Goods / Golf Galaxy and Dave & Busters. As of
September 2020, the inline space was 94% leased and the total mall
collateral was 72% leased. Starwood Capital purchased the mall from
Westfield in 2013. However, in the first quarter of 2020, Starwood
defaulted on approximately $250 million in Israeli bond loans that
were used to finance the Belden Village purchase along with other
malls. Subsequently, the loan transferred to special servicing in
May 2020 due to imminent monetary default. The property's net
operating income (NOI) has declined since 2016 due to lower rental
revenues and the performance has been further impacted by the
pandemic. The loan has now passed its initial maturity date in July
2021. The loan has been recently modified, extending the maturity
date to July 2026 and bringing debt service payments current, and
is expected to be returned to the master servicer. However, due to
recent declines in performance and potential cash flow volatility
on regional malls, this loan may have a heightened risk of default
at or before its extended loan maturity.
Moody's has also assumed a high default probability for one poorly
performing loan, constituting 42% of the pool, and has estimated an
aggregate loss of $62.9 million (a 38% expected loss based on
average) from these specially serviced and troubled loans. The
troubled loan is the Oxmoor Center Loan discussed in further detail
below.
The Oxmoor Center Loan ($73.4 million -- 42% of the pool), which is
secured by a leasehold interest in a 941,000 SF super-regional mall
in Louisville, Kentucky. The center is currently anchored by
Macy's, Von Maur and Dick's Sporting Goods. A portion of the space
formerly occupied by Sears is being developed by Topgolf and
additional restaurants. All anchors own the improvements with the
exception of Dick's Sporting Goods. As of December 2021, the inline
space was 83% leased and the total mall collateral was 78% leased.
The property is in an affluent suburb of Louisville and benefits
from an Apple store presence, with the next closest Apple store
over 60 miles away. The property's performance generally improved
through 2016, however, since this time the property's net operating
income (NOI) has declined annually due primarily to lower rental
revenues. The year-end 2021 NOI DSCR was 1.32X, compared to 1.42X
in 2019. The loan was unable to payoff at its maturity date in June
2021 and subsequently transferred to the special servicer for
maturity default. The loan was modified during 2021, extending the
maturity date June 2023 and was returned to the master servicer in
January 2022. The loan has amortized 22% since securitization,
however, due to declining revenues and occupancy since
securitization and the current market environment for regional
malls, Moody's considers this as a troubled loan.
The second largest loan is the Freedom Village Shopping Center Loan
($4.8 million -- 2.8% of the pool), which is secured by a 129,516
SF anchored-retail property located in Eldersburg, Maryland. As of
September 2021, the property was only 47% occupied, compared to 49%
in 2020 and 90% in 2019. The largest tenant, a grocery store
occupying 46% of the NRA, vacated in 2020 and the borrower is
currently reviewing several LOIs for portions of the space. The
loan has amortized almost 39% since securitization and matures in
June 2026. Moody's LTV and stressed DSCR are 73% and 1.48X,
respectively, compared to 66% and 1.63X at the last review.
The third largest loan is the Walgreens - Porterville Loan ($3.1
million -- 1.8% of the pool), which is secured by a single tenant
Walgreens located north of Bakersfield, California with a lease in
place until 2036. The property has exhibited stable performance
over the life of the loan, amortizing by 8% and maturing in August
2026. Moody's LTV and stressed DSCR are 71% and 1.34X,
respectively, compared to 71% and 1.32X at the last review.
MORGAN STANLEY 2015-MS1: DBRS Confirms B(high) Rating on F Certs
----------------------------------------------------------------
DBRS Limited confirmed the ratings on the Commercial Mortgage
Pass-Through Certificates, Series 2015-MS1 issued by Morgan Stanley
Capital I Trust 2015-MS1 as follows:
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (high) (sf)
-- Class PST at A (high) (sf)
-- Class D at BBB (sf)
-- Class E at BB (high) (sf)
-- Class F at B (high) (sf)
All trends are Stable.
The performance of the transaction remains in line with DBRS
Morningstar's expectations; however, select loans are showing
increased risk from issuance, as further detailed below. In
addition to factors at the loan level, these risks are mitigated by
the increased credit support for the bonds, a result of paydowns
since issuance. At issuance, the transaction consisted of 54
fixed-rate loans secured by 59 commercial and multifamily
properties, with a trust balance of $885.4 million. According to
the January 2022 remittance report, all 54 loans remain within the
transaction, with no losses to date. There has been a collateral
reduction of 5.2% since issuance, lowering the trust balance to
$839.7 million. Defeasance has been minimal, with six small loans,
representing 3.5% of the pool, defeased since issuance.
According to the January 2022 remittance report, two loans,
representing 6.6% of the pool, are in special servicing and 17
loans, representing 29.7% of the current trust balance, are on the
servicer's watchlist. DBRS Morningstar notes the servicer also
reports that two small defeased loans are on the watchlist;
however, this is expected to be adjusted with the next remittance
report. The watchlist is concentrated with loans backed by retail
and hotel property types, a common theme given the ongoing impacts
of the Coronavirus Disease (COVID-19) pandemic. Likewise, the
transaction is concentrated with loans backed by retail property
types, which represent approximately 40.0% of the pool.
The largest loan on the servicer's watchlist, Waterfront at Port
Chester (Prospectus ID#4; 6.4% of the pool), is secured by a
350,000 square-foot (sf) anchored retail property in Port Chester,
New York, located within a block of the Metro-North Railroad Port
Chester Station. The loan has reported delinquent payments for
various periods since June 2020, with the borrower advising that
tenants had fallen behind on rents and shortfalls were not able to
be funded. The loan was previously in special servicing until the
servicer approved a loan modification to allow for reserves to be
used to pay debt service. The loan was returned to the master
servicer in August 2021, but continues to report more than 90 days
delinquent, with outstanding advances of more than $500,000 as of
the January 2022 remittance. DBRS Morningstar has requested
clarification from the servicer on the payment status for the loan
and the servicer's response is pending.
According to the Q1 2021 reporting, the property was 95% occupied,
in line with issuance; however, the debt service coverage ratio
(DSCR) was 1.19 times (x) for the period, down from 1.62x at
YE2020. News reports in January 2022 confirmed the property's Bed
Bath & Beyond store, which represents 6.4% of the net rentable area
(NRA), will be closing, suggesting the physical occupancy rate will
fall to approximately 88% in the near future. The largest
collateral tenant, Super Stop & Shop (20.1% of the NRA, lease
expires in August 2030), recently completed a significant
renovation of its store in the summer of 2021, which expanded
produce and deli offerings, added curbside pickup stations and
self-checkout lanes, as well as additional upgrades and
improvements. Other tenants include AMC Theatres (20% of the NRA,
lease expires in December 2030), Marshalls, and Crunch Fitness.
Costco Wholesale is a non-collateral shadow anchor. The extended
delinquency and tenant payment issues suggest increased risks for
this loan from issuance. However, DBRS Morningstar notes the
subject property is well located with proximity to a significant
amount of recent or planned development along the riverfront in
Port Chester, with popular national retailers and a grocery anchor
that should benefit as pandemic-related restrictions continue to
ease and commuter traffic improves.
The largest specially serviced loan, Hilton Garden Inn (Prospectus
ID#8; 4.7% of the pool), is part of a pari passu whole loan secured
by a 401-room select-service hotel in Midtown Manhattan. The loan
transferred to special servicing in June 2020 for payment default.
According to the January 2022 remittance report, the loan is
current. The special servicer reports ongoing discussions regarding
a proposed loan modification, but also notes that a foreclosure
option is being tracked, should those negotiations deteriorate. The
servicer previously allowed funds from an excess cash reserve to be
used for debt service payments, but that reserve was depleted as of
early 2021. The loan was reported as many as 60 days delinquent in
the first half of 2021, but has been reported as current or less
than 30 days delinquent since July 2021. Although the pandemic has
been the most significant contributor to recent cash flow declines,
it is noteworthy that the property has underperformed since 2019
when the year-end DSCR was reported at 1.68x. Cash flows amid the
pandemic have been well below breakeven and DBRS Morningstar
believes an updated appraisal would likely show a value decline
from issuance. The issuance value of $251.0 million results in a
loan-to-value ratio of 61.8%, providing some cushion in that
scenario. At September 2021, the property was reportedly 73%
occupied, suggesting that traffic has begun to rebound, a factor
that could incentivize the sponsor to continue negotiating with the
special servicer and keep the loan current.
Notes: All figures are in U.S. dollars unless otherwise noted.
MORGAN STANLEY 2022-L8: Fitch Gives Final B- Rating to 2 Tranches
-----------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
Morgan Stanley Capital I Trust 2022-L8, commercial mortgage
pass-through certificates, series 2022-L8 as follows:
MSC 2022-L8
-- $9,100,000 class A-1 'AAAsf'; Outlook Stable;
-- $30,000,000 class A-2 'AAAsf'; Outlook Stable;
-- $20,000,000 class A-3 'AAAsf'; Outlook Stable;
-- $16,400,000 class A-SB 'AAAsf'; Outlook Stable;
-- $166,893,000a class A-4 'AAAsf'; Outlook Stable;
-- $0b class A-4-1 'AAAsf'; Outlook Stable;
-- $0bc class A-4-X1 'AAAsf'; Outlook Stable;
-- $0b class A-4-2 'AAAsf'; Outlook Stable;
-- $0bc class A-4-X2 'AAAsf'; Outlook Stable;
-- $237,382,000a class A-5 'AAAsf'; Outlook Stable;
-- $0b class A-5-1 'AAAsf'; Outlook Stable;
-- $0bc class A-5-X1 'AAAsf'; Outlook Stable;
-- $0b class A-5-2 'AAAsf'; Outlook Stable;
-- $0bc class A-5-X2 'AAAsf'; Outlook Stable;
-- $479,775,000c class X-A 'AAAsf'; Outlook Stable;
-- $78,821,000 class A-S 'AAAsf'; Outlook Stable;
-- $0b class A-S-1 'AAAsf'; Outlook Stable;
-- $0bc class A-S-X1 'AAAsf'; Outlook Stable;
-- $0b class A-S-2 'AAAsf'; Outlook Stable;
-- $0bc class A-S-X2 'AAAsf'; Outlook Stable;
-- $28,272,000 class B 'AA-sf'; Outlook Stable;
-- $0b class B-1 'AA-sf'; Outlook Stable;
-- $0bc class B-X1 'AA-sf'; Outlook Stable;
-- $0b class B-2 'AA-sf'; Outlook Stable;
-- $0bc class B-X2 'AA-sf'; Outlook Stable;
-- $28,273,000 class C 'A-sf'; Outlook Stable;
-- $0b class C-1 'A-sf'; Outlook Stable;
-- $0bc class C-X1 'A-sf'; Outlook Stable;
-- $0b class C-2 'A-sf'; Outlook Stable;
-- $0bc class C-X2 'A-sf'; Outlook Stable;
-- $25,702,000cd class X-D 'BBB-sf'; Outlook Stable;
-- $15,421,000cd class X-F 'BB-sf'; Outlook Stable;
-- $6,854,000cd class X-G 'B-sf'; Outlook Stable;
-- $14,564,000d class D 'BBBsf'; Outlook Stable;
-- $11,138,000d class E 'BBB-sf'; Outlook Stable;
-- $15,421,000d class F 'BB-sf'; Outlook Stable;
-- $6,854,000d class G 'B-sf'; Outlook Stable.
The following class is not expected to be rated by Fitch:
-- $22,276,176e class H-RR.
(a) When Fitch published its expected ratings on March 18, the
initial certificate balances of class A-4 and A-5 were not yet
known but expected to be $404,275,000 in aggregate, subject to a 5%
variance. The balances above reflect the final certificate
balances.
(b) class of exchangeable certificates may be exchanged for the
corresponding classes of exchangeable certificates and vice versa.
The dollar denomination of each of the received classes of
certificates must be equal to the dollar denomination of each of
the received classes of exchangeable certificates. Class A-4 may be
surrendered (or received) for the received (or surrendered) classes
A-4-1 and A-4-X1. Class A-4 may be surrendered (or received) for
the received (or surrendered) classes A-4-2 and A-4-X2. Class A-5
may be surrendered (or received) for the received (or surrendered)
classes A-5-1 and A-5-X1. Class A-5 may be surrendered (or
received) for the received (or surrendered) classes A-5-2 and
A-5-X2. Class A-S may be surrendered (or received) for the received
(or surrendered) classes A-S-1 and A-S-X1. Class A-S may be
surrendered (or received) for the received (or surrendered) classes
A-S-2 and A-S-X2. Class B may be surrendered (or received) for the
received (or surrendered) classes B-1 and B-X1. Class B may be
surrendered (or received) for the received (or surrendered) classes
B-2 and B-X2. Class C may be surrendered (or received) for the
received (or surrendered) classes C-1 and C-X1. Class C may be
surrendered (or received) for the received (or surrendered) classes
C-2 and C-X2.
(c) Notional amount and IO.
(d) Privately placed and pursuant to Rule 144A.
(e) Horizontal Risk Retention Interest.
TRANSACTION SUMMARY
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 39 loans secured by 125
commercial properties having an aggregate principal balance of
$685,394,176 as of the cutoff date. The loans were contributed to
the trust by Morgan Stanley Mortgage Capital Holdings LLC, Starwood
Mortgage Capital LLC, Bank of Montreal, and Argentic Real Estate
Finance LLC. Midland Loan Services, a division of PNC Bank,
National Association, is expected to be the master servicer and LNR
Partners LLC is expected to be the special servicer.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 19.8% of the properties
by balance, cash flow analyses on 88.6% of the pool, and asset
summary reviews on 100% of the pool.
Fitch has withdrawn the expected rating for class X-B because the
class was removed from the final deal structure. The classes above
reflect the final ratings and deal structure.
KEY RATING DRIVERS
Lower Fitch Trust Leverage; Higher Total Debt: The pool's Fitch
stressed loan to value ratio (LTV) of 97.3% on the trust debt is
lower than the 2022 and 2021 averages for Fitch-rated U.S.
private-label multiborrower transactions of 100.1% and 103.3%,
respectively. Fitch's stressed debt service coverage ratio (DSCR)
of 1.27x is lower than the 2022 and 2021 respective averages of
1.44x and 1.38x. However, five loans, representing 28.8% of the
pool, have subordinate secured debt, mezzanine financing or
Delaware Statutory Trust (DST)-related bridge preferred equity. The
pool's Fitch total debt LTV and DSCR of 111.7% and 1.13x,
respectively, are worse than the respective 2022 averages of 108.2%
and 1.34x.
Investment-Grade Credit Opinion Loans: Five loans, representing
28.8% of the pool, received an investment-grade credit opinion.
Constitution Center (9.9% of pool), received a standalone credit
opinion of 'A-sf*', 601 Lexington Avenue (6.0% of pool), 26
Broadway (4.9% of pool) and ILPT Logistics Portfolio (3.5% of pool)
each received a standalone credit opinion of 'BBB-sf*'. Coleman
Highline Phase IV (4.4% of pool), received a standalone credit
opinion of 'BBBsf*'. The investment-grade credit opinion loan
concentration is greater than the 2022 average of 18.8% and the
2021 average of 13.3%.
Pool Concentration: The pool's 10 largest loans represent 60.1% of
its cutoff balance. This is higher than the 2022 and 2021 averages
of 51.8% and 51.2%, respectively. The pool's Loan Concentration
Index (LCI) of 488 is higher than the 2022 and 2021 averages of 376
and 381, respectively.
Limited Amortization: The pool contains 26 loans, totaling 77.1% of
the cutoff balance, that are full-term IO. This concentration of
full-term IO loans is lower than the 2022 average of 79.4% but
higher than the 2021 average of 70.5%. In addition, four loans
totaling 10.5% of the pool have a partial IO period. This results
in a low scheduled principal paydown of 3.8% of the pool balance by
maturity, which is in line with the average pool paydown of 3.7%
for YTD 2022 and below the 2021 average of 4.8%.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Declining cash flow decreases property value and capacity to meet
its debt service obligations. The table below indicates the model
implied rating sensitivity to changes to the same one variable,
Fitch NCF.
-- Original Rating: 'AAAsf'/'AA-sf'/'A-sf'/'BBBsf'/'BBB-sf'/'BB-
sf'/'B-sf'
-- 10% NCF Decline: 'A+sf'/'BBB+sf'/'BBB-sf'/'BB+sf'/'BB-
sf'/'CCCsf'/'CCCsf'
-- 20% NCF Decline: 'A-sf'/'BBB-
sf'/'BBsf'/'Bsf'/'CCCsf'/'CCCsf'/'CCCsf'
-- 30% NCF Decline:
'BBBsf'/'BB+sf'/'CCCsf'/'CCCsf'/'CCCsf'/'CCCsf'/'CCCsf'
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Improvement in cash flow increases property value and capacity to
meet its debt service obligations. The table below indicates the
model implied rating sensitivity to changes in one variable, Fitch
NCF.
-- Original Rating: 'AAAsf'/'AA-sf'/'A-sf'/'BBBsf'/'BBB-sf'/'BB-
sf'/'B-sf'
-- 20% NCF Increase: 'AAAsf'/'AAAsf'/'Asf'/'A+sf'/'A-sf'/'BBB-
sf'/'BBB-sf'
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
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 Ernst & Young LLP. The third-party due diligence
described in Form 15E focused on a comparison and re-computation of
certain characteristics with respect to each of the mortgage loans.
Fitch considered this information in its analysis and it did not
have an effect on Fitch's analysis or conclusions.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
NATIXIS 2022-RRI: S&P Assigns Prelim B- (sf) Rating on Cl. F Certs
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Natixis
Commercial Mortgage Securities Trust 2022-RRI's commercial mortgage
pass-through certificates.
The note issuance is a U.S. CMBS securitization backed by a
commercial mortgage loan secured by the borrowers' fee simple and
leasehold interests in 38 limited-service Red Roof Inn or Red Roof
Plus flagged hotels totaling 4,825 guestrooms across 19 U.S.
states.
The preliminary ratings are based on information as of April 6,
2022. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
S&P said, "The preliminary ratings reflect our view of the
collateral's historical and projected performance, the experience
of the sponsors and the manager, the trustee-provided liquidity,
the mortgage loan terms, and the transaction's structure. We
determined that the trust loan has a beginning and ending
loan-to-value ratio of 118.6%, based on our value of the properties
backing the transaction.
"The recent rapid spread of the Omicron variant highlights the
inherent uncertainties of the pandemic, as well as the importance
and benefits of vaccines. While the risk of new, more severe
variants displacing Omicron and evading existing immunity cannot be
ruled out, our current base case assumes that existing vaccines can
continue to provide significant protection against severe illness.
Furthermore, many governments, businesses, and households around
the world are tailoring policies to limit the adverse economic
impact of recurring COVID-19 waves. Consequently, we do not expect
a repeat of the sharp global economic contraction of second-quarter
2020. Meanwhile, we continue to assess how well each issuer adapts
to new waves in its geography or industry."
Preliminary Ratings Assigned
Natixis Commercial Mortgage Securities Trust 2022-RRI(i)
Class A, $71,190,000: AAA (sf)
Class X-CP, $53,392,500(ii): AAA (sf)
Class X-NCP, $71,190,000(ii): AAA (sf)
Class B, $22,990,000: AA- (sf)
Class C, $17,090,000: A- (sf)
Class D, $22,580,000: BBB- (sf)
Class E, $35,600,000: BB- (sf)
Class F, $31,530,000: B- (sf)
Class G, $40,270,000: Not rated
(i)The issuer will issue the certificates to qualified
institutional buyers in line with Rule 144A of the Securities Act
of 1933.
(ii)Notional amount. The notional amount of the class X-CP
certificates will be equal to the portion balance of the A-2
portion. The notional amount of the class X-NCP certificates will
be equal to the certificate balance of the class A certificates.
OCP CLO 2016-12: Fitch Gives BB- Rating to Class E-R2 Notes
-----------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to OCP CLO
2016-12, Ltd. Refinancing Notes.
DEBT RATING
---- ------
OCP CLO 2016-12 Ltd.
A-R2 LT AAAsf New Rating
B-R2 LT AAsf New Rating
C-R2 LT Asf New Rating
D-R2 LT BBB-sf New Rating
E-R2 LT BB-sf New Rating
Preference Shares LT NRsf New Rating
X LT AAAsf New Rating
TRANSACTION SUMMARY
OCP CLO 2016-12, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) managed by Onex Credit
Partners LLC that originally closed in October 2016, and was
subsequently refinanced in October 2018. The secured notes were
refinanced in whole on March 30, 2022 from proceeds of newly issued
secured notes and subordinated securities, which will provide
financing on a portfolio of approximately $550.0 million of
primarily first lien senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B/B-', which is in line with that of
recent CLOs. The weighted average rating factor (WARF) of the
indicative portfolio is 25.0 versus a maximum covenant, in
accordance with the initial expected matrix point of 27.0. Issuers
rated in the 'B' rating category denote a highly speculative credit
quality; however, the notes benefit from appropriate credit
enhancement of 36%, 24%, 18%, 12% and 8% for classes A-R2, B-R2,
C-R2, D-R2 and E-R2, respectively, and standard U.S. CLO structural
features.
Asset Security (Positive): The indicative portfolio consists of
99.6% first lien senior secured loans. The weighted average
recovery rate (WARR) assumption of the indicative portfolio is
75.42% versus a maximum covenant, in accordance with the initial
expected matrix point of 71.95%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 52.0% of the portfolio balance in aggregate while
the top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity required by industry,
obligor and geographic concentrations is in line with other recent
U.S. CLOs.
Portfolio Management (Neutral): The transaction has a 3.1-year
reinvestment period and reinvestment criteria similar to those of
other U.S. CLOs. Fitch's analysis was based on a stressed portfolio
created by making adjustments to the indicative portfolio to
reflect permissible concentration limits and collateral quality
test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, class X, A-R2, B-R2,
C-R2, D-R2 and E-R2 notes can withstand default rates of up to
100%, 57.1%, 52.8%, 47.5%, 40.4% and 34.9%, respectively, assuming
portfolio recovery rates of 38.2% in the 'AAAsf' stress scenario,
45.8% in the 'AAsf' stress scenario, 55.0% in the 'Asf' stress
scenario, 64.1% in the 'BBB-sf' stress scenario and 70.5% in the
'BB-sf' stress scenario. The performance of all classes of rated
debt at the other permitted matrix points is in line with that of
other recent CLOs.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Variability in key model assumptions, such as decreases in
recovery rates and increases in default rates, could result in
a downgrade. Fitch evaluated the notes' sensitivity to
potential changes in such metrics.
-- The results under these sensitivity scenarios are 'AAAsf' for
class X, between 'BBB+sf' and 'AAAsf' for class A-R2, between
'BB+sf' and 'AAsf' for class B-R2, between 'B+sf' and 'Asf'
for class C-R2, between lower than 'B-sf' and 'BBB+sf' for
class D-R2 and between lower than 'B-sf' and 'BB+sf' for class
E-R2.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrade scenarios are not applicable to class X and A-R2
notes, as these notes are in the highest rating category of
'AAAsf'. At other rating levels, variability in key model
assumptions, such as increases in recovery rates and decreases
in default rates, could result in an upgrade.
-- Fitch evaluated the notes' sensitivity to potential changes in
such metrics. Results under these sensitivity scenarios are
'AAAsf' for class B-R2 notes, between 'A+sf' and 'AA+sf' for
class C-R2 notes, between 'Asf' and 'A+sf' for class D-R2
notes and between 'BBB-sf' and 'BBB+sf' for class E-R2 notes.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information. Overall, Fitch's assessment of the asset pool
information relied upon for its rating analysis according to its
applicable rating methodologies indicates that it is adequately
reliable.
RAIT CRE I: Fitch Hikes Ratings on 2 Tranches to CCsf
-----------------------------------------------------
Fitch Ratings has upgraded two and affirmed 37 classes from six
commercial real estate loan (CREL) collateralized debt obligations
(CDOs). These six transactions represent Fitch's entire portfolio
of CREL CDO transactions. In addition, the Rating Outlook on one
class was revised to Stable from Negative.
DEBT RATING PRIOR
---- ------ -----
RAIT CRE CDO I Ltd/LLC
E 751020AF5 LT CCsf Upgrade Csf
F 751020AG3 LT CCsf Upgrade Csf
G 751020AH1 LT Csf Affirmed Csf
H 751020AJ7 LT Csf Affirmed Csf
J 751020AL2 LT Csf Affirmed Csf
Nomura CRE CDO 2007-2, Ltd./LLC
D Fltg Notes Due 2042 65537HAF4 LT Dsf Affirmed Dsf
E Fltg Notes Due 2042 65537HAG2 LT Csf Affirmed Csf
F Fltg Notes Due 2042 65537HAH0 LT Csf Affirmed Csf
G Fltg Notes Due 2042 65537HAJ6 LT Csf Affirmed Csf
H Fltg Notes Due 2042 65537HAK3 LT Csf Affirmed Csf
J Fltg Notes Due 2042 65537HAL1 LT Csf Affirmed Csf
K Fltg Notes Due 2042 65537HAM9 LT Csf Affirmed Csf
L Fltg Notes Due 2042 65537GAA7 LT Csf Affirmed Csf
M Fltg Notes Due 2042 65537GAB5 LT Csf Affirmed Csf
N Fltg Notes Due 2042 65537GAC3 LT Csf Affirmed Csf
O Fltg Notes Due 2042 65537GAD1 LT Csf Affirmed Csf
CapitalSource Real Estate Loan Trust 2006-A
C 140560AD5 LT Bsf Affirmed Bsf
D 140560AE3 LT CCCsf Affirmed CCCsf
E 140560AF0 LT CCCsf Affirmed CCCsf
F 140560AG8 LT Csf Affirmed Csf
G 140560AH6 LT Csf Affirmed Csf
H 140560AJ2 LT Csf Affirmed Csf
J 140560AK9 LT Csf Affirmed Csf
Gramercy Real Estate CDO 2005-1, Ltd./LLC
J 385000AK0 LT Dsf Affirmed Dsf
K 385000AL8 LT Csf Affirmed Csf
N-Star REL CDO VI, Ltd./LLC
J LT Csf Affirmed Csf
K LT Csf Affirmed Csf
N-Star REL CDO VIII, Ltd./LLC
B 62940FAD1 LT CCCsf Affirmed CCCsf
C 62940FAE9 LT Csf Affirmed Csf
D 62940FAF6 LT Csf Affirmed Csf
E 62940FAG4 LT Csf Affirmed Csf
F 62940FAH2 LT Csf Affirmed Csf
G 62940FAJ8 LT Csf Affirmed Csf
H 62940FAK5 LT Csf Affirmed Csf
J 62940BAA6 LT Csf Affirmed Csf
K 62940BAB4 LT Csf Affirmed Csf
L 62940BAC2 LT Csf Affirmed Csf
M 62940BAE8 LT Csf Affirmed Csf
N 62940BAF5 LT Csf Affirmed Csf
KEY RATING DRIVERS
High Loss Expectations; Concentration and Adverse Selection: The
affirmations reflect the continued high loss expectations and
increasing pool concentration and adverse selection of the
remaining collateral. Due to the concentrated nature of the
remaining collateral pools, a look-through analysis was performed
for each CREL CDO transaction. The six transactions have one to
eight assets remaining in their collateral pools; these assets
include CREL interests (whole loans/A-notes, mezzanine loans and
preferred equity positions) and rated securities (CMBS, RMBS, CREL
CDO and CRE CDO bonds).
Rating Cap: The ratings of classes C, D and E in CapitalSource Real
Estate Loan Trust 2006-A were capped due to their reliance for
repayment on the Miller Portfolio loan (82.3% of collateral pool),
and lack of updated performance information from the CDO manager.
Further, class C is the most senior class and therefore requires
timely payment of interest; this class is susceptible to default
from missed timely interest payment in the event of potential
collateral interest shortfalls. The Rating Outlook for class C was
revised to Stable from Negative, reflecting the class' seniority
and sufficient credit enhancement relative to Fitch's overall pool
base case loss of 17.6% for the transaction.
The Miller Portfolio is comprised of 22 cross-collateralized and
cross-defaulted loans secured by a portfolio of 28 healthcare
properties totaling 2,070 beds, which include nine assisted living
facilities and 19 skilled nursing facilities, located primarily in
secondary markets solely within the state of Indiana. Recent
portfolio operating performance has not been provided. Portfolio
occupancy in 2020 fell to 63% from 71% in 2018. Revenue sources for
the portfolio include Medicaid, Medicare, private pay and an
intergovernmental transfer program available in Indiana. The loan
was previously extended and has an upcoming maturity in September
2022.
Increased Credit Enhancement: The upgrades of classes E and F to
'CCsf' in RAIT CRE CDO reflect increased credit enhancement since
Fitch's last rating action from better than expected recoveries on
asset dispositions. Default remains probable for these classes but
are no longer considered inevitable.
Since the last rating action, the CDO manager disposed of five loan
interests with recoveries totaling $28.1 million (68% of the
aggregate loan balance). Fitch views the remaining assets, which
are all subordinate interests or REO, as having de minimis recovery
prospects based on the limited recent financial information
provided. The CDO manager is reportedly working on the disposition
of the remaining assets. Class E is now the senior most class, and
thus non-deferable. Interest availability from assets going forward
is not reliable as only one loan in the pool had an interest
payment in March 2022.
Undercollateralization: Many of the classes in these CREL CDOs are
undercollateralized due to substantial incurred realized losses;
these include all remaining classes of the Gramercy Real Estate CDO
2005-1, N-Star REL CDO VI and Nomura CRE CDO 2007-2 transactions.
Classes affirmed at 'Csf' indicate default is considered inevitable
as they are either undercollateralized or reliant on collateral
consistent with characteristics of 'Csf' to repay. Classes affirmed
at 'Dsf' are due to the declaration of an Event of Default as they
are non-deferrable classes that experienced interest payment
shortfalls.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downgrades of the 'Bsf', 'CCCsf' and 'CCsf' rated classes in
these six CREL CDOs would occur should the performance of the
remaining collateral continue to decline, should any of the
classes become the senior-most class in the transaction and
miss an interest payment, and/or if further losses are
realized.
-- Classes already rated 'Csf' have limited sensitivity to
further negative migration given their highly distressed
rating level. However, there is potential for classes to be
downgraded to 'Dsf' at or prior to legal final maturity if
they are non-deferrable classes that experience any interest
payment shortfalls or should an Event of Default, as set forth
in the transaction documents, occur.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrades to the 'Bsf', 'CCCsf' and 'CCsf' rated classes in
these six CREL CDOs are unlikely due to the CDOs'
concentration and adverse selection but may occur with the
receipt of updated financials that show substantially improved
performance of the underlying assets and/or significantly
higher recoveries than expected on disposed assets.
-- Upgrades to the 'Csf' rated classes are not expected as these
classes are either undercollateralized and/or rely on 'Csf'
rated collateral, where minimal to no recoveries are expected,
for repayment. Upgrades to the classes rated 'Dsf' in Gramercy
2005-1 and Nomura CRE CDO 2007-2 are not possible as they are
non-deferrable classes that have already experienced an
interest payment shortfall.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
REGATTA XIX FUNDING: Moody's Assigns B3 Rating to $5MM Cl. F Notes
------------------------------------------------------------------
Moody's Investors Service has assigned ratings to eight classes of
notes issued by Regatta XIX Funding Ltd. (the "Issuer").
Moody's rating action is as follows:
US$300,000,000 Class A-1 Senior Secured Floating Rate Notes due
2035, Definitive Rating Assigned Aaa (sf)
US$20,000,000 Class A-F Senior Secured Fixed Rate Notes due 2035,
Definitive Rating Assigned Aaa (sf)
US$10,000,000 Class A-2 Senior Secured Floating Rate Notes due
2035, Definitive Rating Assigned Aaa (sf)
US$50,000,000 Class B Senior Secured Floating Rate Notes due 2035,
Definitive Rating Assigned Aa2 (sf)
US$30,000,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2035, Definitive Rating Assigned A2 (sf)
US$30,000,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2035, Definitive Rating Assigned Baa3 (sf)
US$20,000,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2035, Definitive Rating Assigned Ba3 (sf)
US$5,000,000 Class F Junior Secured Deferrable Floating Rate Notes
due 2035, Definitive Rating Assigned B3 (sf)
The notes listed are referred to herein, collectively, as the
"Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
Regatta XIX Funding Ltd. is a managed cash flow CLO. The issued
notes are collateralized primarily by broadly syndicated senior
secured corporate loans. At least 90% of the portfolio must consist
of senior secured loans and eligible investments, and up to 10% of
the portfolio may consist of second lien loans, unsecured loans,
bonds and senior secured notes. The portfolio is approximately 90%
ramped as of the closing date.
Napier Park Global Capital (US) LP (the "Manager") will direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the Rated Notes, the Issuer issued 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 December 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $500,000,000
Diversity Score: 85
Weighted Average Rating Factor (WARF): 2843
Weighted Average Spread (WAS): SOFR + 3.50%
Weighted Average Coupon (WAC): 6.50%
Weighted Average Recovery Rate (WARR): 47.0%
Weighted Average Life (WAL): 8.0
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
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.
RESIDENTIAL 2022-I: S&P Assigns Prelim 'BB-' Rating on 14 Notes
---------------------------------------------------------------
S&P Global Ratings has assigned a preliminary 'BB- (sf)' rating to
the Series 2022-I Class 14 notes to be issued by Residential
Reinsurance 2022 Ltd. (Res Re 2022). The notes cover losses in all
50 states in the U.S. and the District of Columbia from tropical
cyclone, earthquake (including fire following for renters
policies), severe thunderstorm, winter storm, wildfire, volcanic
eruption, meteorite impact, and other perils (including, in each
case, flood losses arising from automobile policies and renters
policies) on an annual aggregate indemnity basis.
The rating reflects the lowest of: the natural-catastrophe
(nat-cat) risk factor ('bb-'); the rating on the assets in the
Regulation 114 trust account ('AAAm'); and the rating on the ceding
insurer, various operating companies in the USAA group. (all rated
AA+/Stable/--).
The initial base case, one-year probability of attachment, expected
loss, and probability of exhaustion figures are 0.77%, 0.61%, and
0.49%, respectively--using WSST sensitivity results, these
percentages are 0.94%, 0.77%, and 0.63%, respectively. This
issuance has a variable reset. Beginning with the first annual
reset in June 2023, the attachment probability and expected loss
can be reset to maximum of 1.27% and 0.86%, respectively. We used
the maximum attachment probability as the baseline to determine the
nat-cat risk factor for the remaining risk periods.
Based on AIR's analysis, on a historical basis, there have not been
any years when the modelled losses exceeded the initial attachment
level of the notes.
RUN TRUST 2022-NQM1: Fitch Gives Final B- Rating to Cl. B-2 Certs
-----------------------------------------------------------------
Fitch Ratings has assigned final ratings to the residential
mortgage-backed certificates issued by RUN 2022-NQM1 Trust (RUN
2022-NQM1).
DEBT RATING PRIOR
---- ------ -----
RUN 2022-NQM1
A-1 LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAsf New Rating AA(EXP)sf
A-3 LT Asf New Rating A(EXP)sf
M-1 LT BBB-sf New Rating BBB-(EXP)sf
B-1 LT BB-sf New Rating BB-(EXP)sf
B-2 LT B-sf New Rating B-(EXP)sf
B-3 LT NRsf New Rating NR(EXP)sf
R LT NRsf New Rating NR(EXP)sf
X LT NRsf New Rating NR(EXP)sf
A-IO-S LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
The certificates are supported by 525 nonprime residential
mortgages with a total balance of approximately $331 million, as of
the cutoff date.
Under Fitch's assumptions, classes rated 'AAAsf' or 'AAsf' received
timely interest while all other bonds received ultimate interest.
Only the A-3 bond took a writedown in its target rating stress. The
writedown was in one of the 18 'Asf' cashflow curves and was less
than one bps, which Fitch deemed immaterial to the rating.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 10.6% above a long-term sustainable level (versus
10.6% on a national level). Underlying fundamentals are not keeping
pace with the growth in prices, which is a result of a
supply/demand imbalance driven by low inventory, low mortgage rates
and new buyers entering the market. These trends have led to
significant home price increases over the past year, with home
prices rising 18.8% yoy nationally as of December 2021.
Non-QM Credit Quality (Negative): The collateral consists of 525
loans, totaling $331 million and seasoned approximately five months
in aggregate (calculated as the difference between origination date
and cutoff date). The borrowers have a moderate credit profile (739
model FICO and 43% model debt to income ratio [DTI]) and leverage
(82% sustainable loan to value ratio [sLTV] and 73% combined LTV
[cLTV]). The pool consists of 52% of loans where the borrower
maintains a primary residence, while 44% comprise an investor
property. Additionally, 56% are non-qualified mortgage (non-QM),
and the QM rule does not apply for the remainder.
Fitch's expected loss in the 'AAAsf' stress is 25%. This is mostly
driven by the non-QM collateral and the significant investor cash
flow product concentration.
Loan Documentation (Negative): Approximately 82% of the loans in
the pool were underwritten to less than full documentation, and 41%
were underwritten to a 12- or 24-month bank statement program for
verifying income, which is not consistent with Appendix Q standards
and Fitch's view of a full documentation program. A key distinction
between this pool and legacy Alt-A loans is that these loans adhere
to underwriting and documentation standards required under the
Consumer Financial Protections Bureau's (CFPB) Ability to Repay
(ATR) Rule (ATR Rule, or the Rule), which reduces the risk of
borrower default arising from lack of affordability,
misrepresentation or other operational quality risks due to the
rigor of the Rule's mandates with respect to the underwriting and
documentation of the borrower's ATR.
Fitch's treatment of alternative loan documentation increased the
'AAAsf' expected loss by approximately 600bps relative to a fully
documented loan.
High Percentage of DSCR Loans (Negative): There is a 39%
concentration of debt service coverage ratio (DSCR) loans in the
pool. These loans are available to real estate investors that are
qualified on a property cash flow basis, rather than DTI, and
borrower income and employment are not verified. For DSCR loans,
Fitch converts the DSCR values to a DTI and treats as low
documentation.
Fitch's expected loss for these loans is 32% in the 'AAAsf' stress,
and this is driving the higher pool expected losses due to the 39%
concentration.
Sequential-Payment Structure with Limited Advancing (Mixed): The
structure distributes principal sequentially to all classes with
losses incurred reverse sequentially.
Advances of delinquent principal and interest (P&I) will be made on
the mortgage loans for the first 180 days of delinquency, to the
extent such advances are deemed recoverable. If the P&I advancing
party fails to make a required advance, then the paying agent will
be obligated to make such advance.
The limited advancing reduces loss severities, as a lower amount is
repaid to the servicer when a loan liquidates and liquidation
proceeds are prioritized to cover principal repayment over accrued
but unpaid interest. However, the additional stress on the
structure is a downside, as there is limited liquidity in the event
of large and extended delinquencies.
Excess Cash Flow (Positive): Excess interest is available to
provide liquidity to the deal as well as to protect against losses
by structuring classes B2 and B3 as principal only (PO) bonds. In a
stressed environment, Fitch expects all bonds to pay the net
weighted average coupon (WAC), and excess interest is only
available to the extent that classes B2 and B3 are still
outstanding and have not been fully written off.
As a sensitivity to Fitch's rating stresses, Fitch took into
account a WAC deterioration that varied by rating stress. The WAC
cut was derived by assuming a 2.5% cut (based on the most common
historical modification rate) on 40% (historical Alt-A modification
percentage) of the performing loans. However, the WAC reduction
stress is based on historical modification rates.
Fitch viewed the WAC deterioration as more of a pre-emptive cut
given the ongoing macroeconomic and regulatory environment. A
portion of borrowers will likely be impaired but will not
ultimately default due to modifications and reduced P&I.
Furthermore, this approach had the largest impact on the
back-loaded benchmark scenario.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- The defined negative rating sensitivity analysis demonstrates
how the ratings would react to steeper MVDs at the national
level. The analysis assumes MVDs of 10.0%, 20.0% and 30.0% in
addition to the model projected 41.9% at 'AAA'. The analysis
indicates that there is some potential rating migration with
higher MVDs for all rated classes, compared with the model
projection. Specifically, a 10% additional decline in home
prices would lower all rated classes by one full category.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- The defined positive rating sensitivity analysis demonstrates
how the ratings would react to positive home price growth of
10% with no assumed overvaluation. Excluding the senior class,
which is already rated 'AAAsf', the analysis indicates there
is potential positive rating migration for all of the rated
classes. Specifically, a 10% gain in home prices would result
in a full category upgrade for the rated class, excluding
those assigned ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up- and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
CRITERIA VARIATION
There was one variation to Fitch's "U.S. RMBS Rating Criteria."
Approximately 65.2% of the loans in the deal were originated by
Oaktree Funding Corp. (Oaktree). Fitch's assessment of Oaktree is
seasoned more than 18 months. Given Oaktree's assessment has only
been expired a short period (less than two months) and the
seasoning on the loans, Fitch viewed the risk as immaterial.
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 multiple third-party review firms. The third-party due
diligence described in Form 15E focused on a credit, compliance and
property valuation review.
Fitch considered this information in its analysis and, as a result,
Fitch made the following adjustments to its analysis:
-- A 5% PD credit was applied at the loan level as all of the
grades were either 'A' or 'B'. This resulted in a 48bps
reduction to the 'AAAsf' expected loss.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
SLM STUDENT 2003-4: Fitch Affirms B Rating on 6 Tranches
--------------------------------------------------------
Fitch Ratings has affirmed the ratings of all outstanding classes
of SLM Student Loan Trust 2003-4 and 2003-7. The Rating Outlooks
for all classes remain Stable.
DEBT RATING PRIOR
---- ------ -----
SLM Student Loan Trust 2003-4
A-5A 78442GGD2 LT Bsf Affirmed Bsf
A-5B 78442GGE0 LT Bsf Affirmed Bsf
A-5C 78442GGF7 LT Bsf Affirmed Bsf
A-5D 78442GGG5 LT Bsf Affirmed Bsf
A-5E 78442GGN0 LT Bsf Affirmed Bsf
B 78442GGM2 LT Bsf Affirmed Bsf
SLM Student Loan Trust 2003-7
A-5A 78442GHH2 LT Bsf Affirmed Bsf
A-5B 78442GHJ8 LT Bsf Affirmed Bsf
B 78442GHK5 LT Bsf Affirmed Bsf
The senior notes of both trusts did not pass Fitch's base case
stresses in cashflow modeling, due to the notes not paying in full
prior to their legal final maturity dates; however, the senior
classes are eventually paid in full. The class B notes for both
transactions have legal final maturity dates beyond 2035, and
model-implied ratings higher than the senior classes. However, in
an event of default (EOD) caused by a senior class that is not paid
in full by maturity, the subordinate classes will not receive
interest or principal payments. Therefore, under this scenario,
they also have model-implied ratings of 'CCCsf'.
All notes for both transactions are rated 'Bsf', supported by
qualitative factors such as Navient's ability to call the notes
upon reaching 10% pool factor, and the revolving credit agreement
established by Navient, which allows the servicer to purchase loans
from the trusts. Navient has the option but not the obligation to
lend to the trust, so Fitch does not give quantitative credit to
these agreements. However, these agreements provide qualitative
comfort that Navient is committed to limiting investors' exposure
to maturity risk. Navient Corporation's current Fitch rating is
'BB-'/Stable Outlook.
In the cash flow modeling analysis for SLM 2003-4 and SLM 2003-7,
Fitch used higher transaction-specific servicing fees rather than
the standard fees from Fitch's rating criteria.
KEY RATING DRIVERS
U.S. Sovereign Risk: The trusts' 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'/Negative.
Collateral Performance: Based on transaction-specific performance
to date, Fitch assumes a cumulative default rate of 16.25% and
17.75% under the base case scenario, and a default rate of 48.75%
and 53.25% under the 'AAA' credit stress scenario for SLM 2003-4
and SLM 2003-7, respectively. Fitch maintains a sustainable
constant default rate (sCDR) of 2.5% and 2.7% for SLM 2003-4 and
SLM 2003-7, respectively, and a sustainable constant prepayment
rate (sCPR; voluntary and involuntary prepayments) of 9.7% for both
transactions.
The claim reject rate is assumed to be 0.25% in the base case and
2.0% in the 'AAA' case. The TTM levels of deferment, forbearance
and income-based repayment (IBR; prior to adjustment) are 2.47%,
9.64% and 28.09%, respectively, for SLM 2003-4, and 2.74%, 9.68%
and 26.83%, respectively, for SLM 2003-7. These assumptions are
used as the starting points in cash flow modeling, and subsequent
declines or increases are modeled as per criteria. Fitch assumes
the borrower benefits to be approximately 0.10% for both SLM 2003-4
and SLM 2003-7, based on sponsor-provided information.
Basis and Interest Rate Risk: Basis risk for the transactions
arises from any rate and reset frequency mismatch between interest
rate indices for Special Allowance Payments (SAP) and the
securities. For SLM 2003-4, as of February 2022, approximately
85.39% of the student loans are indexed to LIBOR, and 14.61% are
indexed to the 91-day T-Bill rate. For SLM 2003-7, as of February
2022, approximately 84.93% of the student loans are indexed to
LIBOR, and 15.07% are indexed to the 91-day T-Bill rate.
All the notes are currently indexed to three-month LIBOR, except
for class A-5B of SLM 2003-7, which is indexed to Euribor. For that
class, there is a currency swap in place, and the trust pays a
spread over three-month LIBOR.
Payment Structure: Credit enhancement (CE) is provided by excess
spread, and for the class A notes, subordination of the class B
notes. As of February 2022, the total and senior parity ratios
(including the reserve account but excluding the yield supplement
account) are 100.98% (0.97% CE) and 105.95% (5.62% CE) for SLM
2003-4. As of February 2022, the total and senior parity ratios
(including the reserve account) are 100.89% (0.88% CE) and 105.78%
(5.46% CE) for SLM 2003-7.
Liquidity support is provided by a reserve account currently sized
at their floors of $3,384,496 and $3,761,650 for SLM 2003-4 and SLM
2003-7, respectively. The transactions will continue to release
cash as long as 100% reported total parity (excluding the reserve
account and the yield supplement account) is maintained.
Operational Capabilities: Day-to-day servicing is provided by
Navient Solutions, LLC. Fitch believes Navient to be an acceptable
servicer, due to its extensive track record as one of the largest
servicers of FFELP loans. Fitch also confirmed with the servicer
the availability of a business continuity plan to minimize
disruptions in the collection process during the coronavirus
pandemic.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
'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
provided by the Department of Education. Aside from the U.S.
sovereign rating, defaults, basis risk and loan extension risk
account for the majority of the risk embedded in FFELP student loan
transactions.
This section provides insight into the model-implied sensitivities
the transactions face when one assumption is modified, while
holding others equal. Fitch conducts credit and maturity stress
sensitivity analysis by increasing or decreasing key assumptions by
25% and 50% over the base case. The credit stress sensitivity is
viewed by stressing both the base case default rate and the basis
spread. The maturity stress sensitivity is viewed by stressing
remaining term, IBR usage and prepayments. The results below should
only be considered as one potential outcome, as the transactions
are exposed to multiple dynamic risk factors. It should not be used
as an indicator of possible future performance.
SLM Student Loan Trust 2003-4:
Current Ratings: class A 'Bsf', class B 'Bsf' (Model-Implied
Ratings: class A 'CCCsf', class B 'CCCsf').
Credit Stress Rating Sensitivity
-- Default increase 25%: class A 'CCCsf'; class B 'CCCsf';
-- Default increase 50%: class A 'CCCsf'; class B 'CCCsf';
-- Basis spread increase 0.25%: class A 'CCCsf'; class B 'CCCsf';
-- Basis spread increase 0.50%: class A 'CCCsf; class B 'CCCsf'.
Maturity Stress Rating Sensitivity
-- CPR decrease 25%: class A 'CCCsf'; class B 'CCCsf';
-- CPR decrease 50%: class A 'CCCsf'; class B 'CCCsf';
-- IBR usage increase 25%: class A 'CCCsf'; class B 'CCCsf';
-- IBR usage increase 50%: class A 'CCCsf; class B 'CCCsf';
-- Remaining Term increase 25%: class A 'CCCsf'; class B 'CCCsf';
-- Remaining Term increase 50%: class A 'CCCsf'; class B 'CCCsf'.
SLM Student Loan Trust 2003-7:
Current Ratings: class A 'Bsf', class B 'Bsf' (Model-Implied
Ratings: class A 'CCCsf', class B 'CCCsf').
Credit Stress Rating Sensitivity
-- Default increase 25%: class A 'CCCsf'; class B 'CCCsf';
-- Default increase 50%: class A 'CCCsf'; class B 'CCCsf';
-- Basis spread increase 0.25%: class A 'CCCsf'; class B 'CCCsf';
-- Basis spread increase 0.50%: class A 'CCCsf; class B 'CCCsf'.
Maturity Stress Rating Sensitivity
-- CPR decrease 25%: class A 'CCCsf'; class B 'CCCsf';
-- CPR decrease 50%: class A 'CCCsf'; class B 'CCCsf';
-- IBR usage increase 25%: class A 'CCCsf'; class B 'CCCsf';
-- IBR usage increase 50%: class A 'CCCsf; class B 'CCCsf';
-- Remaining Term increase 25%: class A 'CCCsf'; class B 'CCCsf';
-- Remaining Term increase 50%: class A 'CCCsf'; class B 'CCCsf'.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
SLM Student Loan Trust 2003-4:
Credit Stress Sensitivity
-- Default decrease 25%: class A 'CCCsf'; class B 'CCCsf';
-- Basis Spread decrease 0.25%: class A 'CCCsf'; class B 'CCCsf'.
Maturity Stress Sensitivity
-- CPR increase 25%: class A 'CCCsf'; class B 'CCCsf';
-- IBR usage decrease 25%: class A 'CCCsf'; class B 'CCCsf';
-- Remaining Term decrease 25%: class A 'CCCsf'; class B 'BBBsf'.
SLM Student Loan Trust 2003-7:
Credit Stress Sensitivity
-- Default decrease 25%: class A 'CCCsf'; class B 'CCCsf';
-- Basis Spread decrease 0.25%: class A 'CCCsf'; class B 'CCCsf'.
Maturity Stress Sensitivity
-- CPR increase 25%: class A 'CCCsf'; class B 'CCCsf';
-- IBR usage decrease 25%: class A 'CCCsf'; class B 'CCCsf';
-- Remaining Term decrease 25%: class A 'CCCsf'; class B 'CCCsf'.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
SYMPHONY CLO XXXII: Moody's Assigns Ba3 Rating to $12MM E Notes
---------------------------------------------------------------
Moody's Investors Service has assigned ratings to four classes of
notes issued by Symphony CLO XXXII, Ltd. (the "Issuer" or "Symphony
XXXII").
Moody's rating action is as follows:
US$1,000,000 Class X Amortizing Senior Secured Floating Rate Notes
due 2035, Assigned Aaa (sf)
US$248,000,000 Class A-1 Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$12,000,000 Class A-2 Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$12,000,000 Class E Senior Secured Deferrable Floating Rate Notes
due 2035, Assigned Ba3 (sf)
The notes listed are referred to herein, collectively, as the
"Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
Symphony XXXII is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90% of the portfolio must consist of
first lien senior secured loans, cash, and eligible investments,
and up to 10% of the portfolio may consist of second lien loans,
unsecured loans and other non-loan assets. The portfolio is
approximately 95% ramped as of the closing date.
Symphony Alternative Asset 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 five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the Rated Notes, the Issuer issued five classes of
secured notes and one class 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 December 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 75
Weighted Average Rating Factor (WARF): 3085
Weighted Average Spread (WAS): 3.6%
Weighted Average Coupon (WAC): 6%
Weighted Average Recovery Rate (WARR): 47%
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
December 2021.
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.
TCW CLO 2022-1: S&P Assigns BB- (sf) Rating on Class E Notes
------------------------------------------------------------
S&P Global Ratings assigned its ratings to TCW CLO 2022-1 Ltd./TCW
CLO 2022-1 LLC's fixed- and floating-rate notes.
The note issuance is a CLO transaction governed by collateral
quality tests and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' and lower) senior secured term loans
.
The ratings reflect:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection and ongoing portfolio management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
TCW CLO 2022-1 Ltd./TCW CLO 2022-1 LLC
Class X(i), $4.0 million: AAA (sf)
Class A1, $241.0 million: AAA (sf)
Class AF, $15.0 million: AAA (sf)
Class B, $48.0 million: AA (sf)
Class C (deferrable), $24.0 million: A (sf)
Class D1 (deferrable), $20.0 million: BBB+ (sf)
Class DJ (deferrable), $4.0 million: BBB- (sf)
Class E (deferrable), $16.0 million: BB- (sf)
Subordinated notes, $37.1 million: Not rated
(i)The class X notes are expected to be paid primarily using
interest proceeds in equal installments over the first 11 payment
dates.
TRTX 2022-FL5: DBRS Finalizes B(low) Rating on Class G Notes
------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the following
classes of notes issued by TRTX 2022-FL5 Issuer, Ltd. (the
Issuer):
-- Class A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)
All trends are Stable.
The initial collateral consists of 20 floating-rate mortgages
secured by 116 mostly transitional properties with a cut-off
balance of $1.075 billion, excluding approximately $158.0 million
of future funding participations and $916.8 million of funded
companion participations. In addition, there is a two-year
reinvestment period during which the Issuer may use principal
proceeds to acquire additional eligible loans, subject to the
eligibility criteria. During the reinvestment period, the Issuer
may acquire future funding commitments, funded companion
participations, and additional eligible loans subject to the
eligibility criteria. The transaction stipulates a no downgrade
confirmation from DBRS Morningstar for companion participations
exceeding $500,000 if there is already a participation of the
underlying loan in the trust.
The loans are mostly secured by currently cash flowing assets, many
of which are in a period of transition with plans to stabilize and
improve the asset value. In total, 19 loans, representing 95.7% of
the trust balance, have remaining future funding participations
totaling $156.7 million, which the Issuer may acquire in the
future.
For the floating-rate loans, DBRS Morningstar used the one-month
Libor index, which is based on the lower of a DBRS Morningstar
stressed rate that corresponded to the remaining fully extended
term of the loans or the strike price of the interest rate cap with
the respective contractual loan spread added to determine a
stressed interest rate over the loan term. When the cut-off
balances were measured against the DBRS Morningstar As-Is Net Cash
Flow (NCF), 12 loans, representing 57.9% of the initial pool, had a
DBRS Morningstar As-Is Debt Service Coverage Ratio (DSCR) below
1.00 times (x), a threshold indicative of default risk. However,
the DBRS Morningstar Stabilized DSCRs for four loans, representing
18.4% of the initial pool balance, are below 1.00x. The properties
are often transitioning with potential upside in cash flow;
however, DBRS Morningstar does not give full credit to the
stabilization if there are no holdbacks or if other loan structural
features in place are insufficient to support such treatment.
Furthermore, even with the structure provided, DBRS Morningstar
generally does not assume the assets to stabilize above market
levels.
The transaction will have a sequential-pay structure whereby
interest and principal payments will be prioritized in order of
seniority. In the event that a note protection test is not
satisfied, the payments will be redirected to redeem the Offered
Notes until the note protection tests are satisfied. Interest may
also be deferred for the Class C Notes (Offered Note), Class D
Notes (Offered Note), Class E Notes (Offered Note), Class F Notes
(Retained Note), and Class G Notes (Retained Note).
The transaction's sponsor is TPG RE Finance Trust Holdco, LLC, a
wholly owned subsidiary of TPG RE Finance Trust, Inc (TRTX). TRTX
2022-FL5 Issuer, Ltd. and TRTX 2022-FL5 Co-Issuer, LLC are each
newly formed special-purchase vehicles (collectively, the
Co-Issuers) and indirect wholly owned subsidiaries of the Sponsor.
TPG, Inc. (TPG) is a global investment firm with multiple
investment platforms focused on a wide range of alternative
investment products, including real estate. As of September 30,
2021, TPG had assets under management of approximately $109
billion, including $11.5 billion managed by TPG's real estate
platform, TPG Real Estate (TPGRE). TPGRE includes debt investing
under TRTX, which was formed in December 2014 as a private
commercial mortgage real estate investment trust and went public in
July 2017. As of December 31, 2021, TRTX originated or acquired
approximately $14.4 billion of loan commitments. This transaction
represents TRTX's sixth commercial real estate collateralized loan
obligation (CRE CLO) and fifth broadly marketed CRE CLO transaction
since 2018. The four broadly marketed transactions to date total
$4.4 billion of mortgage assets contributed excluding
reinvestments.
An affiliate of TRTX, an indirect wholly owned subsidiary of the
Sponsor (as the retention holder), will acquire the Class F Notes,
the Class G Notes, and the Preferred Shares (Retained Securities),
representing the most subordinate 15.625% of the transaction by
principal balance.
Five loans, representing 25.1% of the mortgage asset cut-off date
balance, had Above Average or Average + property quality scores
based on physical attributes and/or a desirable location within
their respective markets (The Curtis, One Campus Martius, Westin
Charlotte, Residences at Payton Place, and 300 Lafayette).
Higher-quality properties are more likely to retain existing
tenants/guests and more easily attract new tenants/guests,
resulting in a more stable performance.
The pool contains a relatively high number of properties in primary
markets, which have historically demonstrated lower probability of
default (POD) and loss severity given default (LGD)
characteristics. Nine loans, representing 50.1% of the pool, are in
areas identified as DBRS Morningstar Market Ranks of 6, 7, or 8,
which are generally characterized as highly dense urbanized areas.
These areas benefit from increased liquidity driven by consistently
strong investor demand and lower default frequencies than less
dense suburban, tertiary, and rural markets. Urban markets
represented in the deal include New York City, Los Angeles,
Philadelphia, Honolulu, and Jersey City, New Jersey. Eight loans,
representing 40.9% of the pool balance, have collateral in
Metropolitan Statistical Area (MSA) Group 3, which is the
best-performing group in terms of historical commercial
mortgage-backed securities (CMBS) default rates among the top 25
MSAs. MSA Group 3 has a historical default rate of 17.2%, which is
nearly 11 percentage points lower than the overall CMBS historical
default rate of 28.0%.
Based on the initial pool balances, the overall DBRS Morningstar
Weighted Average (WA) As-Is DSCR of 0.96x and DBRS Morningstar WA
As-Is Loan-to-Value Ratio (LTV) of 74.7% generally reflect
high-leverage financing. Most of the assets are generally well
positioned to stabilize, and any realized cash flow growth would
help to offset a rise in interest rates and improve the overall
debt yield of the loans. DBRS Morningstar associates its LGD based
on the assets' as-is LTV, which does not assume that the
stabilization plan and cash flow growth will ever materialize. The
DBRS Morningstar As-Is DSCR for each loan at issuance does not
consider the sponsor's business plan, as the DBRS Morningstar As-Is
NCF was generally based on the most recent annualized period. The
sponsor's business plan could have an immediate impact on the
underlying asset performance that the DBRS Morningstar As-Is NCF is
not accounting for. When measured against the DBRS Morningstar
Stabilized NCF, the DBRS Morningstar WA DSCR is estimated to
improve to 1.26x, suggesting that the properties are likely to have
improved NCFs once the sponsors' business plans have been
implemented. Furthermore, the DBRS Morningstar Stabilized LTV
improves significantly to 60.0%.
The transaction is managed and includes a 24-month reinvestment
period, which could result in negative credit migration and/or an
increased concentration profile over the life of the transaction.
The risk of negative migration is partially offset by eligibility
criteria (detailed in the transaction documents) that outline DSCR,
LTV, Herfindahl score minimum, property type, and loan size
limitations for reinvestment assets. The transaction requires a no
downgrade confirmation from DBRS Morningstar for new reinvestment
loans and companion participations above $500,000. DBRS Morningstar
will analyze these loans for potential impacts on ratings. Deal
reporting includes standard monthly Commercial Real Estate Finance
Council reporting and quarterly updates. DBRS Morningstar will
regularly monitor this transaction.
DBRS Morningstar has analyzed the loans to a stabilized cash flow
that is, in many instances, above the in-place cash flow. It is
possible that the sponsors will not successfully execute their
business plans and that the higher stabilized cash flow will not
materialize during the loan term, particularly with the ongoing
Coronavirus Disease (COVID-19) pandemic and its impact on the
overall economy. A sponsor's failure to execute the business plan
could result in a term default or the inability to refinance the
fully funded loan balance. DBRS Morningstar sampled a large portion
of the loans, representing 78.8% of the of the mortgage asset
cut-off date balance. The transaction's DBRS Morningstar WA
Business Plan Score of 2.32 is generally in the range of recent
DBRS Morningstar-rated CRE CLO transactions. DBRS Morningstar made
relatively conservative stabilization assumptions and, in each
instance, considered the business plan to be rational and the loan
structure to be sufficient to execute such plans. In addition, DBRS
Morningstar analyzes LGD based on the as-is credit metrics,
assuming the loan is fully funded with no NCF or value upside.
Future funding companion participations will be held by affiliates
of TRTX and have the obligation to make future advances. TRTX
agrees to indemnify the Issuer against losses arising out of the
failure to make future advances when required under the related
participated loan. Furthermore, TRTX will be required to satisfy
and certify to investors certain liquidity requirements on a
quarterly basis.
Three loans, The Curtis, One Campus Martius, and Westin Charlotte,
have fully extended maturity dates within 12 months or less. Given
the pending maturities, the loans may not have adequate time to
complete the sponsors' business plans and fully stabilize. The
Curtis has a low As-Is LTV of 57.8%, and DBRS Morningstar
incorporated minimum upside in the stabilized NCF. One Campus
Martius has a moderately low As-Is LTV of 63.6%, and DBRS
Morningstar did not incorporate upside in the stabilized NCF.
Westin Charlotte has a low As-Is LTV of 59.8%; however, given the
hotel's weak performance and unlikely recovery before the maturity
date, DBRS Morningstar elected to incorporate a POD penalty.
All 20 loans have floating interest rates and have original terms
of 49 months to 61 months, which creates interest rate risk. For
the floating-rate loans, DBRS Morningstar used the one-month Libor
index, which is based on the lower of a DBRS Morningstar stressed
rate that corresponded to the remaining fully extended term of the
loans or the strike price of the interest rate cap with the
respective contractual loan spread added to determine a stressed
interest rate over the loan term. The borrowers of all loans have
purchased Libor rate caps with strike prices that range from 0.25%
to 4.00% to protect against rising interest rates through the
duration of the loan term. In addition to the fulfillment of
certain minimum performance requirements, exercise of any extension
options would also require the repurchase of interest rate cap
protection through the duration of the respectively exercised
option.
Notes: All figures are in U.S. dollars unless otherwise noted.
UNITED AUTO 2022-1: DBRS Finalizes BB Rating on Class E Notes
-------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the following
classes of notes issued by United Auto Credit Securitization Trust
2022-1 (UACST 2022-1 or the Issuer):
-- $144,900,000 Class A Notes at AAA (sf)
-- $38,220,000 Class B Notes at AA (high) (sf)
-- $37,420,000 Class C Notes at A (high) (sf)
-- $41,400,000 Class D Notes at BBB (sf)
-- $34,230,000 Class E Notes at BB (sf)
The ratings are based on DBRS Morningstar's review of the following
analytical considerations:
(1) Transaction capital structure, proposed ratings, and form and
sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization
(OC), subordination, amounts held in the reserve fund, and excess
spread. Credit enhancement levels are sufficient to support the
DBRS Morningstar-projected cumulative net loss (CNL) assumption
under various stress scenarios.
-- The ability of the transaction to withstand stressed cash flow
assumptions and repay investors according to the terms under which
they have invested. For this transaction, the ratings address the
timely payment of interest on a monthly basis and principal by the
legal final maturity date.
(2) The DBRS Morningstar CNL assumption is 19.60% based on the
cut-off date pool composition.
(3) The transaction assumptions consider DBRS Morningstar's
baseline macroeconomic scenarios for rated sovereign economies,
available in its commentary "Baseline Macroeconomic Scenarios For
Rated Sovereigns December 2021 Update," published on December 9,
2021. These baseline macroeconomic scenarios replace DBRS
Morningstar's moderate and adverse pandemic scenarios, which were
first published in April 2020. The baseline macroeconomic scenarios
reflect the view that recent Coronavirus Disease (COVID-19)
pandemic-related developments, particularly the new omicron variant
with subsequent restrictions, combined with rising inflation
pressures in some regions, may damp near-term growth expectations
in coming months. However, DBRS Morningstar expects the baseline
projections will continue to point to an ongoing, gradual
recovery.
(4) United Auto Credit Corporation's (UACC or the Company)
capabilities with regard to originations, underwriting, and
servicing and the existence of an experienced and capable backup
servicer.
-- DBRS Morningstar has performed an operational risk review of
UACC and considers the entity an acceptable originator and servicer
of subprime automobile loan contracts with an acceptable backup
servicer.
-- The Company's senior management team has considerable
experience and a successful track record within the auto finance
industry.
-- UACC successfully consolidated its business into a centralized
servicing platform and consolidated originations into two regional
buying centers. The Company retained experienced managers and staff
at the servicing center and buying centers.
-- UACC continues to evaluate and fine-tune its underwriting
standards as necessary. The Company has a risk management system
allowing centralized oversight of all underwriting and substantial
technology systems, which provide daily metrics on all
originations, servicing, and collections of loans.
(5) The credit quality of the collateral and performance of the
Company's auto loan portfolio.
-- UACC originates collateral that generally has shorter terms,
higher down payments, lower book values, and higher borrower income
requirements than some other subprime auto loan originators.
(6) The legal structure and presence of legal opinions, which
address the true sale of the assets to the Issuer, the
nonconsolidation of the special-purpose vehicle with UACC, that the
trust has a valid first-priority security interest in the assets,
and the consistency with DBRS Morningstar's "Legal Criteria for
U.S. Structured Finance" methodology.
UACC is a specialty finance company that has been engaged in the
subprime automobile finance business since 1996. UACC purchases
motor vehicle retail installment sales contracts from franchise and
independent automobile dealerships throughout the U.S.
The UACST 2022-1 transaction represents the 20th ABS securitization
completed in UACC's history and offers both senior and subordinate
rated securities. The receivables securitized in UACST 2022-1 are
subprime automobile loan contracts secured primarily by used
automobiles, light-duty trucks, and vans.
The rating on the Class A Notes reflects 56.00% of initial hard
credit enhancement provided by the subordinated notes in the pool,
the reserve fund (1.50% as a percentage of the initial collateral
balance), and OC (7.00% of the total pool balance). The ratings on
the Class B, C, D, and E Notes reflect 44.00%, 32.25%, 19.25%, and
8.50% of initial hard credit enhancement, respectively. Additional
credit support may be provided from excess spread available in the
structure.
Notes: All figures are in U.S. dollars unless otherwise noted.
UNITY-PEACE PARK: Moody's Assigns (P)Ba3 Rating to Class E Notes
----------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to two
classes of notes to be issued by Unity-Peace Park CLO, Ltd. (the
"Issuer").
Moody's rating action is as follows:
US$307,500,000 Class A-1 Senior Secured Floating Rate Notes due
2035, Assigned (P)Aaa (sf)
US$19,250,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2035, Assigned (P)Ba3 (sf)
The notes listed are referred to herein, collectively, as the
"Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
Unity-Peace Park CLO, Ltd. is a managed cash flow CLO. The issued
notes will be collateralized primarily by broadly syndicated senior
secured corporate loans. At least 96.0% of the portfolio must
consist of first lien senior secured loans and eligible
investments, and up to 4.0% of the portfolio may consist of
second-lien loans, first-lien last-out loans, unsecured loans, and
senior secured bonds. Moody's expect the portfolio to be
approximately 80% ramped as of the closing date.
Blackstone Liquid Credit Strategies 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 five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the Rated Notes, the Issuer will issue subordinated
notes and four classes of senior 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 December 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $500,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 3050
Weighted Average Spread (WAS): 3.40%
Weighted Average Coupon (WAC): 7.0%
Weighted Average Recovery Rate (WARR): 48.0%
Weighted Average Life (WAL): 8.0 years (covenant 9.0)
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
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.
VELOCITY COMMERCIAL 2022-1: DBRS Finalizes B(low) on 3 Tranches
---------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the Mortgage-Backed
Certificates, Series 2022-1 (the Certificates) issued by Velocity
Commercial Capital Loan Trust 2022-1 (VCC 2022-1 or the Issuer) as
follows:
-- $166.3 million Class A at AAA (sf)
-- $166.3 million Class A-S at AAA (sf)
-- $166.3 million Class A-IO at AAA (sf)
-- $26.6 million Class M-1 at AA (low) (sf)
-- $26.6 million Class M1-A at AA (low) (sf)
-- $26.6 million Class M1-IO at AA (low) (sf)
-- $15.3 million Class M-2 at A (low) (sf)
-- $15.3 million Class M2-A at A (low) (sf)
-- $15.3 million Class M2-IO at A (low) (sf)
-- $7.5 million Class M-3 at BBB (sf)
-- $7.5 million Class M3-A at BBB (sf)
-- $7.5 million Class M3-IO at BBB (sf)
-- $32.5 million Class M-4 at BB (high) (sf)
-- $32.5 million Class M4-A at BB (high) (sf)
-- $32.5 million Class M4-IO at BB (high) (sf)
-- $16.4 million Class M-5 at B (high) (sf)
-- $16.4 million Class M5-A at B (high) (sf)
-- $16.4 million Class M5-IO at B (high) (sf)
-- $8.9 million Class M-6 at B (low) (sf)
-- $8.9 million Class M6-A at B (low) (sf)
-- $8.9 million Class M6-IO at B (low) (sf)
Classes A-IO, M1-IO, M2-IO, M3-IO, M4-IO, M5-IO, and M6-IO are
interest-only (IO) certificates. The class balances represent
notional amounts.
Classes A, M-1, M-2, M-3, M-4, M-5, and M-6 are exchangeable
certificates. These classes can be exchanged for combinations of
initial exchangeable certificates as specified in the offering
documents.
The AAA (sf) ratings on the Certificates reflect 40.30% of credit
enhancement (CE) provided by subordinated certificates. The AA
(low) (sf), A (low) (sf), BBB (sf), BB (high) (sf), B (high) (sf),
and B (low) (sf) ratings reflect 30.75%, 25.25%, 22.55%, 10.90%,
5.00%, and 1.80% of CE, respectively.
Other than the classes specified above, DBRS Morningstar does not
rate any other classes in this transaction.
VCC 2022-1 is a securitization of a portfolio of newly originated
and seasoned fixed- and adjustable-rate, first-lien residential
mortgages collateralized by investor properties with one to four
units (residential investor loans) and small-balance commercial
(SBC) mortgages collateralized by various types of commercial,
multifamily rental, and mixed-use properties. The Certificates are
backed by 572 mortgage loans with a total principal balance of
$278,608,735 as of the Cut-Off Date (January 1, 2022).
Approximately 50.8% of the pool comprises residential investor
loans and about 49.2% of SBC loans. Velocity Commercial Capital,
LLC (Velocity) originated 100% of the loans in this securitization.
The loans were underwritten to program guidelines for
business-purpose loans where the lender generally expects the
property (or its value) to be the primary source of repayment (No
Ratio). The lender reviews the mortgagor's credit profile, though
it does not rely on the borrower's income to make its credit
decision. However, the lender considers the property-level cash
flows or minimum debt-service coverage ratio (DSCR) in underwriting
SBC loans with balances over $750,000 for purchase transactions and
over $500,000 for refinance transactions. Because the loans were
made to investors for business purposes, they are exempt from the
Consumer Financial Protection Bureau's Ability-to-Repay rules and
TILA-RESPA Integrated Disclosure rule.
The pool is about one-month seasoned on a weighted-average (WA)
basis, although seasoning may span from zero up to 67 months.
PHH Mortgage Corporation will service all loans within the pool for
a servicing fee of 0.30% per annum. In addition, Velocity will act
as a Special Servicer servicing the loans that defaulted or became
60 or more days delinquent under Mortgage Bankers Association (MBA)
method and other loans, as defined in the transaction documents
(Specially Serviced Loans). The Special Servicer will be entitled
to receive compensation based on an annual fee of 0.75% and the
balance of Specially Serviced Loans. Also, the Special Servicer is
entitled to a liquidation fee equal to 2.00% of the net proceeds
from the liquidation of a Specially Serviced Loan, as described in
the transaction documents.
The Servicer will fund advances of delinquent principal and
interest (P&I) until the advances are deemed unrecoverable. Also,
the Servicer is obligated to make advances with respect to taxes,
insurance premiums, and reasonable costs incurred in the course of
servicing and disposing properties.
U.S. Bank National Association (rated AA (high) with a Stable trend
by DBRS Morningstar) will act as the Trustee, Paying Agent, and
Custodian.
The Seller, directly or indirectly through a majority-owned
affiliate, is expected to retain an eligible horizontal residual
interest consisting of the Class M-7, Class P, and Class XS
Certificates, collectively representing at least 5% of the fair
value of all Certificates, to satisfy the credit risk-retention
requirements under Section 15G of the Securities Exchange Act of
1934 and the regulations promulgated thereunder.
On or after the later of (1) the three year anniversary of the
Closing Date or (2) the date when the aggregate stated principal
balance of the mortgage loans is reduced to 30% of the Closing Date
balance, the Depositor may purchase all outstanding Certificates
(Optional Purchase) at a price equal to the sum of the remaining
aggregate balance of the Certificates plus accrued and unpaid
interest, and any fees, expenses, and indemnity payments due and
unpaid to the transaction parties, including any unreimbursed P&I
and servicing advances, and other amounts due as applicable. The
Optional Purchase will be conducted concurrently with a qualified
liquidation of the Issuer.
Additionally, if on any date on which the unpaid mortgage loan
balance and the value of real estate owned (REO) properties has
declined to less than 10% of the initial mortgage loan balance as
of the Cut-off Date, the Directing Holder, the Special Servicer, or
the Servicer, in that order of priority, may purchase all of the
mortgages, REO properties, and any other properties from the Issuer
(Optional Termination) at a price specified in the transaction
documents. The Optional Termination will be conducted as a
qualified liquidation of the Issuer. The Directing Holder
(initially, the Seller) is the representative selected by the
holders of more than 50% of the outstanding subordinate
certificates with the lowest priority of principal distributions
(the Controlling Class).
The transaction uses a structure sometimes referred to as a
modified pro rata structure. Prior to the Class A CE falling below
10.0% of the loan balance as of the Cut-off Date (Class A Minimum
CE Event), the principal distributions allow for amortization of
all senior and subordinate bonds based on CE targets set at
different levels for performing (same CE as at issuance) and
nonperforming (higher CE than at issuance) loans. Each Class's
target principal balance is determined based on the CE targets and
the performing and nonperforming (those that are 90 or more days
MBA delinquent, in foreclosure and REO, and subject to a servicing
modification within the prior 12 months) loan amounts. As such, the
principal payments are paid on a pro rata basis, up to each Class's
target principal balance, so long as no loans in the pool are
nonperforming. If the share of nonperforming loans grows, the
corresponding CE target increases. Thus, the principal payment
amount increases for the senior and senior subordinate classes and
falls for the more subordinate bonds. The goal is to distribute the
appropriate amount of principal to the senior and subordinate bonds
each month, to always maintain the desired level of CE, based on
the performing and non-performing pool percentages. After the Class
A Minimum CE Event, the principal distributions are made
sequentially.
Relative to the sequential-pay structure, the modified pro rata
structure is more sensitive to the timing of the projected defaults
and losses as the losses may be applied at a time when the amount
of credit support is reduced as the bonds' principal balances
amortize over a life of the transaction. That said, the excess
spread can be used to cover realized losses after being allocated
to the unpaid net WA coupon shortfalls (Net WAC Rate Carryover
Amounts).
COMMERCIAL MORTGAGE-BACKED SECURITIES (CMBS) METHODOLOGY
Of the 251 loans, 247 loans, representing 99.2% of the SBC portion
of the pool, have a fixed interest rate with a straight average of
7.20%. The four floating-rate loans have interest rate floors
(excluding rate margins) ranging from 3.49% to 5.25% with a
straight average of 4.25% and interest rate margins of 4.00%. To
determine the probability of default (POD) and loss severity given
default inputs in the CMBS Insight Model, DBRS Morningstar applied
a stress to the various indexes that corresponded with the
remaining fully extended term of the loans and added the respective
contractual loan spread to determine a stressed interest rate over
the loan term. DBRS Morningstar looked to the greater of the
interest rate floor or the DBRS Morningstar stressed index rate
when calculating stressed debt service. The WA modeled coupon rate
was 6.80%. Most of the loans have original loan term lengths of 30
years and fully amortize over 30-year schedules. However, 18 loans,
which comprise 11.2% of the SBC pool, have an initial IO period
ranging from 24 months to 120 months and then fully amortize over
shortened 20- to 28-year schedules.
Most SBC loans were originated between November 2021 and December
2021 (247 loans; 99.2% of the SBC pool), with only four loans (0.8%
of the SBC pool) originated between March 2016 and July 2016,
resulting in minimal seasoning of 1.5 months on average. The SBC
pool has a WA original term length of 360 months, or 30 years.
Based on the current loan amount, which reflects approximately
seven basis points (bps) of amortization, and the current appraised
values, the SBC pool has a WA loan-to-value (LTV) ratio of 66.6%.
However, DBRS Morningstar made LTV adjustments to 44 loans that had
an implied capitalization rate more than 200 bps lower than a set
of minimal capitalization rates established by the DBRS Morningstar
Market Rank. The DBRS Morningstar minimum capitalization rates
range from 5.0% for properties in Market Rank 8 to 8.0% for
properties in Market Rank 1. This resulted in a higher DBRS
Morningstar LTV of 73.0%. Lastly, all loans fully amortize over
their respective remaining terms, resulting in 100% expected
amortization; this amount of amortization is greater than what is
typical for CMBS conduit pools. DBRS Morningstar's research
indicates that for CMBS conduit transactions securitized between
2000 and 2019, average amortization by year has ranged between 7.5%
and 21.1%, with an overall median rate of 18.8%.
As contemplated and explained in DBRS Morningstar's "Rating North
American CMBS Interest-Only Certificates" methodology, the most
significant risk to an IO cash flow stream is term default risk. As
noted in the methodology, for a pool of approximately 63,000 CMBS
loans that had fully cycled through to their maturity defaults,
DBRS Morningstar noted the average total default rate across all
property types was approximately 17%, the refinance default rate
was 6% (approximately one-third of the total rate), and the term
default rate was approximately 11%. DBRS Morningstar recognizes the
muted impact of refinance risk on IO certificates by notching the
IO rating up by one notch from the Reference Obligation rating.
When using the 10-year Idealized Default Table default probability
to derive a POD for a CMBS bond from its rating, DBRS Morningstar
estimates that, in general, a one-third reduction in the CMBS
Reference Obligation POD maps to a tranche rating that is
approximately one notch higher than the reference Obligation or the
Applicable Reference Obligation, whichever is appropriate.
Therefore, similar logic regarding term default risk supported the
rationale for DBRS Morningstar to reduce the POD in the CMBS
Insight Model by one notch because refinance risk is largely absent
for this SBC pool of loans.
The DBRS Morningstar CMBS Insight Model does not contemplate the
ability to prepay loans, which is generally seen as credit positive
because a prepaid loan cannot default. The CMBS predictive model
was calibrated using loans that have prepayment lockout features.
Those loans' historical prepayment performance is close to 0
conditional prepayment rate (CPR). If the CMBS predictive model had
an expectation of prepayments, DBRS Morningstar would expect the
default levels to be reduced. Any loan that prepays is removed from
the pool and can no longer default. This collateral pool does not
have any prepayment lockout features, and DBRS Morningstar expects
that this pool will have prepayments over the remainder of the
transaction. DBRS Morningstar applied the following to calculate a
default rate prepayment haircut: using Intex Dealmaker, a lifetime
constant default rate (CDR) was calculated that approximated the
default rate for each rating category. While applying the same
lifetime CDR, DBRS Morningstar applied a 2.0% CPR prepayment rate.
When holding the CDR constant and applying 2.0% CPR, the cumulative
default amount declined. The percentage change in the cumulative
default prior to and after applying the prepayments, subject to a
10.0% maximum reduction, was then applied to the cumulative default
assumption to calculate a fully adjusted cumulative default
assumption.
The SBC pool is quite diverse based on loan size, with an average
cut-off date loan balance of $545,858, a concentration profile
equivalent to that of a transaction with 147 equal-size loans, and
a top-10 loan concentration of 15.5%. Increased pool diversity
helps to insulate the higher-rated classes from event risk.
The loans are mostly secured by traditional property types (i.e.,
multifamily, retail, office, and industrial), with no exposure to
higher-volatility property types, such as hotels or other lodging
facilities.
All loans in the SBC pool fully amortize over their respective
remaining loan terms between 291 and 360 months, reducing refinance
risk.
The SBC pool has a WA expected loss of 5.39%, which is higher than
recently analyzed comparable Velocity small-balance transactions.
Contributing factors to the higher expected loss include a higher
concentration of office and retail properties, a higher percentage
of loans marked as Below Average for property quality, and slightly
weaker/less urban locations in terms of metropolitan statistical
area grouping and DBRS Morningstar Market Ranks.
As classified by DBRS Morningstar for modeling purposes, the SBC
pool contains a significant exposure to retail (26.9% of the SBC
pool) and a smaller exposure to office (19.3% of the SBC pool),
which are two of the higher-volatility asset types. Loans counted
as retail include those identified as automotive and potentially
commercial condominium. Combined, retail and office properties
represent nearly half of the SBC pool balance. Retail, which has
struggled because of the Coronavirus Disease (COVID-19) pandemic,
comprises the largest asset type in the transaction. DBRS
Morningstar applied a 31.8% reduction to the net cash flow (NCF)
for retail properties and a 30.0% reduction for office assets in
the SBC pool, which is above the average NCF reduction applied for
comparable property types in CMBS analyzed deals. Multifamily
comprises the fourth-largest property type concentration in the SBC
pool (18.2%). Based on DBRS Morningstar's research, multifamily
properties securitized in conduit transactions have had lower
default rates than most other property types.
DBRS Morningstar did not perform site inspections on loans within
its sample for this transaction. Instead, DBRS Morningstar relied
upon analysis of third-party reports and online searches to
determine property quality assessments. Of the 65 loans DBRS
Morningstar sampled, 17 were Average quality (30.8%), 20 were
Average - (29.5%), 25 were Below Average (35.9%), and three were
Poor (3.8%). DBRS Morningstar assumed unsampled loans were Average
- quality, which has a slightly increased POD level. This is more
conservative than the assessments from sampled loans and is
consistent with other SBC transactions.
Limited property-level information was available for DBRS
Morningstar to review. Asset summary reports, property condition
reports, Phase I/II environmental site assessment (ESA) reports,
and historical cash flows were generally not available for review
in conjunction with this securitization. DBRS Morningstar received
and reviewed appraisals for the top 30 loans, which represent 32.4%
of the SBC pool balance. Most of the appraisals were issued between
March 2021 and December 2021, when 247 of the 251 loans were
originated. The four seasoned loans in the pool had appraisals
issued between March 2016 and June 2016. DBRS Morningstar was able
to perform a loan-level cash flow analysis on the top 30 loans. The
haircuts ranged from -2.0% to -45.7%, with an average of -22.6%;
however, DBRS Morningstar generally applied more conservative
haircuts on the unsampled loans. No ESA reports were provided and
are not required by the Issuer; however, all of the loans are
placed onto an environmental insurance policy that provides
coverage to the Issuer and the securitization trust in the event of
a claim.
DBRS Morningstar received limited borrower information, net worth
or liquidity information, and credit history. DBRS Morningstar
generally initially assumed loans had Weak sponsorship scores,
which increases the stress on the default rate. The initial
assumption of Weak reflects the generally less sophisticated nature
of small balance borrowers and assessments from past small balance
transactions. Furthermore, DBRS Morningstar received a 12-month pay
history on each loan as of December 31, 2021. If any loan had more
than two late pays within this period or was currently 30 days past
due, DBRS Morningstar applied an additional stress to the default
rate. This occurred for only three loans, representing 0.6% of the
SBC pool balance. Finally, DBRS Morningstar received a borrower
FICO score as of December 31, 2021, for all loans, with an average
FICO score of 727. While "North American CMBS Multi-Borrower Rating
Methodology" does not contemplate FICO scores, the Residential
Mortgage-Backed Securities (RMBS) Methodology does and would
characterize a FICO score of 727 as near-prime, whereas prime is
considered greater than 750. Borrowers with a FICO score of 727
could generally be described as potentially having had previous
credit events (foreclosure, bankruptcy, etc.) but, if they did, it
is likely that these credit events were cleared about two to five
years ago.
RESIDENTIAL MORTGAGE-BACKED SECURITIES (RMBS) METHODOLOGY
The collateral pool consists of 321 mortgage loans with a total
balance of approximately $141.6 million collateralized by one- to
four-unit investment properties. The mortgage loans were
underwritten by Velocity to No Ratio program guidelines for
business-purpose loans.
The coronavirus pandemic and the resulting isolation measures
caused an immediate economic contraction, leading to sharp
increases in unemployment rates and income reductions for many
consumers. Shortly after the onset of the pandemic, DBRS
Morningstar saw an increase in the delinquencies for many RMBS
asset classes.
Such mortgage delinquencies were mostly in the form of
forbearances, which are generally short-term periods of payment
relief that may perform very differently from traditional
delinquencies. At the onset of the pandemic, the option to forbear
mortgage payments was widely available, driving forbearances to an
elevated level. When the dust settled, loans with
coronavirus-induced forbearance in 2020 performed better than
expected, thanks to government aid, low LTVs, and acceptable
underwriting in the mortgage market in general. Across nearly all
RMBS asset classes in recent months delinquencies have been
gradually trending downward, as forbearance periods come to an end
for many borrowers.
As of the Cut-Off Date, no borrower within the pool is currently
subject to a coronavirus-related forbearance plan with the
Servicer. In the event a borrower requests or enters into a
coronavirus-related forbearance plan after the Cut-Off Date but
prior to the Closing Date, the Sponsor will remove such loan from
the mortgage pool and remit the related Closing Date substitution
amount. Loans that enter a coronavirus-related forbearance plan on
or after the Closing Date will remain in the pool.
Notes: All figures are in U.S. dollars unless otherwise noted.
VNDO TRUST 2016-350P: S&P Lowers Class E Certs Rating to 'B (sf)'
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S&P Global Ratings lowered its rating on the class E commercial
mortgage pass-through certificates from VNDO Trust 2016-350P, a
U.S. CMBS transaction. At the same time, S&P's affirmed its ratings
on five other classes from the same transaction.
This is a U.S. CMBS transaction backed by a portion of a
fixed-rate, interest-only (IO) mortgage whole loan secured by an
office property in Manhattan, N.Y.
Rating Actions
S&P said, "The downgrade of class E and the affirmations of classes
A, B, C, and D reflect our reevaluation of the office property that
secures the sole loan in the transaction. Our analysis considers
that the sponsor has not yet been able to increase the property's
occupancy rate to historical or market occupancy levels even though
it received notice from the former largest tenant, Ziff-Brothers
(50.3% of net rentable area [NRA]), 18 months prior to its April
2021 lease expiration that it did not intend to renew its lease.
The office building is currently only 75.5% leased with no further
leasing prospects on the vacant space and would require significant
capital to re-let the vacant space. In addition, tenants comprising
approximately 25.1% of NRA are expected to vacate upon their
respective 2022 and 2023 lease expirations.
"Our property-level analysis also reflects softened office
submarket fundamentals from lower demand and longer re-leasing
timeframes as more companies adopt a hybrid work arrangement. We
therefore revised our sustainable net cash flow (NCF) downward
(-20.9% from our last review) to $24.4 million by utilizing a 75.5%
in-place occupancy rate as of the January 2022 rent roll and
aligning our net operating income (NOI) closer to the 2021
servicer-reported figures. Using a 6.25% S&P Global Ratings
capitalization rate, we arrived at an expected-case valuation of
$391.0 million or $685 per sq. ft., a decline of 18.2% from our
last review and issuance value of $478.2 million. This yielded an
S&P Global Ratings loan-to-value ratio of 102.3% on the whole loan
balance."
Specifically, the downgrade on class E reflects its first loss
position in the waterfall. Although the model-indicated ratings
were lower than the classes' revised or current rating levels, S&P
tempered its downgrade on class E and affirmed its ratings on
classes A, B, C, and D because it weighed certain qualitative
considerations, including:
-- The property's desirable location in midtown Manhattan;
-- The potential that the operating performance of the office
building could improve above our revised expectations;
-- The high 2016 appraised land value of $410.0 million;
-- The significant market value decline that would be needed
before these classes experience principal losses;
-- The liquidity support provided in the form of servicer
advancing; and
-- The relative position of the classes (particularly for classes
A through D) in the waterfall.
The whole loan had a reported current payment status through its
March 2022 debt service payments and the borrower did not request
COVID-19 relief. In addition, the sponsor provided a $25.0 million
guaranty in lieu of sweeping excess cash flow into a re-leasing
reserve account because Ziff-Brothers did not renew or extend its
lease at least 18 months prior to its April 2021 lease expiry. The
servicer, Midland Loan Services (Midland), confirmed that aside
from placing $3.25 million into a special tenant
improvement/leasing commission (TI/LC) reserve account, the
borrower has not drawn down on the remaining funds. If the
property's performance does not improve and/or there are reported
negative changes in the performance beyond what S&P has already
considered, it may revisit our analysis and adjust its ratings as
necessary.
S&P affirmed its rating on the class X-A IO certificates based on
its criteria for rating IO securities, in which the rating on the
IO securities would not be higher than that of the lowest-rated
reference class. The notional amount of the class X-A certificates
references class A.
Property-Level Analysis
S&P said, "Our property-level analysis considered that while the
sponsor was able to partly re-tenant the building after
Ziff-Brothers, comprising 50.3% of NRA, vacated, the occupancy
level is still significantly below our expectations. The property
was 75.5% leased, according to the January 2022 rent roll, compared
with our assumed 92.5% occupancy rate that we derived in our last
review in December 2019 and at issuance.
"Although we were aware, at issuance and in our last review, that
Ziff-Brothers was reducing its footprint at the property because it
subleased 53.3% and then 65.0% of its leased square footage (26.8%
and then 32.7% of the property's NRA, respectively), our analyses
also factored in the property's desirable location in midtown
Manhattan, the property's strong occupancy history (averaging 97.4%
between 2007 and 2018), the below 10.0% submarket vacancy rate, and
strong sponsorship from Vornado, including its $25.0 million
guaranty to assist in the expected lease-up of any vacant space at
the property. At that time, we assumed a 92.5% occupancy rate and
minimal time and cost to lease up the vacant space. As a result, we
arrived at an expected-case value of $478.2 million or $838 per sq.
ft."
However, the former Ziff-Brothers' space was only partly backfilled
by tenants on short-term leases (less than five years) to achieve
its current 75.5% occupancy level. The property also faces
concentrated rollover in 2022 (16.0% of NRA) and 2023 (39.2%). The
largest tenant, Citadel Enterprise Americas, accounting for 20.6%
of NRA, signed two leases at the property in 2020 and 2021, but is
expected to relocate to 425 Park Avenue after its leases expire in
December 2023. In addition, Midland indicated that tenant
Egon-Zehnder International (4.5%) will vacate upon its May 2022
lease expiration. According to the sponsor, there are no additional
leasing prospects for the currently vacant space. Coupled with
weakened office submarket fundamentals due to the COVID-19 pandemic
and more companies embracing flexible work arrangements,
concentrated rollover risk, and upcoming tenant movements, we
revised our expected-case assumptions and valuation of the
property.
S&P said, "Our current analysis considered the aforementioned
developments as well as current market data and conditions.
According to CoStar, the Plaza District office submarket had
experienced higher vacancy rates in recent years due to increased
remote work. Plaza District has one of the largest, stable 4- to
5-star office properties, however, most were built in the 20th
century. It is one of the most expensive submarkets in New York
City, and rents could continue to be negatively impacted (according
to CoStar, market rent for 4- to 5-star properties in the office
submarket declined 2.6% in 2020, 1.1% in 2021, and 0.4% as of
year-to-date (YTD) March 2022) if vacancy and availability rates
continue to be elevated. CoStar noted that the 4- to 5-star
properties office submarket asking rent, vacancy rate, and
availability rate as of YTD March 2022 were $93.28 per sq. ft.,
15.5%, and 18.1%, respectively. CoStar projects the office
submarket vacancy rate and asking rent to be 14.1% and $101.13 per
sq. ft., respectively, in 2023. This compares with, according to
the January 2022 rent roll, the property's occupancy rate and gross
rent of 75.5% and $110.53 per sq. ft., respectively, as calculated
by S&P Global Ratings. As a result, in our current analysis, we
assumed a 75.5% occupancy rate and in-place gross rent, arriving at
an S&P Global Ratings NCF of $24.4 million. Using a S&P Global
Ratings capitalization rate of 6.25%, we derived a $391.0 million
expected-case value or $685 per sq. ft."
Transaction Summary
This is a U.S. stand-alone (single borrower) transaction backed by
a portion of a 10-year, fixed-rate, IO mortgage whole loan, secured
by the borrower's fee simple interest in a 30-story,
570,784-sq.-ft. class A office building located at 350 Park Avenue
between East 51st and East 52nd Streets, in midtown Manhattan,
within the Plaza District office submarket. The IO mortgage whole
loan had an initial and current $400.0 million balance, pays a per
annum fixed interest rate of 3.91513%, and matures on Jan. 6, 2027.
The whole loan is split into four senior A and two subordinate B
notes. The $233.3 million trust balance (according to the March 11,
2022, trustee remittance report), comprises the $77.6 million
senior note A-1, the $51.7 million senior note A-3, the $62.4
million subordinate note B-1, and the $41.6 million subordinate
note B-2. The $100.0 million senior note A-2 is in GS Mortgage
Securities Trust 2017-GS5 and the $66.7 million senior note A-4 is
in JPMDB Commercial Mortgage Securities Trust 2017-C5, both U.S.
CMBS transactions. The A notes are pari passu to each other and
senior to the B notes. There is no additional debt. To date, the
trust has not incurred any principal losses. Midland reported a
2.14x debt service coverage as of year-end 2021, down from 3.03x as
of year-end 2020.
The recent rapid spread of the omicron variant highlights the
inherent uncertainties of the pandemic as well as the importance
and benefits of vaccines. S&P said, "While the risk of new, more
severe variants displacing omicron and evading existing immunity
cannot be ruled out, our current base case assumes that existing
vaccines can continue to provide significant protection against
severe illness. Furthermore, many governments, businesses, and
households around the world are tailoring policies to limit the
adverse economic impact of recurring COVID-19 waves. Consequently,
we do not expect a repeat of the sharp global economic contraction
of second-quarter 2020. Meanwhile, we continue to assess how well
each issuer adapts to new waves in its geography or industry."
Rating Lowered
VNDO Trust 2016-350P
Class E to 'B (sf)' from 'BB- (sf)'
Ratings Affirmed
VNDO Trust 2016-350P
Class A: AAA (sf)
Class B: AA- (sf)
Class C: A- (sf)
Class D: BBB- (sf)
Class X-A: AAA (sf)
WEHLE PARK CLO: Moody's Assigns Ba3 Rating to $21.6MM Cl. E Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned ratings to two classes of
notes issued by Wehle Park CLO, Ltd. (the "Issuer" or "Wehle
Park").
Moody's rating action is as follows:
US$345,600,000 Class A Senior Secured Floating Rate Notes due 2035,
Definitive Rating Assigned Aaa (sf)
US$21,600,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2035, Definitive Rating Assigned Ba3 (sf)
The notes listed are referred to herein, collectively, as the
"Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
Wehle Park is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90.0% of the portfolio must consist of
first lien senior secured loans, cash, and eligible investments,
and up to 10.0% of the portfolio may consist of second lien loans,
first lien last out loans, unsecured loans and senior secured
bonds, provided that not more than 5.0% of the portfolio may
consist of senior secured bonds. The portfolio is approximately
90.0% ramped as of the closing date.
Blackstone 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 five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the Rated Notes, the Issuer issued three other
classes of secured notes and one class 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 December 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $540,000,000
Diversity Score: 60
Weighted Average Rating Factor (WARF): 3136
Weighted Average Spread (WAS): 3mS + 3.5%
Weighted Average Coupon (WAC): 7.00%
Weighted Average Recovery Rate (WARR): 47.50%
Weighted Average Life (WAL): 8.0 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
December 2021.
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.
WELLS FARGO 2012-LC5: Moody's Affirms Caa1 Rating on Cl. F Certs
----------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on seven classes
and upgraded the ratings on three classes in Wells Fargo Commercial
Mortgage Trust 2012-LC5, Commercial Mortgage Pass-Through
Certificates, Series 2012-LC5 as follows:
Cl. A-3, Affirmed Aaa (sf); previously on Mar 22, 2019 Affirmed Aaa
(sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Mar 22, 2019 Affirmed
Aaa (sf)
Cl. A-S, Affirmed Aaa (sf); previously on Mar 22, 2019 Affirmed Aaa
(sf)
Cl. B, Upgraded to Aa1 (sf); previously on Mar 22, 2019 Affirmed
Aa3 (sf)
Cl. C, Upgraded to A2 (sf); previously on Mar 22, 2019 Affirmed A3
(sf)
Cl. D, Affirmed Baa3 (sf); previously on Mar 22, 2019 Affirmed Baa3
(sf)
Cl. E, Affirmed B1 (sf); previously on Mar 22, 2019 Affirmed B1
(sf)
Cl. F, Affirmed Caa1 (sf); previously on Mar 22, 2019 Affirmed Caa1
(sf)
Cl. X-A*, Affirmed Aaa (sf); previously on Mar 22, 2019 Affirmed
Aaa (sf)
Cl. X-B*, Upgraded to A1 (sf); previously on Mar 22, 2019 Affirmed
A2 (sf)
* Reflects interest-only classes
RATINGS RATIONALE
The ratings on two P&I classes, Cl. B and Cl. C, were upgraded
based primarily on an increase in credit support resulting from
loan paydowns and amortization as well as an increase in
defeasance. The deal has paid down 18% since Moody's last review
and 36% since securitization. Additionally, defeasance increased to
51% of the pool from 20% at last review.
The ratings on six P&I classes were affirmed because the
transaction's key metrics, including Moody's loan-to-value (LTV)
ratio, Moody's stressed debt service coverage ratio (DSCR) and the
transaction's Herfindahl Index (Herf), are within acceptable
ranges. All of the remaining loans in the pool mature by October
2022.
The rating on the Interest-Only (IO) class X-A was affirmed based
on the credit quality of its referenced classes.
The rating on the IO class X-B was upgraded based on an improvement
in the credit quality of its referenced classes.
Moody's rating action reflects a base expected loss of 3.2% of the
current pooled balance, compared to 3.1% at Moody's last review.
Moody's base expected loss plus realized losses is now 2.5% of the
original pooled balance, compared to 2.9% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected. Additionally, significant
changes in the 5-year rolling average of 10-year US Treasury rates
will impact the magnitude of the interest rate adjustment and may
lead to future rating actions.
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 rating all classes except interest-only
classes were "US and Canadian Conduit/Fusion Commercial
Mortgage-Backed Securitizations Methodology" published in November
2021.
DEAL PERFORMANCE
As of the March 17, 2022 distribution date, the transaction's
aggregate certificate balance has decreased by 36% to $823.9
million from $1.28 billion at securitization. The certificates are
collateralized by 56 mortgage loans ranging in size from less than
1% to 8.4% of the pool, with the top ten loans (excluding
defeasance) constituting 33.3% of the pool. Twenty-four loans,
constituting 50.7% of the pool, have defeased and are secured by US
government securities.
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 15, compared to 23 at Moody's last review.
As of the March 2022 remittance report, all loans were current on
their debt service payments.
Fifteen loans, constituting 26.1% of the pool, are on the master
servicer's watchlist, of which two loans, representing 5.8% of the
pool, indicate the borrower has received loan modifications in
relation to the coronavirus impact on the property. The watchlist
includes loans that meet certain portfolio review guidelines
established as part of the CRE Finance Council (CREFC) monthly
reporting package. As part of Moody's ongoing monitoring of a
transaction, the agency reviews the watchlist to assess which loans
have material issues that could affect performance.
One loan has been liquidated from the pool, resulting in an
aggregate realized loss of $6.1 million (for a loss severity of
71%). One loan, Courtyard by Marriott Wilmington, DE ($7.4 million
-- 0.9% of the pool), is currently in special servicing. The loan
is secured by a 126-key, 10 story limited service hotel located in
the central business district of Wilmington, DE. The loan
transferred to special servicing in May 2020 due to imminent
monetary default and was more than 90 days delinquent for much of
2021. However, temporary forbearance was granted in January 2022
and the loan is now current through its March 2022 payment date.
The loan matures in August 2022 and a recent appraisal value
exceeded the remaining loan balance.
The credit risk of loans is determined primarily by two factors: 1)
Moody's assessment of the probability of default, which is largely
driven by each loan's DSCR, and 2) Moody's assessment of the
severity of loss upon a default, which is largely driven by each
loan's loan-to-value ratio, referred to as the Moody's LTV or MLTV.
As described in the CMBS methodology used to rate this transaction,
Moody's make various adjustments to the MLTV. Moody's adjust the
MLTV for each loan using a value that reflects capitalization (cap)
rates that are between Moody's sustainable cap rates and market cap
rates. Moody's also use an adjusted loan balance that reflects each
loan's amortization profile. The MLTV reported in this publication
reflects the MLTV before the adjustments described in the
methodology.
Moody's received full year 2020 operating results for 100% of the
pool, and full or partial year 2021 operating results for 98% of
the pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 103%, compared to 89% 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), excluding hotel properties
that had significantly depressed NOI in 2020 / 2021. Moody's value
reflects a weighted average capitalization rate of 9.9%.
Moody's actual and stressed conduit DSCRs are 1.33X and 1.11X,
respectively, compared to 1.67X and 1.26X 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 16.5% of the pool balance.
The largest loan is the 100 Church Street Loan ($69.2 million --
8.4% of the pool), which represents a pari-passu portion of a
$199.0 million mortgage loan. The loan is secured by a 21-story,
1.1 million SF, Class B+ office building located in the City Hall
office submarket of Lower Manhattan. As of December 2021, the
property was 90% leased compared to 99% in September 2018. The top
two tenants represent 68% of the net rentable area and both have
lease expiration dates in 2032 or later. The loan matures in July
2022 and has amortized over 13% since securitization. Moody's LTV
and stressed DSCR are 84% and 1.16X, respectively, compared to 90%
and 1.08X at the last review.
The second largest loan is the Somerset Shoppes Loan ($35.0 million
-- 4.2% of the pool), which is secured by a 186,335 SF retail
center located on Glades Road in Boca Raton, Fl. The property is
anchored by a TJ Maxx, Michaels, and Saks Fifth Ave. As of December
2021, the property was 99% leased, similar to the prior review. The
loan matures in September 2022 and has amortized nearly 17% since
securitization. Moody's LTV and stressed DSCR are 95% and 1.08X,
respectively, compared to 102% and 1.01X at the last review.
The third largest loan is the Rockville Corporate Center Loan
($32.1 million -- 3.9% of the pool), which is secured by a pair of
mid-rise office buildings totaling 220,539 SF located in Rockville,
MD. While the property was 100% leased to two tenants as of
September 2021, the second largest tenant, AARP (75,715 SF),
vacated the property at their lease expiration in November 2021.
The property occupancy is reduced to 65% with the departure of AARP
and the servicer indicated their space is being marketed for lease.
The loan matures in May 2022 and has amortized 15% since
securitization. Due to the recent decline in occupancy, this loan
may face increased refinance risk. Moody's LTV and stressed DSCR
are 127% and 0.83X, respectively, compared to 79% and 1.30X at the
last review.
WELLS FARGO 2015-NXS1: DBRS Confirms B Rating on Class F Certs
--------------------------------------------------------------
DBRS Limited confirmed the ratings on all classes of the Commercial
Mortgage Pass-Through Certificates, Series 2015-NXS1 issued by
Wells Fargo Commercial Mortgage Trust 2015-NXS1 as follows:
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class X-B at A (sf)
-- Class C at A (low) (sf)
-- Class PEX at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class X-E at BB (sf)
-- Class E at BB (low) (sf)
-- Class X-F at B (high) (sf)
-- Class F at B (sf)
All trends are Stable.
The rating confirmations reflect the overall stable performance of
the transaction since the last DBRS Morningstar rating action in
March 2021. As of the January 2022 remittance, 61 of the original
68 loans remain in the pool, with an aggregate principal balance of
$738.4 million, representing a collateral reduction of 22.7% since
issuance. Seven loans, representing 11.2% of the current trust
balance, are fully defeased. The transaction is concentrated by
property type as 14 loans, representing 39.0% of the current trust
balance, are secured by office properties. Two loans, representing
5.7% of the current trust balance, are in special servicing and 10
loans, representing 18.0% of the pool, are being monitored on the
servicer's watchlist.
The transaction's largest specially serviced loan, Hotel Andra
(Prospectus ID#13; 3.1% of the pool), is secured by a 119-room
boutique hotel in downtown Seattle. The loan transferred to special
servicing in April 2020 at the borrower's request because of
imminent default and remains delinquent. The property was closed
from April 2020 through July 2021. In July 2021, the servicer
reported that the borrower expressed a desire to cure the loan and
a forbearance agreement was executed. The terms of the forbearance
include a retroactive principal and interest deferral period and a
waiver of monthly furniture, fixtures, and equipment (FF&E) reserve
deposits. Deferred principal and interest are to be repaid over 18
months, starting in May 2022. As part of the forbearance agreement,
the borrower will also contribute $9.5 million into an FF&E
reserve, which will be used to complete various renovations. The
loan will continue to be monitored and is ultimately expected to be
returned to the master servicer. The property was appraised in June
2021 at a value of $41.9 million, a 23.5% decrease from the
issuance value of $54.8 million. Following the completion of the
renovations and subsequent stabilization of property operations,
the appraiser projected a value of $56.4 million with a projected
stabilization date of June 2024.
Notes: All figures are in U.S. dollars unless otherwise noted.
WELLS FARGO 2017-C38: Fitch Lowers Rating on Class E Certs to Bsf
-----------------------------------------------------------------
Fitch Ratings has downgraded one and affirmed 13 classes of Wells
Fargo Commercial Mortgage (WFCM) Trust 2017-C38 commercial mortgage
pass-through certificates. The Rating Outlook remains Negative on
three classes.
DEBT RATING PRIOR
---- ------ -----
WELLS FARGO COMMERCIAL MORTGAGE TRUST 2017-C38
A-2 95001MAB6 LT AAAsf Affirmed AAAsf
A-3 95001MAC4 LT AAAsf Affirmed AAAsf
A-4 95001MAE0 LT AAAsf Affirmed AAAsf
A-5 95001MAF7 LT AAAsf Affirmed AAAsf
A-S 95001MAG5 LT AAAsf Affirmed AAAsf
A-SB 95001MAD2 LT AAAsf Affirmed AAAsf
B 95001MAK6 LT AA-sf Affirmed AA-sf
C 95001MAL4 LT A-sf Affirmed A-sf
D 95001MAP5 LT BBB-sf Affirmed BBB-sf
E 95001MAR1 LT Bsf Downgrade BB-sf
F 95001MAT7 LT CCCsf Affirmed CCCsf
X-A 95001MAH3 LT AAAsf Affirmed AAAsf
X-B 95001MAJ9 LT A-sf Affirmed A-sf
X-D 95001MAM2 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Increased Loss Expectations: Loss expectations have increased since
Fitch's last rating action, primarily due to higher loss
expectations on the larger Fitch Loans of Concern (FLOCs) and
specially serviced loans/assets. Nine loans (22.4% of pool) are
considered FLOCs, including the three specially serviced
loans/assets.
Fitch's current ratings reflect a base case loss of 5.80%. Losses
could reach as high as 8.20% when factoring an outsized loss on two
hotel loans to account for the ongoing business disruption as a
result of the pandemic as well as factoring in near-term maturing
loans.
Specially Serviced Loans/FLOCs: The largest change in loss
expectations since Fitch's last rating action and largest
contributor to loss is the specially serviced asset, Highland Park
Mixed Use (1.8% of the pool), which is secured by a 57,728 sf
office/retail mixed use property located in Highland Park, IL. As
of October 2020, the largest tenant at the property (Equinox
Highland Park - 40.2% of NRA) vacated, which caused occupancy to
decline to 41.3%.
The loan was transferred to special servicing in June 2020 for
imminent monetary default. In January 2021, the court granted the
lender's motion for default, default judgment, and judgment of
foreclosure sale. Per the special servicer commentary, the asset
was foreclosed in May 2021 and became REO in November 2021. The
special servicer continues to stabilize the asset before marketing
it for sale. Fitch's analysis reflects a stressed value psf of
$196.
The next largest change in loss expectations and FLOC, Banner Bank
(2.1% of pool), is secured by a 176,149 sf suburban office building
located in Boise, ID. The property is a LEED Platinum Certified
Building, the first in Idaho to receive such designation. Occupancy
as of YE 2021 was 88.7% which improved from YE 2020 at 82.2% but
was below YE 2019 from 91.9%. The declines were driven by tenants
vacating upon lease expiration.
Despite the improving property occupancy, NOI as of YE 2021 has
declined 10% from YE 2020 as a result of increased concessions
offered to newer tenants. Additionally, 47% of the NRA has lease
expirations through 2023 including the top tenants Ocean Network
Express (13.5% of NRA), RGN Boise (9.3% of NRA) and Little Morris
(6.6% of NRA) all of which expire in 2023. Fitch requested a
leasing update from the master servicer but no updates were
available. Fitch's base case loss of 12% reflects a 30% stress to
the YE 2021 NOI to reflect the significant upcoming lease
rollover.
Increasing Credit Enhancement (CE): Since Fitch's last rating
action, one loan (1.1% of pool), which was previously defeased,
paid off in full ahead of its scheduled maturity date. Three loans
(1.4% of pool) are currently defeased. Seventeen loans (58.3% of
the pool) have IO payments, including 12 loans in the top 15.
Twelve loans (13.8% of pool) have partial IO payments, of which
nine loans (7.6% of pool) are now amortizing.
Investment Grade Credit Opinion Loans: Four of the top 15 loans
(24.0%) at issuance were assigned standalone investment grade
credit opinions; The General Motors Building (10.1%), the Del Amo
Fashion Center (5.2%), 245 Park Avenue (4.8%) and 225 Park Avenue
(3.9%) received investment grade standalone credit opinions of
'AAAsf', 'BBBsf', 'BBB-sf' and 'BBB-sf', respectively.
Additional Loss Considerations: Fitch performed a sensitivity
scenario which applied an additional stress to the pre-pandemic
cash flow for two hotel loans given significant pandemic-related
2020 NOI declines; this scenario contributed to the downgrade and
Negative Outlooks maintained on classes D, E and X-D.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downgrades would occur with an increase in pool-level losses
from larger FLOCs and/or specially serviced loans/assets.
Downgrades to the 'AAsf' and 'AAAsf' categories are not
expected given their high CE relative to expected losses and
continued amortization, but may occur if interest shortfalls
occur or if a high proportion of the pool defaults and
expected losses increase considerably.
-- Downgrades to the 'BBBsf' and 'Asf' categories would occur
should overall pool losses increase significantly and/or one
or more of the larger FLOCs have an outsized loss, which would
erode CE. Downgrades to the 'Bsf' category would occur should
loss expectations increase on the specially serviced
loans/assets and if performance of the FLOCs or loans
vulnerable to the coronavirus pandemic fail to stabilize or
additional loans default and/or transfer to the special
servicer.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Stable to improved asset performance coupled with paydown
and/or defeasance. Upgrades of the 'Asf' and 'AAsf' categories
would likely occur with significant improvement in CE and/or
defeasance; however, adverse selection, increased
concentrations and further underperformance of the larger
FLOCs or loans impacted by the coronavirus pandemic could
cause this trend to reverse.
-- Upgrades to the 'BBBsf' category would be limited based on
sensitivity to concentrations or the potential for future
concentration. Classes would not be upgraded to 'Asf' if there
is a likelihood for interest shortfalls. An upgrade to the
'Bsf' category is not likely until the later years in a
transaction and only if the performance of the remaining pool
is stable and/or properties vulnerable to the coronavirus
return to pre-pandemic levels, and there is sufficient CE to
the classes.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
WFRBS COMMERCIAL 2011-C5: Moody's Cuts Rating on X-B Certs to Caa1
------------------------------------------------------------------
Moody's Investors Service has downgraded the ratings on four
classes in WFRBS Commercial Mortgage Trust 2011-C5, Commercial
Mortgage-Pass-Through Certificates, Series 2011-C5 as follows:
Cl. E, Downgraded to Ba1 (sf); previously on Feb 24, 2021 Affirmed
Baa3 (sf)
Cl. F, Downgraded to Ba3 (sf); previously on Feb 24, 2021 Affirmed
Ba2 (sf)
Cl. G, Downgraded to B3 (sf); previously on Feb 24, 2021 Affirmed
B2 (sf)
Cl. X-B*, Downgraded to Caa1 (sf); previously on Feb 24, 2021
Affirmed Ba3 (sf)
* Reflects Interest Only Classes
RATINGS RATIONALE
The ratings on the P&I classes were downgraded due to the pool's
significant exposure to a retail property and a regional mall
(82.1% of the pool) that experienced recent declines in net
operating income and were modified after failing to pay-off at
their original maturity dates. As a result of the exposure to these
loans, the remaining classes are at an increased risk of interest
shortfalls and potential for higher expected losses if the largest
loan, Arbor Walk and Palms Crossing Loan (74.4% of the pool), is
unable to pay off at its scheduled maturity date in August 2022.
The rating on the IO Class (Class X-B) was downgraded due to the
decline in the credit quality of its reference classes resulting
from principal paydowns of higher quality reference classes.
The action has considered how the coronavirus pandemic has reshaped
United States' economic environment and the way its aftershocks
will continue to reverberate and influence the performance of CMBS.
Moody's expect the public health situation to improve as
vaccinations against COVID-19 increase and societies continue to
adapt to new protocols. Still, the exit from the pandemic will
likely be bumpy and unpredictable and economic prospects will
vary.
Moody's regard the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Moody's rating action reflects a base expected loss of 15.6% of the
current pooled balance, compared to 2.8% at Moody's last review.
Moody's base expected loss plus realized losses is now 1.5% of the
original pooled balance, compared to 2.1% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, 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 rating all classes except
interest-only classes was "Large Loan and Single Asset/Single
Borrower Commercial Mortgage-Backed Securitizations Methodology "
published November 2021.
Moody's analysis incorporated a loss and recovery approach in
rating the P&I classes in this deal since 100% of the pool is in
special servicing. In this approach, Moody's determines a
probability of default for each specially serviced and troubled
loan that it expects will generate a loss and estimates a loss
given default based on a review of broker's opinions of value (if
available), other information from the special servicer, available
market data and Moody's internal data. The loss given default for
each loan also takes into consideration repayment of servicer
advances to date, estimated future advances and closing costs.
Translating the probability of default and loss given default into
an expected loss estimate, Moody's then applies the aggregate loss
from specially serviced to the most junior class and the recovery
as a pay down of principal to the most senior classes.
DEAL PERFORMANCE
As of the March 15, 2022 distribution date, the transaction's
aggregate certificate balance has decreased by 91.7% to $90.3
million from $1.1 billion at securitization. The certificates are
collateralized by four mortgage loans ranging in size from 7.7% to
74.4% of the pool.
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 two, compared to six at Moody's last review.
Two loans have been liquidated from the pool, resulting in an
aggregate realized loss of $2.2 million (for an average loss
severity of 24%). All four loans are currently in special
servicing.
The largest specially serviced loan is the Arbor Walk and Palms
Crossing Loan ($67.2 million - 74.4% of the pool), which is secured
by two anchored retail properties located in Austin, Texas (Arbor
Walk) and McAllen, Texas (Palms Crossing). The properties are
sponsored by Washington Prime Group. Arbor walk is a 465,000 square
foot (SF) retail center anchored by Home Depot, Marshalls, and
Jo-Ann Fabrics and is located eight miles north of the Austin CBD
in close proximity to the open-air lifestyle center, The Domain.
The Arbor Walk property is subject to a ground lease with the
University of Texas which expires in 2056. Palms Crossing is an
328,000 SF retail center anchored by a Hobby Lobby, Barnes & Noble,
and DSW Shoe Warehouse. The property is located six miles north of
the border with Mexico. As of September 2021, the properties were
collectively 80% leased, compared to 81% leased in December 2020
and 91% leased in December 2019. Arbor Walk was approximately 98%
leased as of September 2021, while Palms Crossing was approximately
55% leased following the closure of anchor Beall's in 2020 and the
departure of Overstock in 2021. The loan transferred in April 2021
for imminent monetary default. The special servicer and borrower
executed a forbearance agreement and extension in July 2021.
The second and third largest specially serviced loans are the
SpringHill Suites Wheeling Loan ($8.6 million - 9.5% of the pool)
and Marriott Courtyard Monroeville Loan ($7.6 million - 8.4% of the
pool), which are secured by full service hotels and share the same
sponsor. The SpringHill Suites Wheeling Loan is secured by a 115
room Marriott-flagged hotel located in Wheeling, West Virginia. As
of June 2021, the property was 63.7% occupied, with Year-to-Date
2021 ADR and RevPAR at $88.82 and $56.58 respectively. The loan is
last paid through September 2021. The Marriott Courtyard
Monroeville Loan is secured by a 98 room hotel located in
Monroeville, Pennsylvania approximately 12 miles east of
Pittsburgh. As of September 2020, the property was 45.8% occupied,
and the trailing-twelve-month ADR and RevPAR were $88.82 and
$56.58, respectively. The loan is last paid through January 2022.
Both loans recently transferred for imminent monetary default at
the borrower's request as a result of the pandemic. The borrower is
looking to sell both properties and pay off the loans.
The smallest specially serviced loan is the Poughkeepsie Galleria
II loan ($6.9 million - 7.7% of the pool), which is secured by an
82,000 SF retail space attached to the Poughkeepsie Galleria, the
1.2 million SF super-regional mall located in Poughkeepsie, New
York. The collateral is 100% occupied by three tenants, Best Buy,
Old Navy, and H&M. Best Buy, which rents 62% of the net rentable
area (NRA), exercised their option to extend their lease term by
five years through January 2026. The loan transferred for imminent
monetary default in April 2020 at the request of the borrower,
Pyramid Management Group. The loan is last paid thru April 2020.
Pyramid has advised they are working towards paying off this loan
but have not provided any additional information. The special
servicer is dual tracking the loan.
WFRBS COMMERCIAL 2012-C10: Moody's Cuts Class E Debt Rating to Ca
-----------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on seven classes
and downgraded the ratings on five classes in WFRBS Commercial
Mortgage Trust 2012-C10 ("WFRBS 2012-C10"), Commercial Mortgage
Pass-Through Certificates Series 2012-C10 as follows:
Cl. A-3, Affirmed Aaa (sf); previously on Jul 15, 2020 Affirmed Aaa
(sf)
Cl. A-FL, Affirmed Aaa (sf); previously on Jul 15, 2020 Affirmed
Aaa (sf)
Cl. A-FX, Affirmed Aaa (sf); previously on Jul 15, 2020 Affirmed
Aaa (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Jul 15, 2020 Affirmed
Aaa (sf)
Cl. A-S, Affirmed Aaa (sf); previously on Jul 15, 2020 Affirmed Aaa
(sf)
Cl. B, Downgraded to A3 (sf); previously on Apr 23, 2021 Downgraded
to A1 (sf)
Cl. C, Downgraded to B1 (sf); previously on Apr 23, 2021 Downgraded
to Ba2 (sf)
Cl. D, Downgraded to Caa3 (sf); previously on Apr 23, 2021
Downgraded to Caa1 (sf)
Cl. E, Downgraded to Ca (sf); previously on Jul 15, 2020 Downgraded
to Caa3 (sf)
Cl. F, Affirmed C (sf); previously on Jul 15, 2020 Downgraded to C
(sf)
Cl. X-A*, Affirmed Aaa (sf); previously on Jul 15, 2020 Affirmed
Aaa (sf)
Cl. X-B*, Downgraded to Ba1 (sf); previously on Apr 23, 2021
Downgraded to Baa3 (sf)
* Reflects Interest Only Classes
RATINGS RATIONALE
The ratings on five P&I classes were affirmed because the
transaction's key metrics, including Moody's loan-to-value (LTV)
ratio, Moody's stressed debt service coverage ratio (DSCR) and the
transaction's Herfindahl Index (Herf), are within acceptable
ranges.
The ratings on four P&I classes were downgraded due to the pool's
significant exposure to four lower quality regional mall properties
(19% of the pool) that have upcoming maturity dates prior to the
end of 2022 and may face increased refinance risk due to their
current and historical performance. Furthermore, all other
remaining loans mature by the end of December 2022 and the largest
loan, Republic Plaza (11.5% of the pool), is secured by an office
property that has experienced recent decline in net operating
income (NOI). Additionally, the pool features several hotel
properties that have not yet fully rebounded in 2021, which also
may face a higher risk of maturity default. Due to the exposure to
these loans, these classes are at an increased risk of interest
shortfalls and the potential for higher expected losses if the
loans are unable to pay off at their scheduled maturity dates.
The rating on one P&I class was affirmed because the ratings are
consistent with Moody's expected loss.
The rating on one IO class (Class X-A) was affirmed based on the
credit quality of the referenced classes.
The rating on the other IO class (Class X-B) was downgraded due to
a decline in the credit quality of its referenced classes.
The action has considered how the coronavirus pandemic has reshaped
United States' economic environment and the way its aftershocks
will continue to reverberate and influence the performance of CMBS.
Moody's expect the public health situation to improve as
vaccinations against COVID-19 increase and societies continue to
adapt to new protocols. Still, the exit from the pandemic will
likely be bumpy and unpredictable and economic prospects will
vary.
Moody's regard the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Moody's rating action reflects a base expected loss of 11.2% of the
current pooled balance, compared to 10.4% at Moody's last review.
Moody's base expected loss plus realized losses is now 8.3% of the
original pooled balance, compared to 8.1% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected. Additionally, significant
changes in the 5-year rolling average of 10-year US Treasury rates
will impact the magnitude of the interest rate adjustment and may
lead to future rating actions.
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 rating all classes except interest-only
classes were "US and Canadian Conduit/Fusion Commercial
Mortgage-Backed Securitizations Methodology" published in November
2021.
DEAL PERFORMANCE
As of the March 15, 2022 distribution date, the transaction's
aggregate certificate balance has decreased by 26% to $960 million
from $1.3 billion at securitization. The certificates are
collateralized by 69 mortgage loans ranging in size from less than
1% to 11.5% of the pool, with the top ten loans (excluding
defeasance) constituting 53.0% of the pool. One loan, constituting
11.5% of the pool, has an investment-grade structured credit
assessment. Thirty-three loans, constituting 25.4% of the pool,
have defeased and are secured by US government securities.
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 13, compared to 18 at Moody's last review.
Thirteen loans, constituting 15.9% of the pool, are on the master
servicer's watchlist, in relation to coronavirus impact on the
property]. The watchlist includes loans that meet certain portfolio
review guidelines established as part of the CRE Finance Council
(CREFC) monthly reporting package. As part of Moody's ongoing
monitoring of a transaction, the agency reviews the watchlist to
assess which loans have material issues that could affect
performance.
One loan has been liquidated from the pool, contributing to an
aggregate realized loss of less than $100,000. One loan, the Dayton
Mall Loan ($75.9 million ? 7.9% of the pool), is currently in
special servicing. The loan is secured by a 778,500 square foot
(SF), component of a 1.45 million SF, two-story regional mall
located in Dayton, Ohio. The property is sponsored by Washington
Prime Group (WPG). The mall's current anchor tenants include Macy's
(non-collateral), JC Penney (collateral) and Dick's Sporting Goods
(collateral). Sears, a prior non-collateral anchor, closed at this
location during 2018. The mall has had other major tenants shutter
due to bankruptcy including a 203,000 SF Elder Beerman
(non-collateral) in early 2018 and a 30,000 SF HHgregg (collateral)
in 2017. The former HHgregg space has since been replaced by Ross
Dress for Less which opened in October 2019. The total mall was 70%
occupied as of September 2021, with the collateral 74% occupied in
September 2021. Property performance has steadily declined since
securitization. Year-end 2019 and 2020 NOI were 41% and 45% lower
than securitization, respectively. The loan transferred to special
servicing in June 2021 due to the sponsor filing for bankruptcy.
WPG has deemed the property as a non-core asset and requested the
lender to consider taking title to the property via a Deed in Lieu
or appoint a receiver to the property. A receiver was appointed in
December 2021 and is working to stabilize occupancy at the
property, as well as collect past due rents.
Moody's has also assumed a high default probability for four poorly
performing loans, constituting 9.2% of the pool. The largest
troubled loan is the Rogue Valley Mall loan ($48.8 million ? 5.1%
of the pool), which is secured by a 453,935 SF component of an
approximately 640,000 SF two-story regional mall located in
Medford, Oregon. The mall has two non-collateral anchors, Macy's
and Kohl's, and two collateral anchors, JCPenney and Macy's Home
Store. The mall is the dominant mall in the trade area and the only
enclosed regional mall within a 100-mile radius. Performance has
declined since securitization, with 2019 NOI down 26% compared to
underwriting. The collateral was 91% leased as of September 2021,
compared to 94% in December 2019, and 96% in 2018. The loan
transferred to special servicing in June 2020 for payment default.
The loan was returned to the master servicer as a corrected
mortgage effective October 2021.
The second largest troubled loan is Towne Mall loan ($19.2 million
-- 2.0% of the pool), which is secured by a 354,000 SF regional
shopping mall located along the primary commercial district in
Elizabethtown, Kentucky approximately three miles south of the CBD.
The mall is sponsored by Macerich. At securitization, the mall was
anchored by Sears, JCPenney and Belk, all of which leased 20% of
the NRA. Sears closed this location in October 2019. The property
was 69% leased as of December 2021, compared to 65% in December
2020. 2021 NOI DSCR was 0.58X. However, the loan remains current.
The other two troubled loans are secured by a mix of industrial and
office properties. Moody's has estimated an aggregate loss of
$84.75 million (a 51.6% expected loss) from these specially
serviced and troubled loans.
The credit risk of loans is determined primarily by two factors: 1)
Moody's assessment of the probability of default, which is largely
driven by each loan's DSCR, and 2) Moody's assessment of the
severity of loss upon a default, which is largely driven by each
loan's loan-to-value ratio, referred to as the Moody's LTV or MLTV.
As described in the CMBS methodology used to rate this transaction,
Moody's make various adjustments to the MLTV. Moody's adjust the
MLTV for each loan using a value that reflects capitalization (cap)
rates that are between Moody's sustainable cap rates and market cap
rates. Moody's also use an adjusted loan balance that reflects each
loan's amortization profile. The MLTV reported in this publication
reflects the MLTV before the adjustments described in the
methodology.
Moody's received full year 2020 operating results for 90% of the
pool, and full or partial year 2021 operating results for 86% of
the pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 94%, compared to 93% 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 14.2% to the most recently
available net operating income (NOI), excluding hotel properties
that had significantly depressed NOI in 2020 and 2021. Moody's
value reflects a weighted average capitalization rate of 10.5%.
Moody's actual and stressed conduit DSCRs are 1.50X and 1.30X,
respectively, compared to 1.67X and 1.30X 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 loan with a structured credit assessment is the Concord Mills
Loan ($110.0 million 11.5% of the pool), which represents a
pari-passu participation of a $235 million mortgage loan. The loan
is secured by a 1.28 million SF super-regional mall located in
Concord, North Carolina. Major tenants include Bass Pro Shops
Outdoor, Burlington Coat Factory and AMC Corporation. The mall was
92% leased as of September 2021 compared to 91% in December 2020
and 97% in December 2019. Property performance has improved since
securitization, with 2020 NOI up 13% from underwriting levels,
despite the increase in vacancy. Moody's structured credit
assessment and stressed DSCR are a3 (sca.pd) and 1.31X,
respectively, unchanged from the prior review.
The top three conduit loans represent 20.8% of the pool balance.
The largest loan is the Republic Plaza Loan ($110.7 million ? 11.5%
of the pool), which represents a pari-passu portion of a $257.9
million loan. The loan is secured by a 56-story Class-A trophy
office tower and a separate 12-story parking garage located in
downtown Denver, Colorado. Major tenants include Encana Oil & Gas,
DCP Midstream LP and Wheeler Trigg O'Donnell LLP. DCP Midstream LP,
which leases approximately 13% of the net rentable area (NRA),
plans to vacate at their lease expiration in May 2023. The property
was 80% leased as of September 2021, compared to 82% in December
2020 and 96% in December 2019. Moody's LTV and stressed DSCR are
118% and 0.85X, respectively, compared to 111% and 0.88X at the
last review.
The second largest loan is the STAG REIT Portfolio ($46.3 million
4.8% of the pool), which is secured by 3.3 million SF in 23
industrial buildings located across eight states: Pennsylvania,
Michigan, Indiana, Kansas, New York, Alabama, Virginia, and South
Carolina. Although several of the market locations are tertiary,
the properties benefit from being situated near or along major
thoroughfares. Twenty of the properties are single-tenant, while
the other three are multi-tenant with the largest tenant leasing at
least 48% of the space. The portfolio was 98% leased as of June
2021. Additionally, five properties, with an outstanding balance of
$5.56 million, have already defeased from this portfolio since
securitization. Excluding the defeased properties, Moody's LTV and
stressed DSCR are 63% and 1.76X, respectively, compared to 65% and
1.69X at the last review.
The third largest loan is the Animas Valley Mall Loan ($42.6
million 4.4% of the pool), which is secured by an approximately
477,000 SF regional mall located in Farmington, New Mexico. It is
the only regional enclosed mall in the trade area (30 miles radius)
and the only regional mall serving the Farmington MSA and the Four
Corners market of New Mexico, Colorado, Arizona and Utah. The mall
was owned by GGP until Rouse Properties was spun off from the
company in 2012, and acquired by Brookfield in 2016. Major tenants
at the mall include Dillard's, JCPenney, Ross Dress for Less, and
Animas Cinema 10. The property lost its Sears anchor (14% of the
NRA) in February 2020. Inline occupancy was 72% as of September
2021. Moody's LTV and stressed DSCR are 139% and 1.05X,
respectively, compared to 143% and 1.02X at the last review.
WFRBS COMMERCIAL 2012-C9: Fitch Cuts Rating on Cl. F Certs to 'B-'
------------------------------------------------------------------
Fitch Ratings has upgraded one class, downgraded one class and
affirmed eight classes of WFRBS Commercial Mortgage Trust
commercial mortgage pass-through certificates, series 2012-C9.
DEBT RATING PRIOR
---- ------ -----
WFRBS 2012-C9
A-3 92930RBB7 LT AAAsf Affirmed AAAsf
A-S 92930RAC6 LT AAAsf Affirmed AAAsf
A-SB 92930RBD3 LT AAAsf Affirmed AAAsf
B 92930RAD4 LT AAAsf Upgrade AAsf
C 92930RAE2 LT A-sf Affirmed A-sf
D 92930RAJ1 LT BBB-sf Affirmed BBB-sf
E 92930RAK8 LT BBsf Affirmed BBsf
F 92930RAL6 LT B-sf Downgrade Bsf
X-A 92930RAF9 LT AAAsf Affirmed AAAsf
X-B 92930RAG7 LT A-sf Affirmed A-sf
KEY RATING DRIVERS
Stable Overall Performance and Credit Enhancement (CE): The
affirmations reflect the transaction's generally stable collateral
performance, continued amortization, and significant defeasance. As
of the March 2022 distribution date, the pool's aggregate principal
balance was reduced by 35.7% to $676.5 million from $1.05 billion
at issuance. One loan (1.5%) remains in special servicing and seven
loans (25.0%) have been designated as Fitch Loans of Concern
(FLOCs). Loans accounting for 34.7% ($235.0 million) have been
defeased compared to 33.1% ($241.7 million) at the prior rating
action. Class G has realized $378,996 in losses and is being
affected by interest shortfalls.
Fitch's current ratings incorporate a base case loss of 5.7%. The
upgrade to class B reflects the significant improvement of CE. The
downgrade to class F reflects the class's limited credit support as
compared against the expected losses in the transaction. The
Outlook revision to Stable from Negative on class E reflects the
improved CE due to continued amortization. The Negative Outlook on
class F reflects losses that could reach 6% when factoring an
outsized loss on the Hilton Garden Troy loan with imminent loan
maturity in October 2022.
Fitch Loans of Concern/Specially Serviced Loan: The largest
contributor to loss is the Chesterfield Towne Center loan (13.8%),
a regional mall in the Richmond, VA metro anchored by JC Penney,
Macy's, and At Home. While overall performance has remained stable
since issuance, the non-collateral Sears box has been dark since
February 2020 and there are no leasing prospects. As of YE2021, the
property was 82.7% physically occupied.
The YE2021 net operating income (NOI) debt service coverage ratio
(DSCR) was 1.77x compared to 1.74x at YE2020 and 2.0x at YE2019.
YE2021 in-line sales (excluding Apple) for tenant under 10,000 sf
was $429 compared to $314 psf at YE 2020 and $411 psf at YE 2019.
Fitch modeled a base case loss of approximately 17% on the loan,
based on a cap rate of 15% and servicer reported YE 2021 NOI.
The second largest contributor to loss is the sole specially
serviced loan, Homewood Suites Houston, TX (1.5%). The loan is
collateralized by a 123-key extended stay hotel located in Houston,
TX. It transferred to special servicing in October 2020 for
imminent monetary default due to pandemic-related stress. The loan
is currently REO and there are no current plans for disposition
according to the special servicer. Additionally, the property
suffered a broken pipe during the extreme cold weather in Texas
last winter, resulting in approximately 20 rooms being taken
offline for repairs. Fitch modeled a base case loss of
approximately 58.2% on the loan due to the hotel asset class,
energy sector exposure, and declining performance prior to the
onset of the pandemic.
The third largest contributor to loss is the 888 Bestgate Road loan
(3.7%), an office property in Annapolis, MD, where occupancy had
declined to 65% as of YE 2021 after several tenants vacated when
their leases ended. The YE 2021 rent roll reflects several newly
signed leases which are expected to increase occupancy to 77% as
leases commence throughout 2022. In June 2018, there was a shooting
in the Capital Gazette's office at the property, which has
contributed to the decline in occupancy and the borrower's
difficulty in leasing up vacant space.
According to the master servicer, the borrower has been working to
refresh the building so as to improve interest from prospective
tenants. They have renovated the first floor, lobby, former Gazette
space and opened up all the out landscaping. The borrower has
communicated intentions to refinance the loan. As of YE 2021, the
loan was performing at a 1.08x NOI DSCR. Fitch modeled a loss of
approximately 17%, which is based on a 9.5% cap rate and YE2021
NOI.
Maturity Concentration: All remaining loans either mature or reach
their anticipated repayment date (ARD) in 2022.
Alternative Loss Considerations: To factor in upcoming refinance
concerns, Fitch's analysis included an additional sensitivity
scenario, which applied a 15% loss on the maturity balance of
Hilton Garden Troy loan to reflect the potential for outsized
losses.
Undercollateralization: The transaction is undercollateralized by
approximately $54,961 due to a workout delayed reimbursement of
advances (WODRA) on the Hilton Garden Troy loan, which was
reflected in the March 2022 remittance report.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downgrades to the 'AAAsf', 'AAsf', and 'A-sf' rated categories
are not likely due to the senior positions in the capital
structure and imminent paydown that is expected from the
majority of the pool that matures in the coming months.
-- Downgrades to the 'BBB-sf' and 'BBsf' rated categories, while
unlikely, would occur should overall pool losses increase with
loans failing to repay at their respective maturities and the
loans of concern incur outsized losses beyond current
estimates. Downgrade to the 'B-sf' rated category would occur
should the mall and/or other loans of concern resolve with
lower than expected recoveries and/or deteriorate further than
Fitch's current expectations.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrades to the 'BBsf' and 'B-sf' rated categories are not
likely to reflect risks related to loans unable to refinance
at maturity and potential for higher losses should additional
loans transfer to special servicing.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
ZAIS CLO 14: Moody's Hikes Rating on $13.5MM Class E Notes to Ba2
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by Zais CLO 14, Limited:
US$15,000,000 Class C-R Secured Deferrable Mezzanine Floating Rate
Notes due 2032 (the "Class C-R Notes"), Upgraded to A1 (sf);
previously on April 23, 2021 Assigned A2 (sf)
US$18,000,000 Class D-R Secured Deferrable Mezzanine Floating Rate
Notes due 2032 (the "Class D-R Notes"), Upgraded to Baa2 (sf);
previously on April 23, 2021 Assigned Baa3 (sf)
US$13,500,000 Class E Deferrable Mezzanine Floating Rate Notes due
2032 (the "Class E Notes"), Upgraded to Ba2 (sf); previously on
March 26, 2020 Definitive Rating Assigned Ba3 (sf)
ZAIS CLO 14, Limited, originally issued in March 2020 and partially
refinanced in April 2021, is a managed cashflow CLO. The notes are
collateralized primarily by a portfolio of broadly syndicated
senior secured corporate loans. The transaction's reinvestment
period will end in April 2022.
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 2022. In light of the reinvestment restrictions during the
amortization period which limit the 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 continue to satisfy certain covenant
requirements. In particular, Moody's assumed that the deal will
benefit from lower WARF, higher par and diversity levels compared
to the levels during the last rating review in April 2021. Moody's
modeled a WARF of 2609 compared to 2831; performing par of $300.3
million compared to $300 million, and diversity score of 72
compared to 66 in April 2021, respectively. Furthermore, the
transaction's reported OC ratios have been stable since April
2021.
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, weighted average
spread, 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: $300,320,859
Defaulted par: $921,053
Diversity Score: 72
Weighted Average Rating Factor (WARF): 2609
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.84%
Weighted Average Recovery Rate (WARR): 47.42%
Weighted Average Life (WAL): 5.12 years
In addition to base case analysis, Moody's considered additional
scenarios where outcomes could diverge from the base case. These
additional scenarios include, among others, near term defaults by
companies facing liquidity pressure, decrease in overall WAS and
lower recoveries on defaulted assets.
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
December 2021.
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.
[*] DBRS Reviews 632 Classes From 71 U.S. RMBS Transactions
-----------------------------------------------------------
DBRS, Inc. reviewed 632 classes from 71 U.S. residential
mortgage-backed security (RMBS) transactions. Of the 635 classes
reviewed, DBRS Morningstar upgraded 20 ratings, confirmed 462
ratings, downgraded five ratings, and discontinued 145 ratings. In
addition, of the confirmed ratings, DBRS Morningstar removed 14
from Under Review with Negative Implications.
A list of the affected ratings are available at
https://www.dbrsmorningstar.com/research/392438
The rating upgrades reflect positive performance trends and
increases in credit support sufficient to withstand stresses at
their new rating levels. The rating confirmations reflect asset
performance and credit-support levels that are consistent with the
current ratings. The rating downgrades reflect the unlikely
recovery of the bonds' accumulated interest shortfall amount. The
discontinued ratings reflect the full repayment of principal to
bondholders.
The pools backing the reviewed RMBS transactions consist of Prime,
Alt-A, Option-Adjustable-Rate-Mortgage, Scratch and Dent,
Second-Lien, Reperforming, Seasoned, Agency, Mortgage Insurance,
and Single Family Rental collateral.
The ratings assigned to the securities listed below differ from the
ratings implied by the quantitative model. DBRS Morningstar
considers these differences material deviations; however, in these
cases, the ratings on the subject securities may reflect additional
seasoning being warranted to substantiate a further upgrade or that
the actual deal or tranche performance is not fully reflected in
the projected cash flows/model output.
-- Accredited Mortgage Loan Trust 2006-1, Asset-Backed Notes,
Series 2006-1, Class A-4
-- Accredited Mortgage Loan Trust 2006-1, Asset-Backed Notes,
Series 2006-1, Class M-1
-- Aegis Asset Backed Securities Trust 2005-2, Mortgage-Backed
Notes, Series 2005-2, Class M3
-- Aegis Asset Backed Securities Trust 2005-2, Mortgage-Backed
Notes, Series 2005-2, Class M4
-- BRAVO Residential Funding Trust 2021-HE1, Mortgage-Backed
Notes, Series 2021-HE1, Class A-3
-- BRAVO Residential Funding Trust 2021-HE1, Mortgage-Backed
Notes, Series 2021-HE1, Class B-1
-- BRAVO Residential Funding Trust 2021-HE1, Mortgage-Backed
Notes, Series 2021-HE1, Class B-2
-- BRAVO Residential Funding Trust 2021-HE1, Mortgage-Backed
Notes, Series 2021-HE1, Class M-1
-- BRAVO Residential Funding Trust 2021-HE2, Mortgage-Backed
Notes, Series 2021-HE2, Class A-3
-- BRAVO Residential Funding Trust 2021-HE2, Mortgage-Backed
Notes, Series 2021-HE2, Class B-1
-- BRAVO Residential Funding Trust 2021-HE2, Mortgage-Backed
Notes, Series 2021-HE2, Class B-2
-- BRAVO Residential Funding Trust 2021-HE2, Mortgage-Backed
Notes, Series 2021-HE2, Class M-1
-- Citigroup Mortgage Loan Trust Inc., Series 2005-WF2,
Asset-Backed Pass-Through Certificates, Series 2005-WF2, Class
MV-4
-- Citigroup Mortgage Loan Trust Inc., Series 2005-WF2,
Asset-Backed Pass-Through Certificates, Series 2005-WF2, Class
MV-5
-- First Franklin Mortgage Loan Trust, Series 2004-FF10,
Asset-Backed Certificates, Series 2004-FF10, Class M-1
-- Flagstar Mortgage Trust 2019-2, Mortgage Pass-Through
Certificates, Series 2019-2, Class B-2
-- Flagstar Mortgage Trust 2019-2, Mortgage Pass-Through
Certificates, Series 2019-2, Class B-4
-- Flagstar Mortgage Trust 2019-2, Mortgage Pass-Through
Certificates, Series 2019-2, Class B-5
-- Morgan Stanley ABS Capital I Inc. Trust 2005-WMC5, Mortgage
Pass-Through Certificates, Series 2005-WMC5, Class B-1
-- Morgan Stanley ABS Capital I Inc. Trust 2005-WMC5, Mortgage
Pass-Through Certificates, Series 2005-WMC5, Class B-2
-- Morgan Stanley ABS Capital I Inc. Trust 2005-WMC5, Mortgage
Pass-Through Certificates, Series 2005-WMC5, Class M-5
-- Morgan Stanley ABS Capital I Inc. Trust 2005-WMC5, Mortgage
Pass-Through Certificates, Series 2005-WMC5, Class M-6
-- New Residential Mortgage Loan Trust 2017-2, Mortgage-Backed
Notes, Series 2017-2, Class A
-- New Residential Mortgage Loan Trust 2017-2, Mortgage-Backed
Notes, Series 2017-2, Class A-1
-- New Residential Mortgage Loan Trust 2017-2, Mortgage-Backed
Notes, Series 2017-2, Class A-1A
-- New Residential Mortgage Loan Trust 2017-2, Mortgage-Backed
Notes, Series 2017-2, Class A-1B
-- New Residential Mortgage Loan Trust 2017-2, Mortgage-Backed
Notes, Series 2017-2, Class A-1C
-- New Residential Mortgage Loan Trust 2017-2, Mortgage-Backed
Notes, Series 2017-2, Class A1-IOA
-- New Residential Mortgage Loan Trust 2017-2, Mortgage-Backed
Notes, Series 2017-2, Class A1-IOB
-- New Residential Mortgage Loan Trust 2017-2, Mortgage-Backed
Notes, Series 2017-2, Class A1-IOC
-- New Residential Mortgage Loan Trust 2017-2, Mortgage-Backed
Notes, Series 2017-2, Class A-2
-- New Residential Mortgage Loan Trust 2017-2, Mortgage-Backed
Notes, Series 2017-2, Class A-3
-- New Residential Mortgage Loan Trust 2017-2, Mortgage-Backed
Notes, Series 2017-2, Class A-4
-- New Residential Mortgage Loan Trust 2017-2, Mortgage-Backed
Notes, Series 2017-2, Class A-5
-- New Residential Mortgage Loan Trust 2017-2, Mortgage-Backed
Notes, Series 2017-2, Class A-6
-- New Residential Mortgage Loan Trust 2017-2, Mortgage-Backed
Notes, Series 2017-2, Class A-IO
-- New Residential Mortgage Loan Trust 2017-2, Mortgage-Backed
Notes, Series 2017-2, Class B1
-- New Residential Mortgage Loan Trust 2017-2, Mortgage-Backed
Notes, Series 2017-2, Class B-1A
-- New Residential Mortgage Loan Trust 2017-2, Mortgage-Backed
Notes, Series 2017-2, Class B-1B
-- New Residential Mortgage Loan Trust 2017-2, Mortgage-Backed
Notes, Series 2017-2, Class B-1C
-- New Residential Mortgage Loan Trust 2017-2, Mortgage-Backed
Notes, Series 2017-2, Class B1-IO
-- New Residential Mortgage Loan Trust 2017-2, Mortgage-Backed
Notes, Series 2017-2, Class B1-IOA
-- New Residential Mortgage Loan Trust 2017-2, Mortgage-Backed
Notes, Series 2017-2, Class B1-IOB
-- New Residential Mortgage Loan Trust 2017-2, Mortgage-Backed
Notes, Series 2017-2, Class B1-IOC
-- New Residential Mortgage Loan Trust 2017-4, Mortgage-Backed
Notes, Series 2017-4, Class A-2
-- New Residential Mortgage Loan Trust 2017-4, Mortgage-Backed
Notes, Series 2017-4, Class B-1
-- New Residential Mortgage Loan Trust 2017-4, Mortgage-Backed
Notes, Series 2017-4, Class B-1A
-- New Residential Mortgage Loan Trust 2017-4, Mortgage-Backed
Notes, Series 2017-4, Class B-1B
-- New Residential Mortgage Loan Trust 2017-4, Mortgage-Backed
Notes, Series 2017-4, Class B-1C
-- New Residential Mortgage Loan Trust 2017-4, Mortgage-Backed
Notes, Series 2017-4, Class B1-IO
-- New Residential Mortgage Loan Trust 2017-4, Mortgage-Backed
Notes, Series 2017-4, Class B1-IOA
-- New Residential Mortgage Loan Trust 2017-4, Mortgage-Backed
Notes, Series 2017-4, Class B1-IOB
-- New Residential Mortgage Loan Trust 2017-4, Mortgage-Backed
Notes, Series 2017-4, Class B1-IOC
-- Nomura Home Equity Loan, Inc., Home Equity Loan Trust, Series
2006-FM1, Asset-Backed Certificates, Series 2006-FM1, Class I-A
-- Nomura Home Equity Loan, Inc., Home Equity Loan Trust, Series
2006-FM1, Asset-Backed Certificates, Series 2006-FM1, Class II-A-3
-- Nomura Home Equity Loan, Inc., Home Equity Loan Trust, Series
2006-FM1, Asset-Backed Certificates, Series 2006-FM1, Class II-A-4
-- Nomura Home Equity Loan, Inc., Home Equity Loan Trust, Series
2006-HE2, Home Equity Loan Trust Asset-Backed Certificates, Series
2006-HE2, Class A-4
-- Nomura Home Equity Loan, Inc., Home Equity Loan Trust, Series
2006-HE2, Home Equity Loan Trust Asset-Backed Certificates, Series
2006-HE2, Class M-1
-- Sequoia Mortgage Trust 2005-3, Mortgage Pass-Through
Certificates, Series 2005-3, Class A-1
-- Sequoia Mortgage Trust 2005-3, Mortgage Pass-Through
Certificates, Series 2005-3, Class X-A
-- Sequoia Mortgage Trust 2005-3, Mortgage Pass-Through
Certificates, Series 2005-3, Class X-B
-- SG Mortgage Securities Trust 2006-OPT2, Asset-Backed
Certificates, Series 2006-OPT2, Class A-1
-- SG Mortgage Securities Trust 2006-OPT2, Asset-Backed
Certificates, Series 2006-OPT2, Class A-2
-- SG Mortgage Securities Trust 2006-OPT2, Asset-Backed
Certificates, Series 2006-OPT2, Class A-3C
-- SG Mortgage Securities Trust 2006-OPT2, Asset-Backed
Certificates, Series 2006-OPT2, Class A-3D
-- Structured Asset Securities Corporation Mortgage Loan Trust
2007-BC1, Mortgage Pass-Through Certificates, Series 2007-BC1,
Class A1
-- Structured Asset Securities Corporation Mortgage Loan Trust
2007-BC1, Mortgage Pass-Through Certificates, Series 2007-BC1,
Class A4
-- Structured Asset Securities Corporation Mortgage Loan Trust
2007-BC1, Mortgage Pass-Through Certificates, Series 2007-BC1,
Class A5
-- Structured Asset Securities Corporation Mortgage Loan Trust
2007-BC1, Mortgage Pass-Through Certificates, Series 2007-BC1,
Class A6
-- Structured Asset Securities Corporation Mortgage Loan Trust
2007-BC4, Mortgage Pass-Through Certificates, Series 2007-BC4,
Class A1
-- Structured Asset Securities Corporation Mortgage Loan Trust
2007-BC4, Mortgage Pass-Through Certificates, Series 2007-BC4,
Class A2
-- Structured Asset Securities Corporation Mortgage Loan Trust
2007-BC4, Mortgage Pass-Through Certificates, Series 2007-BC4,
Class A4
-- Structured Asset Securities Corporation Mortgage Loan Trust
2007-WF2, Mortgage Pass-Through Certificates, Series 2007-WF2,
Class A1
-- Structured Asset Securities Corporation Mortgage Loan Trust
2007-WF2, Mortgage Pass-Through Certificates, Series 2007-WF2,
Class A3
-- Structured Asset Securities Corporation Mortgage Loan Trust
2007-WF2, Mortgage Pass-Through Certificates, Series 2007-WF2,
Class A4
-- Towd Point HE Trust 2021-HE1, Asset-Backed Securities, Series
2021-HE1, Class A3
-- Towd Point HE Trust 2021-HE1, Asset-Backed Securities, Series
2021-HE1, Class A4
-- Towd Point HE Trust 2021-HE1, Asset-Backed Securities, Series
2021-HE1, Class A5
-- Towd Point HE Trust 2021-HE1, Asset-Backed Securities, Series
2021-HE1, Class B1
-- Towd Point HE Trust 2021-HE1, Asset-Backed Securities, Series
2021-HE1, Class B1A
-- Towd Point HE Trust 2021-HE1, Asset-Backed Securities, Series
2021-HE1, Class B1AX
-- Towd Point HE Trust 2021-HE1, Asset-Backed Securities, Series
2021-HE1, Class B1B
-- Towd Point HE Trust 2021-HE1, Asset-Backed Securities, Series
2021-HE1, Class B1BX
-- Towd Point HE Trust 2021-HE1, Asset-Backed Securities, Series
2021-HE1, Class B1C
-- Towd Point HE Trust 2021-HE1, Asset-Backed Securities, Series
2021-HE1, Class B1CX
-- Towd Point HE Trust 2021-HE1, Asset-Backed Securities, Series
2021-HE1, Class B2
-- Towd Point HE Trust 2021-HE1, Asset-Backed Securities, Series
2021-HE1, Class B2A
-- Towd Point HE Trust 2021-HE1, Asset-Backed Securities, Series
2021-HE1, Class B2AX
-- Towd Point HE Trust 2021-HE1, Asset-Backed Securities, Series
2021-HE1, Class B2B
-- Towd Point HE Trust 2021-HE1, Asset-Backed Securities, Series
2021-HE1, Class B2BX
-- Towd Point HE Trust 2021-HE1, Asset-Backed Securities, Series
2021-HE1, Class B2C
-- Towd Point HE Trust 2021-HE1, Asset-Backed Securities, Series
2021-HE1, Class B2CX
-- Towd Point HE Trust 2021-HE1, Asset-Backed Securities, Series
2021-HE1, Class M1
-- Towd Point HE Trust 2021-HE1, Asset-Backed Securities, Series
2021-HE1, Class M1A
-- Towd Point HE Trust 2021-HE1, Asset-Backed Securities, Series
2021-HE1, Class M1AX
-- Towd Point HE Trust 2021-HE1, Asset-Backed Securities, Series
2021-HE1, Class M1B
-- Towd Point HE Trust 2021-HE1, Asset-Backed Securities, Series
2021-HE1, Class M1BX
-- Towd Point HE Trust 2021-HE1, Asset-Backed Securities, Series
2021-HE1, Class M2
-- Towd Point HE Trust 2021-HE1, Asset-Backed Securities, Series
2021-HE1, Class M2A
-- Towd Point HE Trust 2021-HE1, Asset-Backed Securities, Series
2021-HE1, Class M2AX
-- Towd Point HE Trust 2021-HE1, Asset-Backed Securities, Series
2021-HE1, Class M2B
-- Towd Point HE Trust 2021-HE1, Asset-Backed Securities, Series
2021-HE1, Class M2BX
-- Towd Point HE Trust 2021-HE1, Asset-Backed Securities, Series
2021-HE1, Class M2C
-- Towd Point HE Trust 2021-HE1, Asset-Backed Securities, Series
2021-HE1, Class M2CX
CORONAVIRUS DISEASE (COVID-19) IMPACT
The coronavirus pandemic and the resulting isolation measures have
caused an immediate economic contraction, leading to sharp
increases in unemployment rates and income reductions for many
consumers. DBRS Morningstar saw increases in delinquencies for many
RMBS asset classes shortly after the onset of coronavirus.
Such mortgage delinquencies were mostly in the form of forbearance,
which are generally short-term payment reliefs that may perform
very differently from traditional delinquencies. At the onset of
coronavirus, because the option to forbear mortgage payments was so
widely available, it drove forbearance to a very high level. When
the dust settled, coronavirus-induced forbearance in 2020 performed
better than expected, thanks to government aid and good
underwriting in the mortgage market in general. Across nearly all
RMBS asset classes, delinquencies have been gradually trending down
in recent months as the forbearance period comes to an end for many
borrowers.
[*] Moody's Takes Actions on $118.1-Mil. of US RMBS Issued 2005
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of four bonds
and downgraded the rating of one bond from three US residential
mortgage backed transactions (RMBS), backed by Alt-A and subprime
mortgages issued by multiple issuers.
A List of Affected Credit Ratings is available at
https://bit.ly/35OiJdN
Complete rating actions are as follows:
Issuer: Morgan Stanley Mortgage Loan Trust 2005-2AR
Cl. X*, Downgraded to C (sf); previously on Nov 21, 2017 Confirmed
at Ca (sf)
Issuer: NovaStar Mortgage Funding Trust 2005-3
Cl. M-2, Upgraded to Aaa (sf); previously on Jun 3, 2019 Upgraded
to Aa1 (sf)
Cl. M-3, Upgraded to Baa3 (sf); previously on Jun 3, 2019 Upgraded
to Ba2 (sf)
Issuer: NovaStar Mortgage Funding Trust, Series 2005-1
Cl. M-5, Upgraded to Aaa (sf); previously on Aug 1, 2019 Upgraded
to Aa1 (sf)
Cl. M-6, Upgraded to Baa2 (sf); previously on Jan 26, 2018 Upgraded
to Ba1 (sf)
*Reflects Interest Only Classes
RATINGS RATIONALE
The rating actions reflect the recent performance as well as
Moody's updated loss expectations on the underlying pools. The
rating upgrades are a result of the improving performance of the
related pools and an increase in credit enhancement available to
the bonds. The rating downgrade of Class X, an interest only bond
from Morgan Stanley Mortgage Loan Trust 2005-2AR, is primarily due
to the principal paydown of some of its linked P&I bonds. The
rating on an IO bond referencing multiple bonds is the weighted
average of the current ratings of its referenced bonds based on
their current balances, which are grossed up by their realized
losses, if any.
In light of the current macroeconomic environment, Moody's revised
loss expectations based on forecast uncertainties with regard to
the COVID-19 pandemic. Specifically, Moody's have observed an
increase in delinquencies, payment forbearance, and payment
deferrals since the start of pandemic, which could result in higher
realized losses. Moody's rating actions also take into
consideration the buildup in credit enhancement of the bonds,
especially in an environment of elevated prepayment rates, which
has helped offset the impact of the increase in expected losses
spurred by the pandemic.
Moody's estimated the proportion of loans granted payment relief in
a pool based on a review of loan level cashflows. In Moody's
analysis, Moody's considered a loan to be enrolled in a payment
relief program if (1) the loan was not liquidated but took a loss
in the reporting period (to account for loans with monthly
deferrals that were reported as current), or (2) the actual balance
of the loan increased in the reporting period, or (3) the actual
balance of the loan remained unchanged in the last and current
reporting period, excluding interest-only loans and pay ahead
loans. In cases where loan level data is not available, Moody's
assumed that the proportion of borrowers enrolled in payment relief
programs would be equal to levels observed in transactions of
comparable asset quality. Based on Moody's analysis, the proportion
of borrowers that are currently enrolled in payment relief plans
varied greatly, ranging between approximately 2% and 9% among RMBS
transactions issued before 2009. In Moody's analysis, Moody's
assume these loans to experience lifetime default rates that are
50% higher than default rates on the performing loans.
In addition, for borrowers unable to make up missed payments
through a short-term repayment plan, servicers will generally defer
the forborne amount as a non-interest-bearing balance, due at
maturity of the loan as a balloon payment. Moody's analysis
considered the impact of six months of scheduled principal payments
on the loans enrolled in payment relief programs being passed to
the trust as a loss. The magnitude of this loss will depend on the
proportion of the borrowers in the pool subject to principal
deferral and the number of months of such deferral. The treatment
of deferred principal as a loss is credit negative for junior
bonds, which could incur write-downs on bonds when missed payments
are deferred.
The action has considered how the coronavirus pandemic has reshaped
US economic environment and the way its aftershocks will continue
to reverberate and influence the performance of residential
mortgage loans. Moody's expect the public health situation to
improve as vaccinations against COVID-19 increase and societies
continue to adapt to new protocols. Still, the exit from the
pandemic will likely be bumpy and unpredictable and economic
prospects will vary.
Moody's regard the coronavirus outbreak as a social risk under
Moody's ESG framework, given the substantial implications for
public health and safety.
Principal Methodologies
The principal methodology used in rating all classes except
interest-only classes was "US RMBS Surveillance Methodology"
published in July 2020.
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 of the subordinate bonds 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 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.
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. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
[*] S&P Takes Various Actions on 46 Classes from 12 US RMBS Deals
-----------------------------------------------------------------
S&P Global Ratings completed its review of 46 ratings from 12 U.S.
RMBS transactions issued between 2003 and 2006. The review yielded
12 upgrades, two downgrades, and 32 affirmations.
A list of Affected Ratings can be viewed at:
https://bit.ly/3J6XCkq
Analytical Considerations
S&P incorporates various considerations into its decisions to
raise, lower, or affirm ratings when reviewing the indicative
ratings suggested by its projected cash flows. These considerations
are based on transaction-specific performance and/or structural
characteristics and their potential effects on certain classes.
Some of these considerations may include:
-- Collateral performance or delinquency trends;
-- Increase or decrease in available credit support; and
-- Historical and/or outstanding missed interest payments or
interest shortfalls.
Rating Actions
S&P said, "The rating changes reflect our opinion regarding the
associated transaction-specific collateral performance and/or
structural characteristics, and/or reflect the application of
specific criteria applicable to these classes.
"The ratings affirmations reflect our opinion that our projected
credit support, collateral performance, and credit-related
reductions in interest on these classes has remained relatively
consistent with our prior projections."
*********
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