/raid1/www/Hosts/bankrupt/TCR_Public/221009.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, October 9, 2022, Vol. 26, No. 281
Headlines
ABPCI DIRECT XI: Fitch Assigns 'BB-sf' Rating on Class E Debt
ANGEL OAK 2022-6: Fitch Assigns 'Bsf' Rating on Class B-2 Certs
BELLEMEADE RE 2022-2: Moody's Assigns B3 Rating to Cl. M-2 Notes
CANTOR COMMERCIAL 2016-C7: Fitch Affirms CCC Rating on 2 Tranches
CAPITAL FOUR II: Fitch Assigns 'BB-sf' Rating on Class E Debt
CIM TRUST 2022-R3: Fitch Assigns 'Bsf' Rating on Class B2 Notes
CITIGROUP 2021-RP5: Fitch Affirms 'Bsf' Rating on Class B-2 Debt
COLT 2022-8: Fitch Assigns 'B(EXP)sf' Rating on Class B2 Certs
COMM 2012-CCRE4: S&P Lowers Class X-B Notes Rating to CCC (sf)
CONNECTICUT AVE 2022-R09: Moody's Gives Ba1 Rating to 25 Tranches
COREVEST AMERICAN 2022-P2: Fitch Assigns 'B-sf' Rating on G Certs
COREVEST AMERICAN 2022-P2: Fitch Gives 'B-(EXP)' Rating on G Certs
CSAIL 2018-C14: Fitch Affirms 'CCCsf' Rating on 2 Tranches
CSMC TRUST 2022-RPL4: Fitch Assigns 'Bsf' Rating on Class B-2 Notes
CSMC TRUST 2022-RPL4: Fitch Gives 'B(EXP)' Rating on Cl. B-2 Debt
ELMWOOD CLO 19: S&P Assigns B- (sf) Rating on $8MM Class F Notes
FORTRESS CREDIT XV: Moody's Gives (P)Ba3 Rating to $12.8MM E Notes
FREDDIE MAC 2022-DNA7: S&P Assigns BB-(sf) Rating on Cl. M-2 Notes
GS MORTGAGE 2012-GC6: Fitch Hikes Class F Debt Rating to 'BBsf'
GS MORTGAGE 2022-PJ6: Moody's Assigns B3 Rating to Cl. B-5 Debt
INVESCO CLO 2022-3: Fitch Assigns 'BB-sf' Rating on Class E Notes
JP MORGAN 2012-LC9: Moody's Lowers Rating on Cl. E Certs to B3
JP MORGAN 2022-NXSS: Moody's Assigns B2 Rating to 2 Tranches
JPMCC COMMERCIAL 2016-JP4: Fitch Lowers Class E Certs to 'B-sf'
MFA 2022-INV3: S&P Assigns Prelim B+ (sf) Rating on Cl. B-2 Certs
MORGAN STANLEY 2013-C10: Fitch Affirms 'Csf' Rating on Cl. H Certs
MORGAN STANLEY 2013-C12: Fitch Affirms 'CCCsf' Rating on 2 Tranches
NEW RESIDENTIAL 2022-NQM5: Fitch Assigns B-(EXP) Rating on B2 Notes
OBX TRUST 2022-NQM8: Fitch Assigns 'Bsf' Rating on Class B-2 Debt
PRPM TRUST 2022-NQM1: Fitch Assigns 'B(EXP)' Rating on B-2 Certs
REALT 2015-1: Fitch Affirms 'Bsf' Rating on Class G Certs
SANTANDER BANK 2022-B: Moody's Assigns B2 Rating to $49MM F Notes
TOWD POINT 2022-4: Fitch Assigns 'B-sf' Rating on Class B2 Debt
UBS-BARCLAYS COMMERCIAL 2013-C5: Fitch Lowers Cl. F Certs to 'Csf'
VERUS 2022-8: S&P Assigns Prelim B- (sf) Rating on Class B-2 Notes
WELLFLEET CLO 2022-2: S&P Assigns BB- (sf) Rating on Class E Notes
WELLS FARGO 2019-C52: Fitch Affirms 'B-sf' Rating on G-RR Debt
[*] Moody's Takes Action on $272.6MM of US RMBS Issued 2002-2007
[*] S&P Takes Various Actions on 130 Classes From 20 US RMBS Deals
[*] S&P Takes Various Actions on 18 Classes from 14 U.S. ABS Deals
*********
ABPCI DIRECT XI: Fitch Assigns 'BB-sf' Rating on Class E Debt
-------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to ABPCI
Direct Lending Fund CLO XI LP.
Debt Rating Prior
---- ------ -----
ABPCI Direct Lending Fund
CLO XI LP
A-1 LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
A-L LT AAAsf New Rating AAA(EXP)sf
B-1 LT AAsf New Rating AA(EXP)sf
B-2 LT AAsf New Rating AA(EXP)sf
C LT A-sf New Rating A-(EXP)sf
D LT BBB-sf New Rating BBB-(EXP)sf
E LT BB-sf New Rating BB-(EXP)sf
Partnership Interests LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
ABPCI Direct Lending Fund CLO XI LP (the issuer) is a middle-market
(MM) collateralized loan obligation (CLO) managed by AB Private
Credit Investors LLC. Net proceeds from the issuance of the secured
notes and partnership interests will provide financing on a
portfolio of approximately $400.0 million of primarily first lien
senior secured MM loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B-', which is in line with that of recent
MM CLOs. The weighted average rating factor (WARF) of the
indicative portfolio is 31.44 versus a maximum covenant, in
accordance with the initial expected matrix point of 34.35. Issuers
rated in the 'B' rating category denote a highly speculative credit
quality; however, the debt benefits from appropriate credit
enhancement and standard U.S. MM CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
100% first lien senior secured loans. The weighted average recovery
rate (WARR) of the indicative portfolio is 64.5% versus a minimum
covenant, in accordance with the initial expected matrix point of
63.05%.
Portfolio Composition (Positive): The largest three industries may
constitute up to 47.0% of the portfolio balance in aggregate, while
the top five obligors can represent up to 15.0% 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. MM CLOs.
Portfolio Management (Neutral): The transaction has a 4.1-year
reinvestment period and reinvestment criteria similar to other U.S.
MM 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 its stress scenarios at each matrix point, each
class of debt can withstand default rates and recovery assumptions
consistent with other recent Fitch-rated CLO notes.
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 between
'BBB+sf' and 'AAAsf' for class A, between 'BB+sf' and 'AAAsf' for
class B, between 'B+sf' and 'A+sf' for class C, between less than
'B-sf' and 'BBBsf' for class D, and between less than 'B-sf' and
'BB-sf' for class E.
Fitch also evaluated the notes' sensitivity to the potential
decrease in recovery prospects and excess spread due to optional
substitutions. Results under these sensitivity scenarios are
between 'AA+sf' and 'AAAsf' for class A, between 'AA-sf' and
'AAAsf' for class B, between 'BBB+sf' and 'A+sf' for class C,
between 'BB+sf' and 'BBB+sf' for class D and between 'BB-sf' and
'BB+sf' for class E.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Upgrade scenarios are not applicable to class A 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 notes, between 'A+sf'
and 'AAAsf' for class C notes, between 'A-sf' and 'A+sf' for class
D notes, and between 'BBB-sf' and 'BBB+sf' for class E notes.
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.
ANGEL OAK 2022-6: Fitch Assigns 'Bsf' Rating on Class B-2 Certs
---------------------------------------------------------------
Fitch Ratings has assigned final ratings to Angel Oak Mortgage
Trust 2022-6 (AOMT 2022-6).
Debt Rating Prior
---- ------ -----
AOMT 2022-6
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 BBsf New Rating BB(EXP)sf
B-2 LT Bsf New Rating B(EXP)sf
B-3 LT NRsf New Rating NR(EXP)sf
A-IO-S LT NRsf New Rating NR(EXP)sf
XS LT NRsf New Rating NR(EXP)sf
R LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Fitch has assigned final ratings to the RMBS to be issued by Angel
Oak Mortgage Trust 2022-6 Series 2022-6 (AOMT 2022-6) as indicated
above. The certificates are supported by 795 loans with a balance
of $389.30 million as of the cut-off date. This represents the 26th
Fitch-rated AOMT transaction and the sixth Fitch-rated AOMT
transaction in 2022.
The certificates are secured by mortgage loans mainly originated by
Angel Oak Mortgage Solutions LLC (AOMS), Greenbox Loans, Inc. and
Angel Oak Home Loans LLC (AOHL). All other originators make up less
than 10% of the loan pool. Of the loans, 64.3% are designated as
nonqualified mortgage (non-QM) loans, and 35.7% are investment
properties not subject to the Ability to Repay (ATR) Rule. The
servicer is Select Portfolio Servicing Inc. (RPS1-). Computershare
is the master servicer.
There is LIBOR exposure in this transaction, as there are two ARM
loans that reference LIBOR, although the bonds do not have LIBOR
exposure. Class A-1, A-2 and A-3 certificates are fixed rate,
capped at the net weighted average coupon (WAC), and have a step-up
feature. Class M-1, B-1 and B-3 certificates are based on the net
WAC; class B-2 certificates are based on the net WAC but have a
stepdown feature whereby the class becomes a principal-only bond at
the point the class A-1, A-2 and A-3 step-up coupons take place.
On Sept. 19, 2022 Select Portfolio Servicing Inc. (SPS) announced
that it expects to acquire Rushmore Loan Management Services LLC
(Rushmore) with a closing date in the fourth quarter of 2022.
Settlement is subject to regulatory approvals and other customary
closing conditions. With Rushmore under the SPS umbrella, SPS will
employ over 1,600 associates servicing approximately 1.4 million
loans. SPS and Rushmore have each demonstrated high servicing
performance, as represented in their current high servicer ratings
(SPS: 1- as Primary and Special servicer, Rushmore: 1- as Primary
and Sub-servicer) and Stable Outlooks. Fitch will continue to
monitor the performance of SPS and Rushmore as the companies work
to execute on this strategic initiative.
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 10.7% above a long-term sustainable level (versus
11% on a national level as of August 2022, up 1.8% since the prior
quarter). Underlying fundamentals are not keeping pace with growth
in prices, resulting from a supply/demand imbalance driven by low
inventory, favorable 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 19.8% yoy nationally as
of May 2022.
Non-QM Credit Quality (Mixed): The collateral consists of 795 loans
totaling $389.30 million and seasoned at approximately nine months
in aggregate, according to Fitch, and seven months, per the
transaction documents.
The borrowers have a strong credit profile (737 FICO and 41.3%
debt-to-income [DTI] ratio, as determined by Fitch), along with
relatively moderate leverage, with an original combined loan to
value (CLTV) ratio of 71.5%, as determined by Fitch, which
translates to a Fitch-calculated sustainable LTV (sLTV) of 76.7%.
Of the pool, 62.0% represents loans whereby the borrower maintains
a primary or secondary residence, while the remaining 38.0%
comprises investor properties based on Fitch's analysis and the
transaction documents. Fitch determined that 12.5% of the loans
were originated through a retail channel.
Additionally, 64.3% are designated as non-QM, while the remaining
35.7% are exempt from QM status since they are investor loans.
The pool contains 78 loans over $1.0 million, with the largest
amounting to $3.0 million.
Loans on investor properties (10.3% underwritten to the borrower's
credit profile and 27.7% comprising investor cash flow and no ratio
loans) represent 38.0% of the pool, as determined by Fitch. There
are no second lien loans, and 1.1% of the borrowers were viewed by
Fitch as having a prior credit event in the past seven years. Per
the transaction documents, three of the loans have subordinate
financing. In Fitch's analysis, Fitch also considered loans with
deferred balances to have subordinate financing. In this
transaction, there were six loans with deferred balances;
therefore, Fitch performed its analysis considering nine of the
loans to have subordinate financing.
Fitch determined that 32 of the loans in the pool are to foreign
nationals. Fitch treats loans to foreign nationals as investor
occupied, coded as ASF1 (no documentation) for employment and
income documentation and removed the liquid reserves. If a credit
score is not available, Fitch uses a credit score of 650 for these
borrowers.
Although the borrowers' credit quality is higher than that of AOMT
transactions securitized in 2021 and 2020, the pool's
characteristics resemble those of nonprime collateral and,
therefore, the pool was analyzed using Fitch's nonprime model.
Geographic Concentration (Negative): The largest concentration of
loans is in California (37.7%), followed by Florida (18.5%) and
Texas (5.8%). The largest MSA is Los Angeles (20.4%), followed by
Miami (9.1%) and New York City (5.7%). The top three MSAs account
for 35.1% of the pool. As a result, there was a 1.01x penalty for
geographic concentration, which increased the 'AAAsf' loss
expectation by 14 basis points (bps).
Loan Documentation (Negative): Fitch determined that 93.0% of the
loans in the pool were underwritten to borrowers with less than
full documentation. Per the transaction documents, 91.0% of the
loans in the pool were underwritten to borrowers with less than
full documentation. Fitch may consider a loan to be less than a
full documentation loan based on its review of the loan program and
the documentation details provided in the loan tape, which may
explain any discrepancy between Fitch's percentage and the
transaction documents.
Of the loans underwritten to borrowers with less than full
documentation, 55.0% were underwritten to a 12-month 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. To reflect the additional risk, Fitch
increases the probability of default (PD) by 1.5x on bank statement
loans.
In addition to loans underwritten to a bank statement program,
27.6% comprise a debt service coverage ratio (DSCR) product, 0.1%
comprise a no ratio product, 1.1% are an asset depletion product
and 6.8% are third party-prepared 12 month-24 month P&L statements,
with many of these loans having two months of bank statements for
additional documentation.
One loan in the pool is a no ratio DSCR loan; for this loan,
employment and income were considered to be no documentation in
Fitch's analysis; as such, Fitch assumed a DTI ratio of 100%. This
is in addition to the loan being treated as investor occupied. This
resulted in a 75% PD and an expected loss of 37.75% for this loan.
Limited Advancing (Mixed): The deal is structured to six months of
servicer advances for delinquent P&I. 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. The downside
is the additional stress on the structure, as liquidity is limited
in the event of large and extended delinquencies.
The ultimate advancing party in the transaction is the master
servicer, Computershare. Computershare does not hold a rating from
Fitch of at least 'A' or 'F1' and, as a result, does not meet
Fitch's counterparty criteria for advancing delinquent P&I
payments. Fitch ran additional analysis to determine if there was
any impact to the structure if it assumed no advancing of
delinquent P&I for the losses and cash flows. This is in addition
to running the loss and cashflow analysis assuming six months of
delinquent P&I servicer advancing per the transaction documents.
Assuming six months of delinquent P&I advancing was the most
conservative, Fitch is proposing losses and CE off of this
analysis.
Modified Sequential Payment Structure (Neutral): The structure
distributes collected principal pro rata among the class A
certificates while excluding the subordinate bonds from principal
until all three A classes are reduced to zero. To the extent that
either a cumulative loss trigger event or a delinquency trigger
event occurs in a given period, principal will be distributed
sequentially to class A-1, A-2 and A-3 bonds until they are reduced
to zero.
There is excess spread in the transaction available to reimburse
for losses or interest shortfalls should they occur. However,
excess spread will be reduced on and after October 2026, since
class A certificates have a step-up coupon feature whereby the
coupon rate will be the lesser of (i) the applicable fixed rate
plus 1.000% and (ii) the net WAC rate.
To offset the impact of the class A certificates' step-up coupon
feature, class B-2 has a stepdown coupon feature that will become
effective in October 2026, which will change the B-2 coupon to
0.0%. In addition, the transaction was structured so that, on and
after October 2026, classes A-1, A-2 and A-3 would receive unpaid
cap carryover amounts prior to class B-3 being paid interest or
principal payments. Both of these features are supportive of
classes A-1 and A-2 being paid timely interest at the step-up
coupon rate and class A-3 being paid ultimate interest at the
step-up coupon rate.
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 41.9% at 'AAAsf'. 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.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 100% of the loans. The third-party due diligence was
consistent with Fitch's "U.S. RMBS Rating Criteria." The sponsor
engaged SitusAMC, Canopy, Consolidated Analytics, Covius, Evolve,
Infinity, Inglet Blair, Recovco, and Selene to perform the review.
Loans reviewed under these engagements were given compliance,
credit and valuation grades and assigned initial grades for each
subcategory.
An exception and waiver report was provided to Fitch, indicating
the pool of reviewed loans has a number of exceptions and waivers.
Fitch determined that the exceptions and waivers do not materially
affect the overall credit risk of the loans due to the presence of
compensating factors such as having liquid reserves or FICO above
guideline requirements or LTV or DTI lower than guideline
requirement. Therefore, no adjustments were needed to compensate
for these occurrences.
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5 designated website. The loan-level
information Fitch received was provided in the American
Securitization Forum's (ASF) data layout format.
The ASF data tape layout was established with input from various
industry participants, including rating agencies, issuers,
originators, investors and others, to produce an industry standard
for the pool-level data in support of the U.S. RMBS securitization
market. The data contained in the data tape layout were populated
by the due diligence company and no material discrepancies were
noted.
ESG CONSIDERATIONS
AOMT 2022-6 has an ESG Relevance Score of '4' [+] for Transaction
Parties & Operational Risk due to strong due diligence results on
100% of the pool and a 'RPS1-' Fitch-rated servicer, which has a
positive 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.
BELLEMEADE RE 2022-2: Moody's Assigns B3 Rating to Cl. M-2 Notes
----------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to 3
classes of mortgage insurance-linked notes issued by Bellemeade Re
2022-2 Ltd.
The securities reference a pool of mortgage insurance policies
issued by Arch Mortgage Insurance Company and United Guaranty
Residential Insurance Company, the ceding insurers, on a portfolio
of mortgage loans predominantly acquired by Fannie Mae and Freddie
Mac, and originated and serviced by multiple entities.
The complete rating actions are as follows:
Issuer: Bellemeade Re 2022-2 Ltd.
Cl. M-1A, Definitive Rating Assigned Baa3 (sf)
Cl. M-1B, Definitive Rating Assigned Ba3 (sf)
Cl. M-2, Definitive Rating Assigned B3 (sf)
RATINGS RATIONALE
The ratings are based on the credit quality of the mortgage loans,
the structural features of the transaction, the operational
strength of the ceding insurer, the third-party review, and the
representations and warranties framework.
Moody's expected loss on the pool's aggregate exposed principal
balance in a baseline scenario-mean is 2.68%, in a baseline
scenario-median is 2.32% and reaches 17.56% at a stress level
consistent with Moody's Aaa ratings.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's
Approach to Rating US RMBS Using the MILAN Framework" published in
July 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
CANTOR COMMERCIAL 2016-C7: Fitch Affirms CCC Rating on 2 Tranches
-----------------------------------------------------------------
Fitch Ratings has affirmed 13 classes of Cantor Commercial Real
Estate (CFCRE) Commercial Mortgage Trust 2016-C7 commercial
mortgage pass-through certificates. The Rating Outlook for class D
has been revised to Stable from Negative.
Debt Rating Prior
---- ------ -----
CFCRE 2016-C7
A-2 12532BAC1 LT AAAsf Affirmed AAAsf
A-3 12532BAD9 LT AAAsf Affirmed AAAsf
A-M 12532BAE7 LT AAAsf Affirmed AAAsf
A-SB 12532BAB3 LT AAAsf Affirmed AAAsf
B 12532BAF4 LT AA-sf Affirmed AA-sf
C 12532BAG2 LT A-sf Affirmed A-sf
D 12532BAL1 LT BBB-sf Affirmed BBB-sf
E 12532BAN7 LT B-sf Affirmed B-sf
F 12532BAQ0 LT CCCsf Affirmed CCCsf
X-A 12532BAH0 LT AAAsf Affirmed AAAsf
X-B 12532BAJ6 LT AA-sf Affirmed AA-sf
X-E 12532BAW7 LT B-sf Affirmed B-sf
X-F 12532BAY3 LT CCCsf Affirmed CCCsf
KEY RATING DRIVERS
Slight Increase in Loss Expectations: The affirmations and the
Outlook revision to Stable reflect the overall stable pool
performance since Fitch's last rating action and performance
stabilization of properties affected by the pandemic. Fitch's
current ratings incorporate a base case loss of 4.9%. There are
seven Fitch Loans of Concern (FLOCs; 22% of pool), which includes
one loan in special servicing (2.2%). The slight increase in loss
expectations is driven primarily the by the specially serviced
Kirlin Industries loan and the Fresno Fashion Fair loan.
The Negative Outlooks, which were previously assigned for
coronavirus-related performance concerns, reflect possible
downgrade should performance of the FLOCs and specially serviced
loan deteriorate further; the Outlook may be revised back to Stable
with further evidence of performance stabilization of the regional
mall and hotel loans in the pool.
Largest Contributors to Loss: The largest contributor to loss is
the Fresno Fashion Fair loan (6.9%), which is secured by a
536,093-sf collateral portion of a 963,000-sf super-regional mall
located in Fresno, CA. It is anchored by JCPenney (28.7% of NRA;
lease expiry in March 2023) and Macy's Men's and Children's (14.3%;
exercised their five-year extension option to April 2026 during
1Q21). Macy's and Forever 21 are non-collateral anchors. The loan
is sponsored by Macerich Company.
The mall continues to demonstrate improving performance, with NOI
in-line with issuance and sales exceeding historical levels.
Occupancy has improved to 97% as of the 1Q22. from 94% at YE 2021.
Sales have exceeded levels prior to the pandemic and from issuance,
with sales of $971 psf ($797 psf excluding Apple) as of the TTM
March 2022 report. This compares to inline sales of $722 psf ($602
psf excluding Apple) as of TTM August 2018 and $694 psf ($598 psf
excluding Apple) as of TTM August 2016. Fitch's base case loss of
14% reflects an 11% cap rate to the YE 2021 NOI.
The second largest contributor to loss is the Kirlin Industries
loan (2.1%), which is secured by a 95,000-sf vacant flex office
building located in Rockville, MD. The loan transferred to special
servicing in July 2021 due to payment default. The single tenant,
Kirlin Industries, vacated in March 2020 prior to its 2029 lease
expiration due to bankruptcy. The property remains vacant.
According to servicer updates, the lender is trying to lease or
sell the property via a receiver sale. Fitch modeled a loss of 54%
which reflects a stressed value of $77psf.
Increasing Credit Enhancement: As of the August 2022 distribution
date, the pool's aggregate principal balance was reduced by 8.3% to
$599 million from $652.9 million at issuance. There has been $12.1
million in realized losses to date to the non-rated class G.
Interest shortfalls are currently affecting class G. Eleven loans
(55%) are full-term interest-only (IO), and all loans that had
partial IO periods are now amortizing. All loans mature in 2026.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Downgrades to classes A-2 through B are not likely due to their
increasing CE, overall stable pool performance and expected
continued paydown; however, downgrades to these classes may occur
should interest shortfalls affect these classes;
- Downgrades to classes C and D would occur if loss expectations
increase significantly and/or if CE is eroded due to realized
losses that exceed expectations on one or more larger FLOCs;
- Downgrades to class E would occur if the performance of the
FLOCs fail to stabilize, primarily the Fresno Fashion Fair and
hotel loans in the pool.
- Further downgrades to the distressed class F would occur losses
are realized or become more certain.
- Fitch has identified both a baseline and a worse-than-expected,
adverse stagflation scenario based on fallout from the
Russia-Ukraine war, whereby growth is sharply lower amid higher
inflation and interest rates. Even if the adverse scenario should
play out, Fitch expects virtually no impact on ratings performance,
indicating very few rating or Outlook changes. However, for some
transactions with concentrations in underperforming retail
exposure, the ratings impact may be mild to modest, indicating some
changes on sub-investment-grade notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Upgrades to the 'AA-sf' and 'A-sf' category would likely occur
with significant improvement in CE and/or defeasance; however,
adverse selection and increased concentrations or the
underperformance of particular loan(s) could cause this trend to
reverse. Classes would not be upgraded above 'Asf' if there is
likelihood for interest shortfalls.
- The 'BBB-sf', 'B-sf' and 'CCCsf' rated classes are unlikely to
be upgraded absent significant performance improvement and/or
higher recoveries than expected on the specially serviced loan.
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.
CAPITAL FOUR II: Fitch Assigns 'BB-sf' Rating on Class E Debt
-------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Capital
Four US CLO II Ltd.
Debt Rating
---- ------
Capital Four US CLO II Ltd.
A-1 LT AAAsf New Rating
A-2 LT AAAsf New Rating
B LT AAsf New Rating
C LT Asf New Rating
D LT BBB-sf New Rating
E LT BB-sf New Rating
Subordinated Notes LT NRsf New Rating
TRANSACTION SUMMARY
Capital Four US CLO II Ltd. (the issuer) is a static arbitrage cash
flow collateralized loan obligation (CLO) that will be managed by
Capital Four US CLO Management LLC, Net proceeds from the issuance
of the secured and subordinated notes will provide financing on a
portfolio of approximately $400 million of primarily first lien
senior secured loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. Issuers in the 'B' rating category denote a highly
speculative credit quality; however, the notes benefit from
appropriate credit enhancement and standard U.S. CLO structural
features.
Asset Security (Positive): The indicative portfolio consists of
97.5% first-lien senior secured loans with 2.5% senior secured and
unsecured bonds and has a weighted average recovery assumption of
74.75%.
Portfolio Composition (Positive): The largest three industries
comprise 38.7% of the portfolio balance in aggregate while the top
five obligors represent 5.5% 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 does not have a
reinvestment period; however, the issuer has the ability to extend
the weighted average life (WAL) of the portfolio as a result of
maturity amendments. Fitch's analysis was based on a stressed
portfolio incorporating potential maturity amendments on the
underlying loans as well as a one-notch downgrade on the Fitch IDR
Equivalency Rating for assets with a Negative Outlook on the
driving rating of the obligor. The shorter risk horizon means the
transaction is less vulnerable to underlying price movements,
economic conditions and asset performance.
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. Each class of notes was able to withstand default
rates in excess of the respective rating hurdles.
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
a metric. The results under these sensitivity scenarios are between
'BBB+sf' and 'AAAsf' for class A-1, between 'BBB+sf' and 'AAAsf'
for class A-2, between 'BB+sf' and 'AAsf' for class B, between
'B-sf' and 'A-sf' for class C, between less than 'B-sf' and 'BB+sf'
for class D, and between less than 'B-sf' and 'B+sf' for class E.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Upgrade scenarios are not applicable to the class A-1 and A-2
notes, as these notes are in the highest rating category of
'AAAsf'. 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 notes, 'A+sf' for class C notes, 'A+sf' for class D notes,
and 'BBB+sf' for class E notes.
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, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
CIM TRUST 2022-R3: Fitch Assigns 'Bsf' Rating on Class B2 Notes
---------------------------------------------------------------
Fitch Ratings has assigned ratings to CIM Trust 2022-R3.
Debt Rating Prior
---- ------ -----
CIM 2022-R3
A1 LT AAAsf New Rating AAA(EXP)sf
A2 LT AAsf New Rating AA(EXP)sf
M1 LT Asf New Rating A(EXP)sf
M2 LT BBBsf New Rating BBB(EXP)sf
B1 LT BBsf New Rating BB(EXP)sf
B2 LT Bsf New Rating B(EXP)sf
B3 LT NRsf New Rating NR(EXP)sf
A-IO-S LT NRsf New Rating NR(EXP)sf
C LT NRsf New Rating NR(EXP)sf
PRA LT NRsf New Rating NR(EXP)sf
R LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
The CIM 2022-R3 notes are supported by one collateral group that
consists of 1,839 loans with a total balance of approximately $370
million, which includes $23.1 million, or 6.27%, of the aggregate
pool balance in noninterest-bearing deferred principal amounts as
of the cutoff date. The pool generally consists of seasoned
performing loans (SPLs) and reperforming loans (RPLs).
Approximately 18.6% of the pool is seasoned at less than 24 months
and was therefore considered to be a new origination by Fitch.
Distributions of P&I and loss allocations are based on a
traditional senior-subordinate, sequential structure. The
sequential-pay structure locks out principal to the subordinated
notes until the most senior notes outstanding are paid in full. The
servicers will not be advancing delinquent monthly payments of
P&I.
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 9.2% above a long-term sustainable level (versus
9.2% on a national level as of April 2022, down 1.4% since last
quarter). Underlying fundamentals are not keeping pace with the
growth in prices, resulting from a supply/demand imbalance driven
by low inventory, favorable 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 18.9% yoy
nationally as of December 2021.
Distressed Performance History (Negative): The collateral pool
consists primarily of peak-vintage, seasoned performing and RPLs.
Of the pool, 1.3% was 30 days delinquent as of the cut-off date and
33.7% of loans are current but have had recent delinquencies or
incomplete pay strings. Approximately 65.0% of the loans have been
paying on time for at least the most recent 24 months. Roughly
79.65% have been modified.
Low Leverage (Positive): The pool consists of loans with a weighted
average (WA) original CLTV of 80.7%. All loans received an updated
BPO valuation which translate to a WA sustainable LTV (sLTV) of
65.4% at the base case. This is representative of low leverage
borrowers, and is stronger than recently rated RPL transactions.
No Servicer P&I Advancing (Mixed): The servicer will not be
advancing delinquent monthly payments of P&I, which reduce
liquidity to the trust. P&I advances made on behalf of loans that
become delinquent and eventually liquidate reduce liquidation
proceeds to the trust. Due to the lack of P&I advancing, the
loan-level loss severity (LS) is less for this transaction than for
those where the servicer is obligated to advance P&I. Structural
provisions and cash flow priorities, together with increased
subordination, provide for timely payments of interest to the
'AAAsf' and 'AAsf' rated classes.
Sequential-Pay Structure (Positive): The transaction's cash flow is
based on a sequential-pay structure whereby the subordinate classes
do not receive principal until the senior classes are repaid in
full. Losses are allocated in reverse-sequential order.
Furthermore, the provision to re-allocate principal to pay interest
on the 'AAAsf' and 'AAsf' rated notes prior to other principal
distributions is highly supportive of timely interest payments to
those classes in the absence of servicer advancing.
RATING SENSITIVITIES
Factors 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 41% 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:
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 classes excluding those assigned
ratings of 'AAAsf'.
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 Services and Opus Capital Market
Consultants. The third-party due diligence review was completed on
100% of the loans in this transaction. The scope of the due
diligence review was consistent with Fitch criteria for RPL
collateral and also included a property valuation review in
addition to the regulatory compliance and pay history review. All
loans also received an updated tax and title search and review of
servicing comments.
Fitch considered this information in its analysis and, as a result,
made the following adjustments to its analysis: increased the LS
due to HUD-1 issues and increased the LS due to outstanding
delinquent property taxes or liens. These adjustments resulted in
an increase in the 'AAAsf' expected loss of approximately 25bs.
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.
CITIGROUP 2021-RP5: Fitch Affirms 'Bsf' Rating on Class B-2 Debt
----------------------------------------------------------------
Fitch Ratings has taken various rating actions on 42 classes from 1
Prime 2.0, 2 Reperforming (RPL), and 1 ReRemic transactions issued
between 2018 and 2021.
- 4 classes upgraded;
- 38 classes affirmed;
- 38 classes' Rating Outlooks are Stable and four classes' Outlook
are Positive.
Debt Rating Prior
---- ------ -----
CITIGROUP MORTGAGE LOAN TRUST (CMLTI) 2021-RP5
A-1 17330EAA2 LT AAAsf Affirmed AAAsf
A-2 17330EAB0 LT AAsf Affirmed AAsf
A-3 17330EAC8 LT AAsf Affirmed AAsf
A-4 17330EAD6 LT Asf Affirmed Asf
A-5 17330EAE4 LT BBBsf Affirmed BBBsf
B-1 17330EAG9 LT BBsf Affirmed BBsf
B-2 17330EAH7 LT Bsf Affirmed Bsf
M-1 17330EAF1 LT Asf Affirmed Asf
M-2 17330EAU8 LT BBBsf Affirmed BBBsf
CIM TRUST 2021-R6
A1 12567RAA8 LT AAAsf Affirmed AAAsf
A1-A 12567RAB6 LT AAAsf Affirmed AAAsf
A1-B 12567RAC4 LT AAAsf Affirmed AAAsf
B1 12567RAG5 LT BBsf Affirmed BBsf
B2 12567RAH3 LT Bsf Affirmed Bsf
M1 12567RAD2 LT AAsf Affirmed AAsf
M2 12567RAE0 LT Asf Affirmed Asf
M3 12567RAF7 LT BBBsf Affirmed BBBsf
Wells Fargo Mortgage
Backed Securities Trust
2018-1 Trust
A-1 94989UAA9 LT AAAsf Affirmed AAAsf
A-10 94989UAK7 LT AAAsf Affirmed AAAsf
A-15 94989UAQ4 LT AAAsf Affirmed AAAsf
A-16 94989UAR2 LT AAAsf Affirmed AAAsf
A-17 94989UAS0 LT AAAsf Affirmed AAAsf
A-18 94989UAT8 LT AAAsf Affirmed AAAsf
A-19 94989UAU5 LT AAAsf Affirmed AAAsf
A-2 94989UAB7 LT AAAsf Affirmed AAAsf
A-20 94989UAV3 LT AAAsf Affirmed AAAsf
A-5 94989UAE1 LT AAAsf Affirmed AAAsf
A-6 94989UAF8 LT AAAsf Affirmed AAAsf
A-9 94989UAJ0 LT AAAsf Affirmed AAAsf
A-IO1 94989UAW1 LT AAAsf Affirmed AAAsf
A-IO10 94989UBF7LT AAAsf Affirmed AAAsf
A-IO11 94989UBG5LT AAAsf Affirmed AAAsf
A-IO2 94989UAX9 LT AAAsf Affirmed AAAsf
A-IO4 94989UAZ4 LT AAAsf Affirmed AAAsf
A-IO6 94989UBB6 LT AAAsf Affirmed AAAsf
A-IO9 94989UBE0 LT AAAsf Affirmed AAAsf
B-1 94989UBH3 LT AAAsf Upgrade Asf
B-2 94989UBJ9 LT AAsf Upgrade Asf
B-3 94989UBK6 LT Asf Affirmed Asf
B-4 94989UBL4 LT BBBsf Affirmed BBBsf
Mill City Securities 2021-RS1 Ltd.
A1 59982YAA1 LT BBBsf Upgrade BBB-sf
A2 59982YAB9 LT BBsf Upgrade BB-sf
KEY RATING DRIVERS
Updated Remittance Reporting for Wells Fargo Mortgage Backed
Securities 2018-1 (WFMBS 2018-1) (Positive):
For the July 2022 remittance period, the trustee miscalculated the
senior distribution percentage, resulting in less principal and
interest being allocated to subordinate bonds. This reporting error
resulted in shortfalls to the B1, B2, and B3. This allocation was
corrected, and distributions for B-1 and B-2 were revised so there
were no interest shortfalls. Further, as of July B-3 interest
shortfall had been revised lower. Since July 2022 the B-3 has
continued to take interest shortfalls due to recoupment of prior
servicer advances.
Due to reported interest shortfalls Fitch downgraded B-1, B-2, and
B-3 to 'Asf' August 1 2022, per Fitch criteria timely interest is
required to maintain a rating of 'AA-sf' or higher. After
considering the error correction, and confirming no interest
shortfalls to the B-1, and B-2 classes Fitch has upgraded those
classes to 'AAAsf'/'AAsf' respectively.
Supportive Structures For RPL Backed Transactions (Positive):
Included in this review are two other RPL transactions, Citigroup
Mortgage Loan Trust 2021-RP5 (CMLTI 2021-RP5) and CIM Trust 2021-R6
(CIM 2021-R6). Additionally, Mill City Mortgage Loan Trust 2021-RS1
(MCMLT 2021-RS1) is a Re-REMIC transaction backed by nine RPL
transactions issued by Mill City (Carval).
RPL transactions cash flow is based on a sequential-pay structure
whereby the subordinate classes do not receive principal until the
senior classes are repaid in full. Losses are allocated in
reverse-sequential order. Furthermore, the provision to re-allocate
principal to pay interest on the 'AAAsf' and 'AAsf' rated notes
prior to other principal distributions is highly supportive of
timely interest payments to those classes. The sequential structure
results in significant amortization and deleveraging, resulting in
increased credit enhancement.
Since origination CE for most senior bond (A1) has increased 500bps
(currently 23.65%) for CMLTI 2021-RP5, 481bps (currently 19.01%)
for CIM 2021-R6, and 143bps (currently 63.03%) for MCMLT 2021-RS1.
Borrower Performance (Mixed): Overall mortgage delinquencies (DQ)
rates remain below pandemic levels, however performance for deals
within this review are mixed. Delinquencies within the WFMBS 2018-1
transaction are low, where approximately 1.53% of borrowers are 30
days delinquent. Delinquencies for CIM 2021-R6 remain relatively
low, approximately 2.6% of borrowers are 30 days or more
delinquent. In contrast, delinquencies for CMLTI 2021-RP5 have been
growing, currently 7.5% of borrowers are 30 days or more
delinquent. For MCMLT 2021-RS1, the average delinquencies for
underlying deals are approximately 11.3%.
Home Price Appreciation Outpacing Overvaluation (Positive):
As a result of Home Price Appreciation, resulting in an increased
amount of borrower equity, Fitch expected losses have decreased. As
of July 2022, S&P Corelogic Case-Shiller Index reported an annual
gain of 15.8% nationally. Over the past year, Fitch estimates that
national home prices are 11.0% as of 1Q22 overvalued on a
population weighted basis. Fitch haircuts property values based on
overvaluation at a local level to determine long-term sustainable
values and determine Sustainable LTV's (sLTV).
Since issuance, the sLTV for the 2021 RPL transactions have
decreased 75bps and the underlying sLTV for the MCMLT 2021-RS1 have
decreased 65bps on average.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
This defined negative stress 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 decline at the base case.
This analysis indicates that there is some potential rating
migration with higher MVDs compared with the model projection.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth with no
assumed overvaluation. The analysis assumes positive home price
growth of 10.0%. Excluding the senior classes already rated 'AAAsf'
as well as classes that are constrained due to qualitative rating
caps, the analysis indicates there is potential positive rating
migration for all of the other rated classes.
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.
ESG CONSIDERATIONS
CMLTI 2021-RP5 has an ESG Relevance Score of '4' [+] for
Transaction Parties & Operational Risk due to exposure to
counterparty risk, which has a positive impact on the credit
profile, and is relevant to the rating[s] in conjunction with other
factors.
Wells Fargo Mortgage Backed Securities Trust 2018-1 Trust has an
ESG Relevance Score of '4' [+] for Transaction Parties &
Operational Risk due to {exposure to counterparty risk , which has
a positive impact on the credit profile, and is relevant to the
rating[s] 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.
COLT 2022-8: Fitch Assigns 'B(EXP)sf' Rating on Class B2 Certs
--------------------------------------------------------------
Fitch Ratings expects to rate the residential mortgage-backed
certificates to be issued by COLT 2022-8 Mortgage Loan Trust (COLT
2022-8).
Debt Rating
---- ------
COLT 2022-8
A1 LT AAA(EXP)sf Expected Rating
A2 LT AA(EXP)sf Expected Rating
A3 LT A(EXP)sf Expected Rating
AIOS LT NR(EXP)sf Expected Rating
B1 LT BB(EXP)sf Expected Rating
B2 LT B(EXP)sf Expected Rating
B3 LT NR(EXP)sf Expected Rating
M1 LT BBB(EXP)sf Expected Rating
X LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
The certificates are supported by 553 nonprime loans with a total
balance of approximately $298 million as of the cutoff date. Loans
in the pool were originated by multiple originators, including
Sprout Mortgage, Northpointe Bank and others. Loans were aggregated
by Hudson Americas L.P. Loans are currently serviced by Select
Portfolio Servicing, Inc. (SPS) or Northpointe Bank.
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 10.2% above a long-term sustainable level (versus
11.0% on a national level as of 1Q22, up 1.8% since last quarter).
Underlying fundamentals are not keeping pace with the growth in
prices, resulting from a supply/demand imbalance driven by low
inventory, favorable 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 18.0% yoy nationally as
of June 2022.
Non-QM Credit Quality (Negative): The collateral consists of 553
loans, totaling $298 million and seasoned approximately three
months in aggregate. The borrowers have a moderate credit profile -
731.2 model FICO and 43% model debt-to-income ratio (DTI) - and
leverage — 83.8% sustainable loan-to-value ratio (sLTV) and 75.5%
combined LTV (cLTV). The pool consists of 59.5% of loans where the
borrower maintains a primary residence, while 36.7% comprise an
investor property. Additionally, 63.2% are nonqualified mortgage
(non-QM); the QM rule does not apply to 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 81.6% of the loans in
the pool were underwritten to less than full documentation and
50.7% were underwritten to a 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 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 625 bps relative to a fully documented
loan.
High Percentage of DSCR Loans (Negative): There are 215 debt
service coverage ratio (DSCR) products in the pool (39% by loan
count). These business purpose loans are available to real estate
investors that are qualified on a cash flow basis, rather than DTI,
and borrower income and employment are not verified. Compared with
standard investment properties for DSCR loans, Fitch converts the
DSCR values to a DTI and treats as low documentation.
Fitch's expected loss for these loans is 38.1% in the 'AAAsf'
stress, which is driving the higher pool expected losses due to the
27.5% WA concentration.
Modified Sequential-Payment Structure with Limited Advancing
(Mixed): The structure distributes principal pro rata among the
senior certificates while shutting out the subordinate bonds from
principal until all senior classes are reduced to zero. If a
cumulative loss trigger event, delinquency trigger event or credit
enhancement (CE) trigger event occurs in a given period, principal
will be distributed sequentially to class A-1, A-2 and A-3
certificates until they are reduced to zero.
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, the master servicer and
then securities administrator 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. The downside to this is the additional stress
on the structure, as there is limited liquidity in the event of
large and extended delinquencies.
COLT 2022-8 has a step-up coupon for the senior classes (A-1, A-2
and A-3). After four years, the senior classes pay the lesser of a
100-bp increase to the fixed coupon or the net weighted average
coupon (WAC) rate. Fitch expects the senior classes to be capped by
the Net WAC. Additionally, after the step-up date, the unrated
class B-3 interest allocation goes toward the senior cap carryover
amount for as long as the senior classes are outstanding. This
increases the P&I allocation for the senior classes.
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 analysis was conducted at the
state and national level to assess the effect of higher MVDs for
the subject pool as well as lower MVDs, illustrated by a gain in
home prices.
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 41.7% 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 analysis was conducted at the state and national level
to assess the effect of higher MVDs for the subject pool as well as
lower MVDs, illustrated by a gain in home prices.
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
'AAAsf' ratings.
SUMMARY OF FINANCIAL ADJUSTMENTS
International scale credit ratings for 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, EdgeMac, Mission, Consolidated Analytics, Covius,
Opus, Selene and Recovco. The third-party due diligence described
in Form 15E focused on credit, compliance and property valuation
review. Fitch considered this information in its analysis and, as a
result, Fitch made the following adjustment to its analysis: a 5%
credit at the loan level for each loan where satisfactory due
diligence was completed. This adjustment resulted in a 50bps
reduction to the 'AAAsf' expected loss.
DATA ADEQUACY
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5 designated website. The loan-level
information Fitch received was provided in the American
Securitization Forum's data layout format.
COMM 2012-CCRE4: S&P Lowers Class X-B Notes Rating to CCC (sf)
--------------------------------------------------------------
S&P Global Ratings lowered its ratings on five classes and affirmed
its rating on one class of commercial mortgage pass-through
certificates from COMM 2012-CCRE4 Mortgage Trust, a U.S. CMBS
transaction.
Rating Actions
S&P said, "The downgrades on classes A-M, B, and C primarily
reflect our revaluation of the Eastview Mall and Commons property
($120.0 million trust balance, 32.7% of the remaining trust
balance), which is the second largest loan remaining in the
transaction and largest specially serviced loan in the pool. The
loan was transferred to the special servicer in June 2022 because
the borrower was unable to refinance the loan before its maturity
date on Sept. 6, 2022.
"The downgrade of the class C certificate to 'CCC (sf)' from 'B-
(sf)' further reflects our view that the class has an elevated risk
of principal loss and liquidity interruption, given our revised
valuation for the Eastview Mall and Commons property and the bond's
subordinate position in the waterfall. Further discussion of the
Eastview Mall and Commons loan, as well as other loans of interest,
is continued below.
"We affirmed our 'AAA (sf)' rating on the class A-3 certificates as
the current, outstanding rating levels were in line with the model
indicated ratings.
"We lowered our ratings on the class X-A and X-B interest-only (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 amount on
class X-A references classes A-1, A-2, A-SB, A-3, and A-M. The
notional amount on class X-B references classes B and C."
Transaction Summary
As of the Sept. 16, 2022, trustee remittance report, the collateral
pool balance was $367.5 million, which is 33.1% of the pool balance
at issuance. The pool currently includes nine loans, down from 48
loans at issuance. Two loans ($140.1 million, 38.1%) are with the
special servicer, and seven ($227.4 million, 61.8%) are on the
master servicer's watchlist. S&P notes that all of the remaining
loans in the pool mature before year-end 2022, with the second
largest loan in the pool, the Eastview Mall and Commons loan,
already past its Sept. 6, 2022, maturity.
S&P calculated a 1.58x S&P Global Ratings' weighted average debt
service coverage (DSC) and 105.0% S&P Global Ratings' weighted
average loan-to-value (LTV) ratio using an 8.39% S&P Global
Ratings' weighted average capitalization rate for the remaining
loans. To date, the pool has incurred $102.9 million (9.3%) in
realized losses reported by the servicer. Based on its revised
valuation on Eastview Mall and Commons, eventual losses may reach
approximately 13.3% of the original pool trust balance.
Specially Serviced Loans
As of the Sept. 16, 2022, trustee remittance report, the Eastview
Mall and Commons and the Mall of Georgia Crossing loans were with
the special servicer, Rialto Capital Advisors LLC.
The Eastview Mall and Commons Loan ($120.0 million pooled trust
amount; 32.7% of the pooled trust balance)
The loan, which is comprised of a $120.0 million pari passu portion
in the trust and another $90.0 million outside of the trust,
transferred to the special servicer in June 2022 for imminent
monetary default at the borrower's request as the loan's maturity
was in September 2022. It is S&P's understanding that the borrower
and special servicer are in the process of negotiating a potential
loan forbearance, as well as a possible three-year or greater
maturity extension. Formerly, the loan had also transferred to
special servicing in June 2020 because of the COVID-19 pandemic,
but later returned to the master servicer as a corrected mortgage
in July 2020.
The loan itself is secured by the borrower's fee simple interest in
an 811,671-sq.-ft. portion of a 1.7 million-sq.-ft. superregional
mall and power center located in Victor, N.Y. Collateral for the
loan includes 725,303 sq. ft. of the mall portion (of a 1.4
million-sq.-ft. mall) and 86,368 sq. ft. of the power center (of a
341,000-sq.-ft. power center). Noncollateral anchor tenants at the
property include Dicks Sporting Goods (123,000 sq. ft., formerly
occupied by Sears), Macy's (168,900 sq. ft.), JCPenney (141,992 sq.
ft.), Home Depot (123,500 sq. ft.), Von Maur (140,000 sq. ft.), and
Target (132,400 sq. ft.). There is also an empty 88,787-sq.-ft.
noncollateral anchor space formerly occupied by Lord & Taylor,
which vacated in August 2020.
Some of the larger tenants occupying space that are part of the
collateral include Regal Cinema (76,230 sq. .ft., 9.4% of the
collateral NRA, Feb. 28, 2031, lease end), Raymour & Flanigan
Furniture (49,900 sq. ft., 6.2%, Jan. 31, 2028), Best Buy (34,966
sq. ft., 4.3%, Jan. 31, 2026), L.L. Bean (27,000 sq. ft., 3.3%,
July 31, 2025), and Staples (25,048 sq. ft., 3.1%, Oct. 31, 2023).
Rollover risk is also elevated as about 41% of the NRA at the
collateral rolls by the end of 2025.
Performance at the property has trended negatively over time, with
servicer-reported NCF falling 17.1% to $17.7 million in 2019 from
$21.4 million in 2018, then further declining 16.1% to $14.8
million in 2020 and another 6% lower to $14.0 million in 2021.
Servicer reported NCF was $3.6 million for the three months ending
March 2022, which represents a 1.45x NCF debt service coverage
ratio (DSCR), modestly above the 1.42x NCF DSCR that was reported
for 2021. Likewise, servicer-reported occupancy has also trended
negative, with reported occupancy of 90.0%, 89.9%, 82.9%, and 79.2%
and for 2018, 2019, 2020, and 2021, respectively. Servicer-reported
occupancy also fell further again to 77.4% in March 2022.
Accordingly, S&P revised its S&P Global Ratings' NCF to $13.3
million, down from $13.6 million from last review. S&P also
increased its S&P Global Ratings' capitalization rate to 10.00%
(from 8.00% at our last review in March 2021) to better incorporate
the risks associated with the property's volatile cash flow and the
uncertainty regarding the loan's eventual resolution from special
servicing. This yielded an S&P Global Ratings' value of $132.9
million for the collateral and a 158.0% S&P Global Ratings' LTV
ratio on the whole loan.
The Mall of Georgia Crossing Loan ($20.1 million pooled trust
amount; 5.5% of the pooled trust balance)
The $20.1 million loan was sent to the special servicer in August
2022 due to imminent monetary default, as the loan matures in
October 2022. It is S&P's understanding that the special servicer
and the borrower are currently negotiating a potential maturity
extension.
The loan is secured by the borrower's fee simple interest in a
317,535-sq.-ft. shopping center located in Buford, Ga. The largest
collateral tenants include Hobby Lobby (58,777 sq ft., 18.5% of the
collateral NRA, Sept. 30, 2033, lease end), TJ Maxx (50,000 sq ft.,
15.8%, Jan. 31, 2030), Best Buy (45,442 sq.ft., 14.3%, Jan. 31,
2025), Nordstrom (40,100 sq.ft., 12.6%, March 31, 2025), and
Staples (24,049 sq. ft., 7.6%, Feb. 29, 2028. There is also a
shadow anchor, Target (123,100 sq. ft.), at the shopping center
that is not a part of the loan's collateral. The property faces
elevated rollover risk in 2025 when two of the largest tenants,
Best Buy and Nordstrom (26.9% of NRA combined), roll.
Performance at the property has been generally stable over time, as
servicer-reported occupancy has remained at, or near, 100%
occupancy since the loan was initially securitized in 2012.
Servicer reported NCF increased 18.3% to $4.9 million in 2019 from
$4.2 million in 2018, then fell 11.0% to $4.4 million in 2020, and
then increased 10.0% to $4.8 million in 2021. Servicer reported NCF
of $2.5 million for year-to-date June 2022 yield a healthy NCF DSCR
of 3.38x, modestly above the 2021 reported NCF DSCR of 3.27x. S&P
said, "As such, we are maintaining our NCF assumption of $3.7
million and capitalization rate of 7.00% from last review, which
yields an S&P Global Ratings' value of $53.5 million for the
collateral and an S&P Global Ratings' LTV ratio 37.6% for the loan.
We will, however, continue to monitor the collateral's reported
performance and the resolution strategy being discussed between the
borrower and the special servicer."
Other Notable Loans
In addition to the above noted specially serviced loans, there are
also two other notable loans in the transaction.
The Prince Building loan, which is comprised of a $125.0 million
pari-passu portion in the trust and another $75.0 million outside
of the trust, is the largest loan remaining in the transaction
(34.0% of the trust balance). The loan matures Oct. 6, 2022, and,
according to the servicer, the borrower is searching for potential
refinancing prospects. The loan is secured by the borrower's fee
simple interest in The Prince Building, a 12-story office property
with ground floor retail located in the SoHo district of Manhattan.
The largest tenants at the property include Group Nine Media Inc.
(100,326 sq. ft., 28.3% of collateral NRA, Sept. 30, 2023, lease
end), ZOCDOC (73,498 sq. ft., 20.7%, March 31, 2028), Equinox
(38,668 sq. ft., 10.9%, Nov. 15, 2035), Forever 21 (20,841 sq. ft.,
5.9%, Jan. 31, 2022, lease end according to the servicer provided
rent roll), and Moncler (17,733 sq. ft., 5.0%, Dec. 31, 2022).
There is elevated rollover risk at the property given the largest
tenant at the property, Group Nine Media, rolls in 2023, in
addition to the Forever 21 and Moncler leases potentially expiring
in the near term. While servicer-reported occupancy fell to 90.6%
in 2019 from 97.0% in 2018, since then occupancy has remained flat
in the low-90%. Servicer reported NCF increased 17.5% to $14.8
million in 2019 from $12.6 million in 2018 and then fell by 28.9%
to $10.5 million in 2020. NCF, however, increased materially by
58.9% to $16.8 million in 2021 and was reported as $4.5 million for
year-to-date March 2022, which represents a NCF DSCR of over 2.00x.
S&P will continue to monitor the performance of this property, in
addition to the loan's potential refinancing.
The $34.4 million (9.4% of the trust balance) TMI Hospitality
Portfolio Loan is the third largest loan remaining in the
transaction. The loan matures on Oct. 6, 2022, and according to the
servicer, the borrower is contemplating a sale of the properties
securing the loan in order to repay the loan at its maturity date.
The loan is secured by the borrower's fee simple interest in a
portfolio of five limited service and five extended stay hotels
located in Michigan, South Dakota, Minnesota, Iowa, Texas, and
Illinois. Performance for the portfolio was negatively impact by
the pandemic, which resulted in the special servicer allowing FF&E
reserves to be used for debt service payments between June and
August 2020. Performance for the portfolio has not recovered since
2019, as servicer reported NCF of $3.4 million for the trailing
12-month period ended June 2022 is still 48.6% lower than the
reported 2019 NCF of $6.6 million, though materially higher than
the pandemic low NCF of $1.4 million reported 2020. Occupancy
likewise has not recovered to pre-pandemic levels of 72.0% reported
in 2019, though occupancy at the portfolio did increase to 62% in
the trailing 12-month period for June 2022 from 48.0% in 2020. We
will continue to monitor the performance of the portfolio and for a
potential repayment of the loan. Given the properties' performance
improvement, we maintained our sustainable NCF of $6.6 million (the
same as last review). Applying an S&P Global Ratings'
capitalization rate of 10.30% (the same as last review), S&P
derived an S&P Global Ratings value of $63.8 million on the
portfolio properties.
Ratings Lowered
COMM 2012-CCRE4 Mortgage Trust
Class A-M: to BBB+ (sf) from A+ (sf)
Class B: to B (sf) from BB (sf)
Class C: to CCC (sf) from B- (sf)
Class X-A: to BBB+ (sf) from A+ (sf)
Class X-B: to CCC (sf) from B- (sf)
Rating Affirmed
COMM 2012-CCRE4 Mortgage Trust
Class A-3: AAA (sf)
CONNECTICUT AVE 2022-R09: Moody's Gives Ba1 Rating to 25 Tranches
-----------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to 62
classes of residential mortgage-backed securities (RMBS) issued by
Connecticut Avenue Securities Trust 2022-R09, and sponsored by The
Federal National Mortgage Association (Fannie Mae). The securities
reference a pool of mortgages loans acquired by Fannie Mae, and
originated and serviced by multiple entities.
The complete rating actions are as follows:
Issuer: Connecticut Avenue Securities Trust 2022-R09
Cl. 2M-1, Definitive Rating Assigned A3 (sf)
Cl. 2M-2A, Definitive Rating Assigned Baa2 (sf)
Cl. 2M-2B, Definitive Rating Assigned Baa3 (sf)
Cl. 2M-2C, Definitive Rating Assigned Ba1 (sf)
Cl. 2M-2, Definitive Rating Assigned Baa3 (sf)
Cl. 2E-A1, Definitive Rating Assigned Baa2 (sf)
Cl. 2A-I1*, Definitive Rating Assigned Baa2 (sf)
Cl. 2E-A2, Definitive Rating Assigned Baa2 (sf)
Cl. 2A-I2*, Definitive Rating Assigned Baa2 (sf)
Cl. 2E-A3, Definitive Rating Assigned Baa2 (sf)
Cl. 2A-I3*, Definitive Rating Assigned Baa2 (sf)
Cl. 2E-A4, Definitive Rating Assigned Baa2 (sf)
Cl. 2A-I4*, Definitive Rating Assigned Baa2 (sf)
Cl. 2E-B1, Definitive Rating Assigned Baa3 (sf)
Cl. 2B-I1*, Definitive Rating Assigned Baa3 (sf)
Cl. 2E-B2, Definitive Rating Assigned Baa3 (sf)
Cl. 2B-I2*, Definitive Rating Assigned Baa3 (sf)
Cl. 2E-B3, Definitive Rating Assigned Baa3 (sf)
Cl. 2B-I3*, Definitive Rating Assigned Baa3 (sf)
Cl. 2E-B4, Definitive Rating Assigned Baa3 (sf)
Cl. 2B-I4*, Definitive Rating Assigned Baa3 (sf)
Cl. 2E-C1, Definitive Rating Assigned Ba1 (sf)
Cl. 2C-I1*, Definitive Rating Assigned Ba1 (sf)
Cl. 2E-C2, Definitive Rating Assigned Ba1 (sf)
Cl. 2C-I2*, Definitive Rating Assigned Ba1 (sf)
Cl. 2E-C3, Definitive Rating Assigned Ba1 (sf)
Cl. 2C-I3*, Definitive Rating Assigned Ba1 (sf)
Cl. 2E-C4, Definitive Rating Assigned Ba1 (sf)
Cl. 2C-I4*, Definitive Rating Assigned Ba1 (sf)
Cl. 2E-D1, Definitive Rating Assigned Baa3 (sf)
Cl. 2E-D2, Definitive Rating Assigned Baa3 (sf)
Cl. 2E-D3, Definitive Rating Assigned Baa3 (sf)
Cl. 2E-D4, Definitive Rating Assigned Baa3 (sf)
Cl. 2E-D5, Definitive Rating Assigned Baa3 (sf)
Cl. 2E-F1, Definitive Rating Assigned Ba1 (sf)
Cl. 2E-F2, Definitive Rating Assigned Ba1 (sf)
Cl. 2E-F3, Definitive Rating Assigned Ba1 (sf)
Cl. 2E-F4, Definitive Rating Assigned Ba1 (sf)
Cl. 2E-F5, Definitive Rating Assigned Ba1 (sf)
Cl. 2-X1*, Definitive Rating Assigned Baa3 (sf)
Cl. 2-X2*, Definitive Rating Assigned Baa3 (sf)
Cl. 2-X3*, Definitive Rating Assigned Baa3 (sf)
Cl. 2-X4*, Definitive Rating Assigned Baa3 (sf)
Cl. 2-Y1*, Definitive Rating Assigned Ba1 (sf)
Cl. 2-Y2*, Definitive Rating Assigned Ba1 (sf)
Cl. 2-Y3*, Definitive Rating Assigned Ba1 (sf)
Cl. 2-Y4*, Definitive Rating Assigned Ba1 (sf)
Cl. 2-J1, Definitive Rating Assigned Ba1 (sf)
Cl. 2-J2, Definitive Rating Assigned Ba1 (sf)
Cl. 2-J3, Definitive Rating Assigned Ba1 (sf)
Cl. 2-J4, Definitive Rating Assigned Ba1 (sf)
Cl. 2-K1, Definitive Rating Assigned Ba1 (sf)
Cl. 2-K2, Definitive Rating Assigned Ba1 (sf)
Cl. 2-K3, Definitive Rating Assigned Ba1 (sf)
Cl. 2-K4, Definitive Rating Assigned Ba1 (sf)
Cl. 2M-2Y, Definitive Rating Assigned Baa3 (sf)
Cl. 2M-2X, Definitive Rating Assigned Baa3 (sf)
Cl. 2B-1A, Definitive Rating Assigned Ba2 (sf)
Cl. 2B-1B, Definitive Rating Assigned B1 (sf)
Cl. 2B-1, Definitive Rating Assigned Ba3 (sf)
Cl. 2B-1Y, Definitive Rating Assigned Ba3 (sf)
Cl. 2B-1X, Definitive Rating Assigned Ba3 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
The ratings are based on the credit quality of the mortgage loans,
the structural features of the transaction, the origination quality
and the servicing arrangement, the third-party review, and the
representations and warranties framework.
Moody's expected loss for this pool in a baseline scenario-mean is
0.95%, in a baseline scenario-median is 0.75% and reaches 4.53% at
a stress level consistent with Moody's Aaa ratings.
PRINCIPAL 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 July 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
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.
COREVEST AMERICAN 2022-P2: Fitch Assigns 'B-sf' Rating on G Certs
-----------------------------------------------------------------
Fitch Ratings has assigned the following ratings and Rating
Outlooks to CoreVest American Finance 2022-P2 Trust Mortgage
Pass-Through Certificates:
Debt Rating Prior
---- ------ -----
CAF 2022-P2
A-1 LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
B LT Asf New Rating A(EXP)sf
C LT A-sf New Rating A-(EXP)sf
D LT BBBsf New Rating BBB(EXP)sf
E LT BBB-sf New Rating BBB-(EXP)sf
F LT BB-sf New Rating BB-(EXP)sf
G LT B-sf New Rating B-(EXP)sf
H LT NRsf New Rating NR(EXP)sf
I LT NRsf New Rating NR(EXP)sf
X LT A-sf New Rating A-(EXP)sf
- $100,000,000 class A1 'AAAsf'; Outlook Stable;
- $76,199,000 class A2 'AAAsf'; Outlook Stable;
- $25,710,000 class B 'Asf'; Outlook Stable;
- $209,793,000a class X 'A-sf'; Outlook Stable;
- $7,884,000 class C 'A-sf'; Outlook Stable;
- $12,684,000 class D 'BBBsf'; Outlook Stable;
- $9,941,000 class E 'BBB-sf'; Outlook Stable;
- $11,655,000 class F 'BB-sf'; Outlook Stable;
- $5,142,000 class G 'B-sf'; Outlook Stable.
Fitch did not rate the following classes:
- $3,085,000 class H;
- $21,940,080b class I.
(a) Notional amount and interest-only.
(b) Horizontal credit risk retention interest.
TRANSACTION SUMMARY
The certificates represent the beneficial ownership interest in the
trust, the primary assets of which are 60 loans secured by 1,191
commercial properties (residential income-producing rental
properties, multifamily properties and mixed-use properties) having
an aggregate principal balance of $274,240,081 as of the cutoff
date. The loans were contributed to the trust by CoreVest American
Finance Lender LLC (CAFL).
Fitch reviewed a comprehensive sample of the transaction's
collateral, including cash flow analysis on 100% of the pool.
Details of Fitch's analysis are highlighted in the presale report.
KEY RATING DRIVERS
Fitch Leverage: Fitch's debt service coverage ratio (DSCR),
loan-to-value ratio (LTV) and Fitch net cash flow (NCF) debt yield
of 0.95x, 117.8% and 7.96%, respectively, indicate leverage in-line
relative to CAFL transactions issued within the past year.
Fitch-stressed DSCR of 0.95x is higher than CAFL 2022-1 (0.89x) and
in-line compared with CAF 2021-3 (0.96x) and CAF 2021-2 (0.98x).
Fitch-stressed LTV of 117.8% is lower compared with CAFL 2022-1
(131.1%), CAF 2021-3 (130.7%) and CAF 2021-2 (127.2%).
Additionally, 33 loans totaling 70.3% of the pool have a
Fitch-stressed DSCR below 1.00x, which is lower compared with CAFL
2022-1 (78.9%) and higher compared with CAFL 2021-3 (68.6%) and
CAFL 2021-2 (52.7%).
Pool Concentration: The pool consists of 60 loans secured by 1,191
properties. On average, each loan has 20 properties. The 10 largest
loans represent 53.6% of the pool, which is more concentrated than
CAF 2022-1, but less concentrated than CAFL 2021-3, which had
respective top 10 loan concentrations of 44.7% and 54.2%.
This transaction has a loan concentration index (LCI) of 402 and a
sponsor concentration index (SCI) of 493. The CAF 2022-1
transaction had an LCI and SCI of 303 and 531, respectively, while
CAFL 2021-3 had an LCI and SCI of 424 and 519, respectively.
Additionally, the pool's largest sponsor contributed 10.2% of the
pool, which is above 9.7% in CAF 2022-1.
Below Average Amortization: Scheduled amortization of 5.4% is
higher than the amounts scheduled for CAF 2022-1 of 4.4%, but lower
than the amounts scheduled for CAFL 2021-3 and CAFL 2021-2 of 6.1%
and 10.6%, respectively. Contributing factors include the pool's
concentration of interest-only (IO) loans, totaling 59.3% of the
cutoff, which is above both the CAF 2022-1 and CAFL
2021-concentrations of 51.7% and 40.6%, respectively.
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 in one variable, Fitch
NCF:
Original Rating: 'AAAsf' / 'Asf' / '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' / 'BB+sf' / 'B+sf' / 'Bsf' /
'CCCsf' / 'CCCsf';
30% NCF Decline: 'BBB+sf' / 'BB+sf' / 'BB-sf' / 'CCCsf' / 'CCCsf' /
'CCCsf' / 'CCCsf'.
Fitch has revised its global economic outlook forecasts as a result
of the war in Ukraine and related economic sanctions. Downside
risks have increased and, therefore, Fitch has published an
assessment of the potential rating and asset performance impact of
a plausible, albeit worse than expected, adverse stagflation
scenario on Fitch's major structured finance and covered bond
subsectors (What a Stagflation Scenario Would Mean for Global
Structured Finance).
Fitch expects the North American CMBS sector in the assumed adverse
scenario to experience virtually no impact on ratings performance,
indicating very few rating or Outlook changes. Fitch expects the
asset performance impact of the adverse case scenario to be more
modest than the most stressful scenario shown above, which assumes
a further 30% decline from Fitch's NCF at issuance.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Similarly, 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 to the
same one variable, Fitch NCF:
Original Rating: 'AAAsf' / 'Asf' / 'A-sf' / 'BBBsf' / 'BBB-sf' /
'BB-sf' / 'B-sf';
20% NCF Increase: 'AAAsf' / 'AAAsf' / 'AA+sf' / 'A+sf' / 'A-sf' /
'BBB-sf' / 'BBB-sf'.
ESG CONSIDERATIONS
CoreVest American Finance 2022-P2 Trust has an ESG Relevance Score
of '4' for Data Transparency & Privacy due to limited transaction
data and periodic reporting, which 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.
COREVEST AMERICAN 2022-P2: Fitch Gives 'B-(EXP)' Rating on G Certs
------------------------------------------------------------------
Fitch Ratings has issued a presale report on CoreVest American
Finance 2022-P2 Trust Mortgage Pass-Through Certificates.
Debt Rating
---- ------
CAF 2022-2
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AAA(EXP)sf Expected Rating
B LT A(EXP)sf Expected Rating
C LT A-(EXP)sf Expected Rating
D LT BBB(EXP)sf Expected Rating
E LT BBB-(EXP)sf Expected Rating
F LT BB-(EXP)sf Expected Rating
G LT B-(EXP)sf Expected Rating
H LT NR(EXP)sf Expected Rating
I LT NR(EXP)sf Expected Rating
X LT A-(EXP)sf Expected Rating
Fitch expects to rate the transaction and assign Rating Outlooks as
follows:
- $100,000,000 class A1 'AAAsf'; Outlook Stable;
- $76,199,000 class A2 'AAAsf'; Outlook Stable;
- $25,710,000 class B 'Asf'; Outlook Stable;
- $209,793,000a class X 'A-sf'; Outlook Stable;
- $7,884,000 class C 'A-sf'; Outlook Stable;
- $12,684,000 class D 'BBBsf'; Outlook Stable;
- $9,941,000 class E 'BBB-sf'; Outlook Stable;
- $11,655,000 class F 'BB-sf'; Outlook Stable;
- $5,142,000 class G 'B-sf'; Outlook Stable.
The following classes are not expected to be rated by Fitch:
- $3,085,000 class H;
- $21,940,080b class I.
(a) Notional amount and interest-only.
(b) Horizontal credit risk retention interest.
TRANSACTION SUMMARY
The certificates represent the beneficial ownership interest in the
trust, the primary assets of which are 60 loans secured by 1,191
commercial properties (residential income-producing rental
properties, multifamily properties and mixed-use properties) having
an aggregate principal balance of $274,240,081 as of the cutoff
date. The loans were contributed to the trust by CoreVest American
Finance Lender LLC (CAFL).
Fitch reviewed a comprehensive sample of the transaction's
collateral, including cash flow analysis on 100% of the pool.
Details of Fitch's analysis are highlighted in the presale report.
KEY RATING DRIVERS
Fitch Leverage: Fitch Ratings' debt service coverage ratio (DSCR),
loan-to-value ratio (LTV) and Fitch net cash flow (NCF) debt yield
of 0.95x, 117.8% and 7.96%, respectively, indicate leverage in-line
relative to CAFL transactions issued within the past year.
Fitch-stressed DSCR of 0.95x is higher than CAFL 2022-1 (0.89x) and
in-line compared to CAF 2021-3 (0.96x) and CAF 2021-2 (0.98x).
Fitch-stressed LTV of 117.8% is lower compared with CAFL 2022-1
(131.1%), CAF 2021-3 (130.7%) and CAF 2021-2 (127.2%).
Additionally, 33 loans totaling 70.3% of the pool have a
Fitch-stressed DSCR below 1.00x, which is lower compared with CAFL
2022-1 (78.9%) and higher compared to CAFL 2021-3 (68.6%) and CAFL
2021-2 (52.7%).
Pool Concentration: The pool consists of 60 loans secured by 1,191
properties. On average, each loan has 20 properties. The 10 largest
loans represent 53.6% of the pool, which is more concentrated than
CAF 2022-1 but less concentrated than CAFL 2021-3, which had
respective top 10 loan concentrations of 44.7% and 54.2%.
This transaction has a loan concentration index (LCI) of 402 and a
sponsor concentration index (SCI) of 493. The CAF 2022-1
transaction had an LCI and SCI of 303 and 531, respectively, while
CAFL 2021-3 had an LCI and SCI of 424 and 519, respectively.
Additionally, the pool's largest sponsor contributed 10.2% of the
pool, which is above 9.7% in CAF 2022-1.
Below Average Amortization: Scheduled amortization of 5.4% is
higher than the amounts scheduled for CAF 2022-1 of 4.4%, but lower
than the amounts scheduled for CAFL 2021-3 and CAFL 2021-2 of 6.1%
and 10.6%, respectively. Contributing factors include the pool's
concentration of interest-only (IO) loans, totaling 59.3% of the
cutoff, which is above both the CAF 2022-1 and CAFL
2021-concentrations of 51.7% and 40.6%, respectively.
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 in one
variable, Fitch NCF:
Original Rating: 'AAAsf' / 'Asf' / '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' / 'BB+sf' / 'B+sf' / 'Bsf' /
'CCCsf' / 'CCCsf';
30% NCF Decline: 'BBB+sf' / 'BB+sf' / 'BB-sf' / 'CCCsf' / 'CCCsf' /
'CCCsf' / 'CCCsf'.
Fitch has revised its global economic outlook forecasts as a result
of the war in Ukraine and related economic sanctions. Downside
risks have increased and, therefore, Fitch has published an
assessment of the potential rating and asset performance impact of
a plausible, albeit worse than expected, adverse stagflation
scenario on Fitch's major structured finance and covered bond
subsectors (What a Stagflation Scenario Would Mean for Global
Structured Finance).
Fitch expects the North American CMBS sector in the assumed adverse
scenario to experience virtually no impact on ratings performance,
indicating very few rating or Outlook changes. Fitch expects the
asset performance impact of the adverse case scenario to be more
modest than the most stressful scenario, which assumes a further
30% decline from Fitch's NCF at issuance.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Similarly, 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 to the
same one variable, Fitch NCF:
Original Rating: 'AAAsf' / 'Asf' / 'A-sf' / 'BBBsf' / 'BBB-sf' /
'BB-sf' / 'B-sf';
20% NCF Increase: 'AAAsf' / 'AAAsf' / 'AA+sf' / 'A+sf' / 'A-sf' /
'BBB-sf' / 'BBB-sf'.
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
CoreVest American Finance 2022-P2 Trust has an ESG Relevance Score
of '4' for Data Transparency & Privacy due to limited transaction
data and periodic reporting, which 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.
CSAIL 2018-C14: Fitch Affirms 'CCCsf' Rating on 2 Tranches
----------------------------------------------------------
Fitch Ratings has affirmed 14 classes of CSAIL 2018-C14 Commercial
Mortgage Trust commercial mortgage pass-through certificates.
Debt Rating Prior
---- ------ -----
CSAIL 2018-C14
A-2 12596GAX7 LT AAAsf Affirmed AAAsf
A-3 12596GAY5 LT AAAsf Affirmed AAAsf
A-4 12596GAZ2 LT AAAsf Affirmed AAAsf
A-S 12596GBD0 LT AAAsf Affirmed AAAsf
A-SB 12596GBA6 LT AAAsf Affirmed AAAsf
B 12596GBE8 LT AA-sf Affirmed AA-sf
C 12596GBF5 LT A-sf Affirmed A-sf
D 12596GAG4 LT BBBsf Affirmed BBBsf
E 12596GAJ8 LT BBB-sf Affirmed BBB-sf
F 12596GAL3 LT B-sf Affirmed B-sf
G 12596GAN9 LT CCCsf Affirmed CCCsf
X-A 12596GBB4 LT AAAsf Affirmed AAAsf
X-F 12596GAA7 LT B-sf Affirmed B-sf
X-G 12596GAC3 LT CCCsf Affirmed CCCsf
KEY RATING DRIVERS
Stable Performance: Overall pool performance has remained
relatively stable since Fitch's prior rating action. Fitch's
current ratings reflect a base case loss of 4.7%, which is a slight
decline from Fitch's prior review, but remains above issuance
levels due to performance declines for the larger Fitch Loans of
Concern (FLOC's) and loans in special servicing.
Fitch has identified five loans (17.3% of the pool) as FLOC's,
including three loans in special servicing. The Rating Outlooks for
classes F and X-F were placed on Negative at the prior rating
action primarily due to coronavirus stresses applied to six hotel
loans, all of which have recovered or are stabilizing from the
pandemic lows. The Negative Outlooks has been maintained for these
classes primarily due to concerns with the larger FLOCs,
particularly Continental Towers (8.7% of the pool), and the
specially serviced loans.
Fitch Loans of Concern: The largest FLOC and largest contributor to
loss expectations is the Continental Tower loan (8.7% of the pool),
which is secured by three 12-story office buildings totaling
910,866 sf located in Rolling Meadows, IL. Occupancy has remained
low, reporting at 64% as of March 2022 and 62% as of July 2022,
down from 74% at YE 2020, 86% at YE 2019, and 93% at issuance. The
current largest tenants include Verizon Wireless (17.5% of the NRA;
lease expiring April 2028), Panasonic (5.2%; December 2022), and
Advocate Health Partners (5.2%; December 2025).
The loan had total reserves of $4.82 million as of August 2022,
including $4.67 million in tenant reserves. The servicer reported
NOI DSCR was 1.05x as of 1Q 2022, down from 1.35x as of YE 2021 and
1.64x at YE 2019. The YE 2021 NOI is 50% below the issuer's
underwritten NOI at issuance. The full-term, interest-only loan has
remained current.
Per media reports, the property has undergone significant
renovation between 2020 and 2021, which is part of a larger capital
improvement plan since 2015. At issuance, the sponsor (Rubenstein
Properties Fund III, L.P.) contributed $53.6 million of cash equity
to facilitate the acquisition, which represents 44.1% of the
purchase price and 38.8% of the total transaction cost.
Fitch's base case loss of 17% reflects a 9.5% cap rate and a 5%
stress off the YE 2021 NOI. Fitch's analysis gives credit for the
loan remaining current and sponsor continued investment in the
property.
The second largest FLOC is the Holiday Inn FiDi (3.70%), which is
secured by a 492-key full-service Holiday Inn Express in the
financial district of New York City. The loan transferred to
special servicing in May 2020 at the borrower's request due to
imminent monetary default. Despite reopening in April 2021, the
hotel remained 90+ days delinquent. Foreclosure was filed in March
2022 and the lender is awaiting the court's ruling for summary
judgement.
Room Revenue increased significantly in YE 2021 compared with YE
2020, but NOI DSCR still remains low at -0.15x as of YE 2021;
however, this was an improvement from -0.75x at YE 2020. The TTM
June 2022 occupancy, ADR, and RevPAR are 69.8%, $144, and $100,
respectively, compared with 65.7%, $166, and $109 for the comp set.
The hotel's TTM June 2022 penetration ratios for occupancy, ADR and
RevPAR were 106%, 86.6%, and 91.9%, respectively. Fitch's base case
loss expectation of 5% reflects a stress to the most recent
appraisal and implies a stressed value per key of $174,539.
The next largest FLOC is the specially serviced Utah Hotel
Portfolio loan (2.1%), which is secured by three limited-service
hotels and one full-service hotel totaling 251-keys located in
Utah. The loan transferred to special servicing in July 2020 due to
payment default as a result of COVID-19 performance declines. The
special servicer has been pursuing foreclosure strategy since
December 2021.
Portfolio performance has continued to slide with occupancy
reported at 34.4% as of YTD March 2022 and an NOI DSCR of 0.23x.
Fitch's base case loss of 30% reflects a stressed value of
approximately $40,600 per room.
Increasing Credit Enhancement: As of the August 2022 distribution
date, the pool's aggregate principal balance has been paid down by
11.4% to $684 million from $771.6 million. The accelerated paydown
is attributable to the Prudential - Digital Realty Portfolio loan
(9.1% of the original pool balance) prepaying with yield
maintenance and the disposition of Country Inn & Suites
Jacksonville loan from special servicing with zero loss. Three
loans (2.7%) have fully defeased. There are 17 loans (46.2% of the
pool) that are full-term, interest-only (IO); 15 loans (41.1%) that
are partial IO; and 10 loans (12.6%) that are currently amortizing.
Interest shortfalls of $280,515 and $14,771 are currently affecting
the Non-Rated and VRR classes, respectively.
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
the classes rated 'AAAsf or 'AA-sf' are not likely due to the high
CE and relatively stable performance of the pool, but may occur
should interest shortfalls occur.
Downgrades to the classes rated 'A-sf' may occur if a high
proportion of the pool defaults and expected losses increase
significantly.
Downgrades to the classes rated 'BBBsf' and 'BBB-sf' could occur if
overall pool losses increase and/or one or more large loans have an
outsized loss, which would erode credit enhancement.
Downgrades to classes rated 'B-sf' and 'CCCsf' would occur should
loss expectations or certainty of loss increase for the larger
FLOCs and/or specially serviced loans, and/or a further
deterioration in performance. The Negative Outlooks may be revised
back to Stable if performance and recovery prospects for the FLOCs
improve, and there is sufficient CE.
Fitch has identified both a baseline and a worse-than-expected,
adverse stagflation scenario based on fallout from the
Russia-Ukraine war whereby growth is sharply lower amid higher
inflation and interest rates; even if the adverse scenario should
play out, Fitch expects virtually no impact on ratings performance,
indicating very few rating or Outlook changes. However, for some
transactions with concentrations in underperforming retail
exposure, the ratings impact may be mild to modest, indicating some
changes on sub-investment-grade notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Upgrades would occur with stable to improved asset performance,
particularly on the FLOCs, coupled with paydown and/or defeasance.
Upgrades of the 'AA-sf' and 'A-sf' category would likely occur with
significant improvement in credit enhancement and/or defeasance;
however, adverse selection and increased concentrations or the
underperformance of particular loan(s) could cause this trend to
reverse.
Upgrades to the 'BBBsf' and 'BBB-sf' category are considered
unlikely and 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. The 'B-sf' and 'CCCsf' rated classes are
unlikely to be upgraded absent significant performance improvement
and substantially higher recoveries than expected on the FLOCs.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
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.
CSMC TRUST 2022-RPL4: Fitch Assigns 'Bsf' Rating on Class B-2 Notes
-------------------------------------------------------------------
Fitch Ratings has assigned final ratings to the residential
mortgage-backed notes issued by CSMC 2022-RPL4 Trust (CSMC
2022-RPL4).
Debt Rating Prior
---- ------ -----
CSMC 2022-RPL4
A-1 LT AAAsf New Rating AAA(EXP)sf
M-1 LT AAsf New Rating AA(EXP)sf
M-2 LT Asf New Rating A(EXP)sf
M-3 LT BBBsf New Rating BBB(EXP)sf
B-1 LT BBsf New Rating BB(EXP)sf
B-2 LT Bsf New Rating B(EXP)sf
B-3 LT NRsf New Rating NR(EXP)sf
B-4 LT NRsf New Rating NR(EXP)sf
B-5 LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
The notes are supported by one collateral group that consists of
2,786 seasoned performing loans and reperforming loans (RPLs) with
a total balance of approximately $448 million, including $40
million in deferred balances.
Distributions of P&I and loss allocations are based on a
traditional senior subordinate, sequential structure. The
sequential pay structure locks out principal to the subordinated
notes until the most senior notes outstanding are paid in full. The
servicers will not be advancing delinquent monthly payments of
P&I.
KEY RATING DRIVERS
RPL Credit Quality (Negative): The collateral consists of 2,786
seasoned performing and RPLs, totaling $448 million, and seasoned
approximately 190 months in aggregate (as calculated as the
difference between the origination date and the cut-off date). The
pool is 80.9% current and 19.1% DQ (as determined by Fitch).
Over the last two years, 38.4% of loans have been clean current.
Additionally, 78.2% of loans have a prior modification. The
borrowers have a weak credit profile (630 FICO and 45%
debt-to-income [DTI]) and low leverage (62% sustainable
loan-to-value [sLTV]). The pool consists of 94.6% of loans where
the borrower maintains a primary residence, while 5.4% are
investment properties or second home.
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 (vs. 11%
on a national level as of August 2022, up 1.8% since last
quarter).
Underlying fundamentals are not keeping pace with the growth in
prices, resulting from a supply/demand imbalance driven by low
inventory, favorable 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 19.8% yoy nationally as
of May 2022.
Sequential Pay Structure (Positive): The transaction's cash flow is
based on a sequential pay structure whereby the subordinate classes
do not receive principal until the senior classes are repaid in
full. Losses are allocated in reverse sequential order.
Furthermore, the provision to reallocate principal to pay interest
on the 'AAAsf' and 'AAsf' rated notes prior to other principal
distributions is highly supportive of timely interest payments to
that class in the absence of servicer advancing.
No Servicer P&I Advances (Mixed): The deal is structured to zero
months of servicer advances for delinquent principal and interest.
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. The downside to this is the additional stress
on the structure side, as there is limited liquidity in the event
of large and extended delinquencies.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Fitch's incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analysis was conducted at the
state and national level to assess the effect of higher MVDs for
the subject pool.
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 42.3% 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.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
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'.
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.
CSMC TRUST 2022-RPL4: Fitch Gives 'B(EXP)' Rating on Cl. B-2 Debt
-----------------------------------------------------------------
Fitch Ratings has assigned expected ratings to the residential
mortgage-backed notes issued by CSMC 2022-RPL4 Trust (CSMC
2022-RPL4).
Debt Rating
---- ------
CSMC 2022-RPL4
A-1 LT AAA(EXP)sf Expected Rating
M-1 LT AA(EXP)sf Expected Rating
M-2 LT A(EXP)sf Expected Rating
M-3 LT BBB(EXP)sf Expected Rating
B-1 LT BB(EXP)sf Expected Rating
B-2 LT B(EXP)sf Expected Rating
B-3 LT NR(EXP)sf Expected Rating
B-4 LT NR(EXP)sf Expected Rating
B-5 LT NR(EXP)sf Expected Rating
AIOS LT NR(EXP)sf Expected Rating
PT LT NR(EXP)sf Expected Rating
SA LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
The notes are supported by one collateral group that consists of
2,786 seasoned performing loans (SPLs) and reperforming loans
(RPLs) with a total balance of approximately $448 million,
including $40 million in deferred balances.
Distributions of principal and interest (P&I) and loss allocations
are based on a traditional senior subordinate, sequential
structure. The sequential pay structure locks out principal to the
subordinated notes until the most senior notes outstanding are paid
in full. The servicers will not be advancing delinquent monthly
payments of P&I.
KEY RATING DRIVERS
RPL Credit Quality (Negative): The collateral consists of 2,786
seasoned performing and reperforming loans, totaling $448 million,
and seasoned approximately 190 months in aggregate (as calculated
as the difference between the origination date and the cut-off
date). The pool is 80.9% current and 19.1% DQ (as determined by
Fitch). Over the last two years, 38.4% of loans have been clean
current. Additionally, 78.2% of loans have a prior modification.
The borrowers have a weak credit profile (630 FICO and 45% DTI) and
low leverage (62% sustainable LTV [sLTV]). The pool consists of
94.6% of loans where the borrower maintains a primary residence,
while 5.4% are investment properties or second home.
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 (vs. 11%
on a national level as of August 2022, up 1.8% since last quarter).
Underlying fundamentals are not keeping pace with the growth in
prices, resulting from a supply/demand imbalance driven by low
inventory, favorable 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 19.8% yoy nationally as
of May 2022.
Sequential Pay Structure (Positive): The transaction's cash flow is
based on a sequential pay structure whereby the subordinate classes
do not receive principal until the senior classes are repaid in
full. Losses are allocated in reverse sequential order.
Furthermore, the provision to reallocate principal to pay interest
on the 'AAAsf' and 'AAsf' rated notes prior to other principal
distributions is highly supportive of timely interest payments to
that class in the absence of servicer advancing.
No Servicer P&I Advances (Mixed): The deal is structured to 0
months of servicer advances for delinquent principal and interest.
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. The downside to this is the additional stress
on the structure side, as there is limited liquidity in the event
of large and extended delinquencies.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Fitch's incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analysis was conducted at the
state and national level to assess the effect of higher MVDs for
the subject pool.
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 42.3% 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.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Fitch's incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper MVDs than assumed at the MSA level.
Sensitivity analysis was conducted at the state and national level
to assess the effect of lower MVDs.
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'.
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 and Opus Capital Markets Consultants LLC. The
third-party due diligence described in Form 15E focused on a
regulatory compliance review. A data integrity check and an updated
tax and title search was also performed. Fitch considered this
information in its analysis and, as a result, Fitch made the
following adjustment(s) to its analysis:
Loans with a missing or indeterminate HUD-1 were given a 5pt loss
severity penalty or a default 100% loss severity depending on
state
Loans that were missing modification agreements received a three
month foreclosure timeline extension
Loans that were found to be out of compliance with state or federal
high cost regulations were given a 200% loss severity.
In total, these adjustments added approximately 50bps to the AAAsf
loss expectation.
DATA ADEQUACY
Fitch utilized data files that were made available by the issuer on
its SEC Rule 17g-5 designated website. Fitch received loan-level
information based on the American Securitization Forum's (ASF) data
layout format, and the data are considered to be comprehensive. The
ASF data tape layout was established with input from various
industry participants, including rating agencies, issuers,
originators, investors and others, to produce an industry standard
for the pool-level data in support of the U.S. RMBS securitization
market. The data contained in the ASF 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.
ELMWOOD CLO 19: S&P Assigns B- (sf) Rating on $8MM Class F Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Elmwood CLO 19 Ltd.'s
fixed- and 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 Elmwood Asset Management LLC.
The ratings reflect S&P's view of:
-- The collateral pool's diversification;
-- 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
Elmwood CLO 19 Ltd. /Elmwood CLO 19 LLC
Class A, $248.00 million: AAA (sf)
Class B-1, $41.00 million: AA (sf)
Class B-2, $15.00 million: AA (sf)
Class C (deferrable), $20.00 million: A (sf)
Class D (deferrable), $22.20 million: BBB- (sf)
Class E (deferrable), $13.00 million: BB- (sf)
Class F (deferrable), $8.00 million: B- (sf)
Subordinated notes, $33.00 million: Not rated
FORTRESS CREDIT XV: Moody's Gives (P)Ba3 Rating to $12.8MM E Notes
------------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to three
classes of notes to be issued and one class of loans to be incurred
by Fortress Credit BSL XV Limited (the "Issuer" or "Fortress Credit
BSL XV").
US$40,000,000 Class A-L Senior Secured Floating Rate Loans maturing
2033, Assigned (P)Aaa (sf)
US$200,000,000 Class A-T Senior Secured Floating Rate Notes due
2033, Assigned (P)Aaa (sf)
US$8,000,000 Class A-F Senior Secured Fixed Rate Notes due 2033,
Assigned (P)Aaa (sf)
US$12,800,000 Class E Deferrable Mezzanine Floating Rate Notes due
2033, Assigned (P)Ba3 (sf)
The notes and loans listed are referred to herein, collectively, as
the "Rated Debt."
On the closing date, the Class A-T Notes and Class A-L Loans have a
principal balance of $200,000,000 and $40,000,000, respectively. At
any time, the Class A-L Loans may be converted in whole or in part
to Class A-T Notes, thereby decreasing the principal balance of the
Class A-L Loans and increasing, by the corresponding amount, the
principal balance of the Class A-T Notes. The aggregate principal
balance of the Class A-L Loans and Class A-T Notes will not exceed
$240,000,000, less the amount of any principal repayments. Neither
Class A-T Notes nor any other Notes may be converted into Class A-L
Loans.
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.
Fortress Credit BSL XV is a managed cash flow CLO. The issued debt
will be collateralized primarily by broadly syndicated senior
secured corporate loans. At least 92.5% of the portfolio must
consist of senior secured loans, cash, and eligible investments,
and up to 7.5% of the portfolio may consist of second lien loans,
first lien last out loans, senior unsecured loans, senior secured
bonds and senior secured notes, provided that no more than 5.0% of
the portfolio may consist of senior secured bonds and senior
secured notes. Moody's expect the portfolio to be fully ramped as
of the closing date.
FC BSL CLO Manager 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 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 Debt, the Issuer will issue four 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 debt 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: 55
Weighted Average Rating Factor (WARF): 2920
Weighted Average Spread (WAS): SOFR + 4.00%
Weighted Average Coupon (WAC): 7.00%
Weighted Average Recovery Rate (WARR): 47.00%
Weighted Average Life (WAL): 6.21 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.
FREDDIE MAC 2022-DNA7: S&P Assigns BB-(sf) Rating on Cl. M-2 Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to Freddie Mac STACR REMIC
Trust 2022-DNA7's notes.
The note issuance is an RMBS securitization backed by residential
mortgage loans, deeds of trust, or similar security instruments
encumbering mortgaged properties acquired by Freddie Mac.
S&P said, "Since we assigned preliminary ratings and published our
presale report on Sept. 22, 2022, the sponsor (Freddie Mac)
decreased the size of the class M-2 offered notes and increased the
size of the corresponding retained H reference tranches by the same
amount. Related exchangeables balances also changed accordingly.
Credit support levels were not impacted by the resizing, and
therefore we assigned final ratings that are unchanged from the
preliminary ratings."
The ratings reflect S&P's view of:
-- The credit enhancement provided by the subordinated reference
tranches, as well as the associated structural deal mechanics;
-- The REMIC structure that reduces the counterparty exposure to
Freddie Mac for periodic principal and interest payments, but, at
the same time, pledges the support of Freddie Mac (a highly rated
counterparty) to cover shortfalls, if any, on interest payments and
to 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, in our view, enhances the notes' strength;
-- The enhanced credit risk management and quality control
processes Freddie Mac uses in conjunction with the underlying R&W
framework; and
-- The potential impact current and near-term macroeconomic
conditions may have on the performance of the mortgage borrowers in
the pool. S&P said, "On April 17, 2020, we updated our mortgage
outlook and corresponding archetypal foreclosure frequency levels
to account for the potential impact the COVID-19 pandemic may have
on the overall credit quality of collateralized pools. While
COVID-19 pandemic-related performance concerns have waned, given
our current outlook for the U.S. economy considering the impact of
the Russia-Ukraine military conflict, supply-chain disruptions, and
rising inflation and interest rates, we continue to maintain our
updated 'B' foreclosure frequency for the archetypal pool at
3.25%."
Ratings Assigned
Freddie Mac STACR REMIC Trust 2022-DNA7
Class A-H(i), $19,040,346,431: Not rated
Class M-1A, $237,000,000: BBB+ (sf)
Class M-1AH(i), $12,873,312: Not rated
Class M-1B, $180,000,000: BBB- (sf)
Class M-1BH(i), $9,903,717: Not rated
Class M-2, $100,000,000: BB- (sf)
Class M-2A, $50,000,000: BB+ (sf)
Class M-2AH(i), $54,946,791: Not rated
Class M-2B, $50,000,000: BB- (sf)
Class M-2BH(i), $54,946,791: Not rated
Class M-2R, $100,000,000: BB- (sf)
Class M-2S, $100,000,000: BB- (sf)
Class M-2T, $100,000,000: BB- (sf)
Class M-2U, $100,000,000: BB- (sf)
Class M-2I, $100,000,000: BB- (sf)
Class M-2AR, $50,000,000: BB+ (sf)
Class M-2AS, $50,000,000: BB+ (sf)
Class M-2AT, $50,000,000: BB+ (sf)
Class M-2AU, $50,000,000: BB+ (sf)
Class M-2AI, $50,000,000: BB+ (sf)
Class M-2BR, $50,000,000: BB- (sf)
Class M-2BS, $50,000,000: BB- (sf)
Class M-2BT, $50,000,000: BB- (sf)
Class M-2BU, $50,000,000: BB- (sf)
Class M-2BI, $50,000,000: BB- (sf)
Class M-2RB, $50,000,000: BB- (sf)
Class M-2SB, $50,000,000: BB- (sf)
Class M-2TB, $50,000,000: BB- (sf)
Class M-2UB, $50,000,000: BB- (sf)
Class B-1H(i), $149,923,989: Not rated
Class B-2H(i), $99,949,325: Not rated
Class B-3H(i), $49,974,663: Not rated
(i)Reference tranche only and will not have corresponding notes.
Freddie Mac retains the risk of these tranches.
GS MORTGAGE 2012-GC6: Fitch Hikes Class F Debt Rating to 'BBsf'
---------------------------------------------------------------
Fitch Ratings has upgraded one class of GS Mortgage Securities
Trust 2012-GC6. Fitch has also assigned a Stable Rating Outlook to
class F.
Debt Rating Prior
---- ------ -----
GSMS 2012-GC6
F 36192BAQ0 LT BBsf Upgrade CCCsf
KEY RATING DRIVERS
Improved Credit Enhancement; One Remaining Specially Serviced
Asset: The recovery expectations on the remaining rated class have
improved since the last rating action. The class' recovery is
dependent on the ultimate disposition of the LHG Hotel Portfolio.
The loan is secured by a portfolio of 12 limited service hotels
built between 1993 and 1999 and renovated between 2002 and 2011.
The portfolio totals 852 rooms and is located across six states,
OH, CA, TX, MN, MI, and CO, primarily in secondary markets.
All the properties are a franchise of Marriott Hotels except for
property #12 which functions under the flagship of Radisson hotels.
The loan transferred on Oct. 22, 2021 due to imminent default. The
portfolio was negatively impacted by the coronavirus pandemic and
has not rebounded to pre-pandemic levels. As of TTM June 2021 DSCR
remained below 1.0x. The loan did not repay at its December 2021
maturity.
Class F currently requires a recovery of approximately $10,700 per
room of the collateral to pay in full. The upgrade reflects the
expectation of recovery of class F.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Downgrades are unlikely as recoveries on the remaining asset are
likely given the leverage level.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Further upgrades were not considered as recovery is dependent on a
defaulted specially serviced asset.
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.
GS MORTGAGE 2022-PJ6: Moody's Assigns B3 Rating to Cl. B-5 Debt
---------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to 43
classes of residential mortgage-backed securities (RMBS) issued by
GS Mortgage-Backed Securities Trust 2022-PJ6, and sponsored by
Goldman Sachs Mortgage Company (GSMC).
The securities are backed by a pool of prime jumbo (99.8% by
balance) and GSE-eligible (0.2% by balance) residential mortgages
acquired by GSMC (98.7% by balance), MTGLQ Investors, L.P. (MTGLQ)
(0.7% by balance), and MCLP Asset Company, Inc. (MCLP) (0.6% by
balance), the mortgage loan sellers, from certain originators or
the aggregator, MAXEX Clearing LLC and serviced by NewRez LLC d/b/a
Shellpoint Mortgage Servicing and United Wholesale Mortgage, LLC.
The complete rating actions are as follows:
Issuer: GS Mortgage-Backed Securities Trust 2022-PJ6
Cl. A-1, Definitive Rating Assigned Aaa (sf)
Cl. A-1-X*, Definitive Rating Assigned Aa1 (sf)
Cl. A-2, Definitive Rating Assigned Aaa (sf)
Cl. A-3, Definitive Rating Assigned Aaa (sf)
Cl. A-3-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-4, Definitive Rating Assigned Aaa (sf)
Cl. A-4A, Definitive Rating Assigned Aaa (sf)
Cl. A-5, Definitive Rating Assigned Aaa (sf)
Cl. A-5-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-6, 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-9-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-10, Definitive Rating Assigned Aaa (sf)
Cl. A-11, Definitive Rating Assigned Aaa (sf)
Cl. A-11-X*, 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-15-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-16, Definitive Rating Assigned Aaa (sf)
Cl. A-17, Definitive Rating Assigned Aaa (sf)
Cl. A-17-X*, 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-21-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-22, Definitive Rating Assigned Aaa (sf)
Cl. A-23, Definitive Rating Assigned Aa1 (sf)
Cl. A-23-X*, Definitive Rating Assigned Aa1 (sf)
Cl. A-24, Definitive Rating Assigned Aa1 (sf)
Cl. A-X*, Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Definitive Rating Assigned A2 (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
The ratings are based on the credit quality of the mortgage loans,
the structural features of the transaction, the origination quality
and the servicing arrangement, the third-party review, and the
representations and warranties framework.
Moody's expected loss for this pool in a baseline scenario-mean is
0.60%, in a baseline scenario-median is 0.39% and reaches 4.67% at
a stress level consistent with Moody's Aaa rating.
PRINCIPAL 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 July 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
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.
INVESCO CLO 2022-3: Fitch Assigns 'BB-sf' Rating on Class E Notes
-----------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Invesco
CLO 2022-3, Ltd.
Debt Rating
---- ------
Invesco CLO 2022-3, Ltd.
A-1 LT AAAsf New Rating
A-2 LT AAAsf New Rating
B LT AAsf New Rating
C LT Asf New Rating
D LT BBB-sf New Rating
E LT BB-sf New Rating
F LT NRsf New Rating
Subordinated Notes LT NRsf New Rating
TRANSACTION SUMMARY
Invesco CLO 2022-3, Ltd. (the issuer) is an arbitrage cash flow CLO
that will be managed by Invesco CLO Equity Fund 3. Net proceeds
from the issuance of the secured and subordinated notes will
provide financing on a portfolio of approximately $500.0 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', which is in line with recent CLOs.
Issuers rated in the 'B' rating category denote a highly
speculative credit quality; however, the notes benefit from
appropriate credit enhancement and standard U.S. CLO structural
features.
Asset Security (Positive): The indicative portfolio consists of
98.9% first-lien senior secured loans and has a weighted average
recovery assumption of 76.70%. Fitch stressed the indicative
portfolio by assuming a higher portfolio concentration of assets
with lower recovery prospects and further reduced recovery
assumptions for higher rating stresses.
Portfolio Composition (Positive): The largest three industries may
comprise up to 39.0% of the portfolio balance in aggregate, while
the top five obligors can represent up to 11.5% 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 5.1-year
reinvestment period and reinvestment criteria similar to 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 its stress scenarios, the rated notes can withstand
default rates and recovery assumptions consistent with other recent
Fitch-rated CLO notes.
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
a metric. The results under these sensitivity scenarios are between
'A-sf' and 'AAAsf' for class A-1, between 'BBB+sf' and 'AAAsf' for
class A-2, between 'BB+sf' and 'AA+sf' for class B, between 'Bsf'
and 'A+sf' for class C, between less than 'B-sf' and 'BBB-sf' for
class D, and between less than 'B-sf' and 'BBsf' for class E.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Upgrade scenarios are not applicable to the class A-1 and A-2
notes, as these notes are in the highest rating category of
'AAAsf'. 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 notes, between 'A+sf' and 'AAsf' for class C notes, between
'Asf' and 'A+sf' for class D notes, and 'BBB+sf' for class E
notes.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
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.
JP MORGAN 2012-LC9: Moody's Lowers Rating on Cl. E Certs to B3
--------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on six classes
and downgraded the ratings on five classes in J.P. Morgan Chase
Commercial Mortgage Securities Trust 2012-LC9 as follows:
Cl. A-5, Affirmed Aaa (sf); previously on Jul 8, 2020 Affirmed Aaa
(sf)
Cl. A-S, Affirmed Aaa (sf); previously on Jul 8, 2020 Affirmed Aaa
(sf)
Cl. B, Affirmed Aa2 (sf); previously on Jul 8, 2020 Affirmed Aa2
(sf)
Cl. C, Downgraded to Baa1 (sf); previously on Jul 8, 2020 Affirmed
A2 (sf)
Cl. D, Downgraded to Ba1 (sf); previously on Apr 23, 2021
Downgraded to Baa2 (sf)
Cl. E, Downgraded to B3 (sf); previously on Apr 23, 2021 Downgraded
to B1 (sf)
Cl. F, Affirmed Caa1 (sf); previously on Apr 23, 2021 Downgraded to
Caa1 (sf)
Cl. G, Affirmed Caa3 (sf); previously on Apr 23, 2021 Downgraded to
Caa3 (sf)
Cl. X-A*, Affirmed Aaa (sf); previously on Jul 8, 2020 Affirmed Aaa
(sf)
Cl. X-B*, Downgraded to A2 (sf); previously on Jul 8, 2020 Affirmed
A1 (sf)
Cl. EC, Downgraded to A1 (sf); previously on Jul 8, 2020 Affirmed
Aa3 (sf)
* Reflects Interest Only Classes
RATINGS RATIONALE
The ratings on the P&I classes were affirmed because of their
credit support and 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 increased
risk of losses and interest shortfalls driven primarily by the
significant exposure to loans in special servicing. Two loans,
representing 38% of the pool are in special servicing.
The ratings on the IO class (Class X-A) was affirmed based on the
credit quality of the referenced classes.
The rating on the IO class (Class X-B) was downgraded due to a
decline in the credit quality of its referenced classes.
The rating on the exchangeable class (Class EC) was downgraded due
to the credit quality of its referenced exchangeable classes.
Moody's regard e-commerce competition as a social risk under
Moody's ESG framework. The rise in e-commerce and changing consumer
behavior presents challenges to brick-and-mortar discretionary
retailers.
Moody's rating action reflects a base expected loss of 16.3% of the
current pooled balance, compared to 11.8% at Moody's last review.
Moody's base expected loss plus realized losses is now 5.6% of the
original pooled balance, compared to 6.6% 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 July
2022.
DEAL PERFORMANCE
As of the September 16, 2022, distribution date, the transaction's
aggregate certificate balance has decreased by 66% to $365.5
million from $1.071 million at securitization. The certificates are
collateralized by 18 mortgage loans ranging in size from less than
1% to 31% of the pool, with the top ten loans (excluding
defeasance) constituting 76% of the pool. Six loans, constituting
22.7% 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 5, compared to 10 at Moody's last review.
As of the September 2022 remittance report, loans representing
69.5% were current or within their grace period on their debt
service payments and 30.5% were beyond their grace period but less
than 30 days delinquent.
Ten loans, constituting 39% 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.
Two loans, constituting 38% of the pool, are currently in special
servicing. No loans have been liquidated from the pool.
The largest specially serviced loan is the West County Center Loan
($111.5 million – 30.5% of the pool), which represents a
pari-passu portion of a $166.1 million mortgage loan. The loan is
secured by the 744,000 square feet (SF) collateral portion of a 1.2
million SF super-regional mall in Des Peres, Missouri, a suburb of
St. Louis. As of the March 2022 rent roll, the mall was 95% leased,
compared to 97% leased as of the March 2020 rent roll. Anchor
tenants include Macy's (non-collateral), JC Penney
(non-collateral), Dick's Sporting Goods, and Nordstrom. Other
notable tenants are Barnes & Noble Booksellers, Forever 21, H&M,
and Apple. The mall is owned by a joint venture comprised of
entities affiliated with CBL, TIAA-CREF, and the Dutch pension fund
APG. The loan was transferred to special servicing in April 2020
for imminent monetary default at the borrower's request as a result
of the Covid-19 pandemic. In November 2020, the parent company of
the borrower, CBL & Associates Properties, Inc. filed for
bankruptcy. The loan remains less than one month delinquent as of
the September 2022 payment date. Property performance has declined
since securitization due to lower revenues and the 2021 NOI was
approximately 49% below underwritten levels. The mall also faces
competition from six regional and super regional malls within the
St. Louis MSA. However, the loan has amortized 14% since
securitization. The borrower is in discussions with the lender to
extend or modify this loan which is set to mature in December
2022.
The second largest specially serviced loan is the Salem Center Loan
($27.9 million – 7.7% of the pool), which is secured by the
212,007 SF collateral portion of a 649,624 SF regional mall,
located in Salem, Oregon. At securitization, the mall's
non-collateral anchors included Kohl's, Nordstrom, JCPenney, and
Macy's. However, Nordstrom closed its location in April 2018, and
JCPenney announced it would close its location as part of its
Chapter 11 Bankruptcy proceedings. Property performance declined
from securitization as a result of declining occupancy and revenue.
The loan transferred to special servicing in August 2017 due to
imminent default and was foreclosed in August 2018. The mall was
temporarily closed as a result of the coronavirus outbreak but
re-opened in late May 2020 with limited stores. As of September
2022 remittance, this loan has amortized by 16% since
securitization and is presently REO. Moody's estimates an
aggregate $55.6 million loss for the specially serviced loans (40%
expected loss on average).
As of the September 2022 remittance statement cumulative interest
shortfalls were $2.4 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 2021 operating results for 100% of the
pool, and full or partial year 2022 operating results for 46% of
the pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 103%, the same as at Moody's last
review. Moody's conduit component excludes loans with structured
credit assessments, defeased and CTL loans, and specially serviced
and troubled loans. Moody's net cash flow (NCF) reflects a weighted
average haircut of 15% to the most recently available net operating
income (NOI). Moody's value reflects a weighted average
capitalization rate of 9.3%
Moody's actual and stressed conduit DSCRs are 1.74X and 1.10X,
respectively, compared to 1.57X and 1.04X 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 28.5% of the pool balance.
The largest loan is the BJ's Wholesale Club Portfolio Loan ($48.1
million -13.1% of the pool), which is secured by first mortgage
liens on four stand-alone retail properties occupied by BJ's
Wholesale Club. BJ's Wholesale Club operates at the improvements
subject to a single triple-net, 20-year master lease that is
scheduled to expire in September 2032. The lease does not provide
for early termination rights outside of the standard condemnation
and casualty clauses. The loan is currently on the watchlist due to
upcoming Annual Repayment Date (ARD) on November 6, 2022 as well as
delinquent financials. The most recent operating statement and rent
roll on file is from June 30, 2021. The loan is current as of its
September 2022 payment date and is interest only for its entire
term. Moody's LTV and stressed DSCR are 89% and 1.16X,
respectively, unchanged from Moody's last review.
The second largest loan is the One South Broad Street Loan ($38.5
million – 10.5% of the pool), which is secured by a 25-story,
Class B office building with a Walgreens in its street-level retail
space located in the Philadelphia CBD, directly south of City Hall.
The property was built in 1932 with the most recent significant
renovation occurring in 2001 and property benefits from its CBD
location just south of Philadelphia City Hall. The loan is
currently on the watchlist due to covenant compliance. A cash
trap was implemented due to a trigger event when the largest
tenant, Wells Fargo (107,433 SF; 23% of the NRA; lease expiration
December 31, 2020) failed to renew their lease 18 months prior to
lease expiration. As of a rent roll dated March 2022, occupancy
was at 56% largely in part to Wells Fargo vacating at lease
expiration in December 2020. The loan matures in December 2022 and
the borrower ordered a payoff quote in May 2022, but never sent
funds. Moody's LTV and stressed DSCR are 153% and 0.64X,
respectively, compared to 110% and 0.89X at the last review.
The third largest loan is the Walk2Walk Campus Loan ($17.8 million
– 4.9% of the pool), which is secured by six multifamily student
housing properties located in SC, VA, KY, NY and TN. As of December
2021, the portfolio was 95% leased, same as at last review. The
loan is currently on the watchlist due to a poor inspection rating
and instances of life safety issues at several of the properties,
but the loan remains current. The loan has a maturity date of
November 2022, and has ARD date of March 2024. Moody's LTV and
stressed DSCR are 88% and 1.14X, respectively, compared to 91% and
1.10X at the last review.
JP MORGAN 2022-NXSS: Moody's Assigns B2 Rating to 2 Tranches
------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to nine
classes of CMBS securities, issued by J.P. Morgan Chase Commercial
Mortgage Securities Trust 2022-NXSS, Commercial Mortgage
Pass-Through Certificates, Series 2022-NXSS:
Cl. A, Definitive Rating Assigned Aaa (sf)
Cl. B, Definitive Rating Assigned Aa3 (sf)
Cl. C, Definitive Rating Assigned A3 (sf)
Cl. D, Definitive Rating Assigned Baa3 (sf)
Cl. E, Definitive Rating Assigned Ba3 (sf)
Cl. F, Definitive Rating Assigned B2 (sf)
Cl. HRR, Definitive Rating Assigned B2 (sf)
Cl. X-CP*, Definitive Rating Assigned A2 (sf)
Cl. X-EXT*, Definitive Rating Assigned A2 (sf)
* Reflects interest-only classes
RATINGS RATIONALE
The certificates are collateralized by the borrower's fee interests
in 29 self-storage properties located across 12 states. Moody's
ratings are based on the credit quality of the loans and the
strength of the securitization structure.
Moody's approach to rating this transaction involved the
application of both Moody's Large Loan and Single Asset/Single
Borrower Commercial Mortgage-Backed Securitization 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 24,076 units offering 2,204,419 SF of
combined rentable area. The portfolio is geographically diverse
as the properties are located across 12 states and 16 markets. As
of July 31, 2022, the portfolio net rentable area was approximately
87.4% occupied. The top five states by TTM NOI are Florida (41.9%),
Georgia (15.4%), North Carolina (10.8%), New York (8.9%) and
Kentucky (4.5%). The top five market concentrations by TTM NOI are
Miami-Fort Lauderdale-Pompano Beach, FL (19.6%), Atlanta-Sandy
Springs-Alpharetta, GA (15.4%), Tampa-St. Petersburg-Clearwater, FL
(11.2%), New York-Newark-Jersey City, NY-NJ-PA (8.9%) and
Charlotte-Concord-Gastonia, NC-SC (8.1%). Trade areas for the
respective property markets are generally dense and affluent as the
weighted average population and median household income are
approximately 138,230 people and $70,700, respectively, within a
three-mile radius.
The portfolio is also granular at the property level, with no
individual property accounting for more than 5.8% of the TTM NOI or
5.3% of the mortgage ALA.
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 1.22x and Moody's first mortgage
stressed DSCR at a 9.25% constant is 0.73x. Moody's DSCR is based
on Moody's stabilized net cash flow.
Moody's LTV ratio for the first mortgage balance is 125.1% based on
Moody's Value. Adjusted Moody's LTV ratio for the first mortgage
balance is 108.7% based on Moody's Value using a cap rate adjusted
for the current interest rate environment.
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 asset quality, property
age, location, market, and historical performance. The pool's
weighted average property quality grade is 1.50.
Notable strengths of the transaction include: the asset quality,
historical operating performance, geographic diversity, demographic
profile, and experienced sponsorship and property management.
Notable concerns of the transaction include: the high Moody's
loan-to value (MLTV) ratio, floating-rate/interest-only mortgage
loan profile, cash-out refinancing, 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 July 2022.
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.
Moody's analysis considers the following inputs to calculate the
proposed IO rating based on the published methodology: original and
current bond ratings and credit estimates; original and current
bond balances grossed up for losses for all bonds the IO(s)
reference(s) within the transaction; and IO type corresponding to
an IO type as defined in the published methodology.
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.
JPMCC COMMERCIAL 2016-JP4: Fitch Lowers Class E Certs to 'B-sf'
---------------------------------------------------------------
Fitch Ratings has downgraded one and affirmed 11 classes of JPMCC
Commercial Mortgage Securities Trust 2016-JP4 commercial mortgage
pass-through certificates. The Rating Outlooks on three classes
remain Negative.
Debt Rating Prior
---- ------ -----
JPMCC 2016-JP4
A-2 46645UAR8 LT AAAsf Affirmed AAAsf
A-3 46645UAS6 LT AAAsf Affirmed AAAsf
A-4 46645UAT4 LT AAAsf Affirmed AAAsf
A-S 46645UAX5 LT AAAsf Affirmed AAAsf
A-SB 46645UAU1 LT AAAsf Affirmed AAAsf
B 46645UAY3 LT AA-sf Affirmed AA-sf
C 46645UAZ0 LT A-sf Affirmed A-sf
D 46645UAC1 LT BBB-sf Affirmed BBB-sf
E 46645UAE7 LT B-sf Downgrade Bsf
X-A 46645UAV9 LT AAAsf Affirmed AAAsf
X-B 46645UAW7 LT AA-sf Affirmed AA-sf
X-C 46645UAA5 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Increased Loss Expectations: The downgrade to class E reflects
increased loss expectations since the prior rating action,
primarily driven by higher expected loss on the Riverway office
portfolio and Summit Mall loans. While the majority of the pool has
exhibited stable performance and have recovered from pandemic lows,
Fitch has identified four loans (17.6% of the pool) as FLOCs,
including one specially serviced loan (2%). Four loans (13.9%) are
on the master servicer's watchlist for declines in occupancy,
performance declines due to the pandemic, upcoming rollover and/or
deferred maintenance. Fitch's current ratings incorporate a base
case loss of 7.2%.
The Negative Outlooks on classes D, E and X-C reflects the
increased loss expectation on the Riverway loan along with concerns
on two regional malls in the pool. These classes may be subject to
a downgrade should performance of these properties not improve and
loss expectations increase and/or additional loans transfer to
special servicing.
Fitch Loans of Concern/Specially Serviced Loan: The largest
increase in expected loss since the prior review is Riverway (6.8%)
loan, which is secured by a four-building suburban office totaling
869,120 sf located in Rosemont, IL (1.5 miles from O'Hare
International Airport). The property consists of three office
buildings and one 10,409-sf daycare center. Large tenants include
U.S. Foods, Inc. (33.7% of NRA; 14.5% expiring in Sept. 2023 and
19.2% in February 2029), Culligan International Company (6.1%;
December 2026), Appleton GRP LLC (4.4%; December 2026) and First
Union Rail Corporation (3.8%; January 2024).
The largest tenant, U.S. Foods, relocated to another building
within the property and downsized by 6% in 2021. Physical occupancy
was 62% as of June 2022, a decline from 91.0% in 2019 after Central
States Pension Fund (21.9%) vacated the property upon lease
expiration in December 2019. As of the June 2022 rent roll, 1.7% of
NRA was scheduled to expire by YE 2022, 14.7% in 2023 including
U.S. Foods, and 3.7% in 2024. The servicer-reported NOI DSCR is
0.79x as of June 2022 after declining to 0.82x as of YE 2021, and
0.65x at YE 2020 from 1.60x at YE 2019. Cash management remains in
place after Central States Pension Fund's lease expiration
triggered a major tenant cash flow sweep. Fitch applied a 10% cap
rate to YE 2021 NOI resulting in an approximate 30% loss severity.
The second largest increase in expected loss since the prior review
is the Summit Mall (5.9%) loan, which is secured by a 528,234-sf
portion of an approximately 777,000-sf regional mall located in
Fairlawn, OH, approximately seven miles northwest of downtown
Akron. The mall is anchored by Macy's (37% of collateral NRA;
expires October 2025) and two non-collateral Dillard's stores.
Collateral occupancy has improved to 91% as of June 2022 from 83%
as of June 2021. As of the June 2022 rent roll, 6.7% of the NRA is
scheduled to expire in 2022, 8.1% in 2023 and 9.7% in 2024. Per the
January 2021 rent roll, the Apple Store has a lease expiration;
however, the store remains open. NOI DSCR has remained strong at
3.93x as of YE 2021 and 4.25x as of YE 2021. Fitch's loss
expectation of approximately 15% in the base case is based on a 15%
cap rate and 20% stress to the YE 2021 NOI to reflect upcoming
lease rollover.
The specially serviced loan is Franklin Marketplace (1.9%), a
223,343-sf retail property located in Philadelphia, PA (15 miles
from the Philadelphia CBD). The property is located immediately
adjacent to Philadelphia Mills (regional shopping mall) and is in
close proximity to Northeast Philadelphia Airport. The loan
transferred to special servicing in September 2020 due to imminent
default. The borrower has decided to not continue workout
discussions and foreclosure is being pursued. Fitch's base case
loss expectation of approximately 60% is based off the most recent
servicer provided appraisal value, and reflects a stressed value of
$42 psf.
Credit Enhancement Improvement: As of the September 2022
distribution date, the pool's aggregate principal balance has been
paid down by 15.6% to $841.8 million from $997.6 million at
issuance. Of the current pool, eight loans (39.3%) are full-term
interest-only, and no loans have a partial-term interest-only
period remaining. The pool has experienced no realized losses since
issuance. Since issuance, four loans (11.6% of original pool)
prepaid and two loans (1.3%) are fully-defeased.
All the loans in the pool are scheduled to mature in 2026 and 2027
(98%) except the specially serviced loan Franklin Marketplace
(2%).
Retail and Office Concentration: There are 17 retail loans (36.6%),
followed by nine office loans (36.3%) and five hotel loans
(16.7%).
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Sensitivity factors that lead to downgrades include an increase in
pool-level losses from underperforming or specially serviced
loans/assets. Downgrades to the 'AA-sf' and 'AAAsf' categories are
unlikely due to increasing CE and expected continued amortization,
but may occur should interest shortfalls affect these classes.
Downgrades to the 'BBB-sf' and 'A-sf' categories would likely occur
if a high proportion of the pool defaults and/or transfers to
special servicing and expected losses increase significantly.
Downgrades to the 'B-sf' category would occur should loss
expectations increase due to an increase in specially serviced
loans and/or the Riverway loan does not stabilize.
Fitch has identified both a baseline and a worse-than-expected,
adverse stagflation scenario based on fallout from the
Russia-Ukraine war whereby growth is sharply lower amid higher
inflation and interest rates; even if the adverse scenario should
play out, Fitch expects virtually no impact on ratings performance,
indicating very few rating or Outlook changes. However, for some
transactions with concentrations in underperforming retail
exposure, the ratings impact may be mild to modest, indicating some
changes on sub-investment-grade notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Sensitivity factors that lead to upgrades would include stable to
improved asset performance coupled with pay down and/or defeasance.
Upgrades to the 'A-sf' and 'AA-sf' categories would likely occur
with significant improvement in CE and/or defeasance; however,
adverse selection, increased concentrations and/or further
underperformance of the FLOCs or loans that have been negatively
affected by the pandemic could cause this trend to reverse.
Upgrades to the 'BBB-sf' category would also consider these
factors, but would be limited based on sensitivity to
concentrations or the potential for future concentrations.
Classes would not be upgraded above 'Asf' if there were likelihood
for interest shortfalls. Upgrades to the 'B-sf' category are 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.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
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.
MFA 2022-INV3: S&P Assigns Prelim B+ (sf) Rating on Cl. B-2 Certs
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to MFA
2022-INV3 Trust's mortgage pass-through certificates series
2022-INV3.
The certificate issuance is an RMBS transaction backed by
first-lien, fixed- and hybrid adjustable-rate, fully amortizing,
and interest-only residential mortgage loans secured by
single-family residences, condominiums, townhomes, and two- to
four-family residential properties to both prime and nonprime
borrowers. The pool consists of 1,005 business-purpose investor
loans (including 249 cross-collateralized loans backed by 1,129
properties) that are exempt from the qualified mortgage and
ability-to-repay rules.
The preliminary ratings are based on information as of Sept. 30,
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 pool's collateral composition;
-- The transaction's credit enhancement, associated structural
mechanics, geographic concentration, and representation and
warranty framework;
-- The mortgage aggregator and mortgage originator; and
-- The current and near-term macroeconomic conditions and the
effect they may have on the performance of the mortgage borrowers
in the pool. S&P said, "On April 17, 2020, we updated our mortgage
outlook and corresponding archetypal foreclosure frequency levels
to account for the potential impact the COVID-19 pandemic may have
on the overall credit quality of collateralized pools. While
pandemic-related performance concerns have waned, we maintain our
updated 'B' foreclosure frequency (FF) for the archetypal pool at
3.25% given our current outlook for the U.S. economy, which
includes the Russia-Ukraine military conflict, supply-chain
disruptions, and rising inflation and interest rates."
Preliminary Ratings Assigned
MFA 2022-INV3 Trust(i)
Class A-1, $137,816,000: AAA (sf)
Class A-2, $22,539,000: AA (sf)
Class A-3, $27,470,000: A (sf)
Class M-1, $13,735,000: BBB (sf)
Class B-1, $11,152,000: BB (sf)
Class B-2, $8,921,000: B+ (sf)
Class B-3, $13,148,631: Not rated
Class A-IO-S, notional(ii): Not rated
Class XS, notional(ii): Not rated
Class R: Not rated
(i)The collateral and structural information in the presale report
reflect the preliminary private placement memorandum dated Sept.
28, 2022. The preliminary ratings address the ultimate payment of
interest and principal and do not address payment of the cap
carryover amounts.
(ii)The notional amount equals the loans' aggregate unpaid
principal balance.
MORGAN STANLEY 2013-C10: Fitch Affirms 'Csf' Rating on Cl. H Certs
------------------------------------------------------------------
Fitch Ratings has affirmed 16 classes of Morgan Stanley Bank of
America Merrill Lynch Trust, commercial mortgage pass-through
certificates, series 2013-C10 (MSBAM 2013-C10). In addition, the
Rating Outlooks for four classes have been revised to Stable from
Negative.
Debt Rating Prior
---- ------ -----
MSBAM 2013-C10
A-3 61762MBV2 LT AAAsf Affirmed AAAsf
A-3FL 61762MAW1 LT AAAsf Affirmed AAAsf
A-3FX 61762MAY7 LT AAAsf Affirmed AAAsf
A-4 61762MBW0 LT AAAsf Affirmed AAAsf
A-5 61762MCC3 LT AAAsf Affirmed AAAsf
A-S 61762MBY6 LT AAAsf Affirmed AAAsf
A-SB 61762MBU4 LT AAAsf Affirmed AAAsf
B 61762MBZ3 LT Asf Affirmed Asf
C 61762MCB5 LT BBBsf Affirmed BBBsf
D 61762MBC4 LT B-sf Affirmed B-sf
E 61762MBE0 LT CCCsf Affirmed CCCsf
F 61762MBG5 LT CCCsf Affirmed CCCsf
G 61762MBJ9 LT CCsf Affirmed CCsf
H 61762MBL4 LT Csf Affirmed Csf
PST 61762MCA7 LT BBBsf Affirmed BBBsf
X-A 61762MBX8 LT AAAsf Affirmed AAAsf
Classes X-A is interest only (IO).
The exchangeable class PST can be exchanged for classes A-S, B and
C.
KEY RATING DRIVERS
Generally Stable Loss Expectations/Expected Paydown: The
affirmations reflect continued stable performance of the majority
of the loans in the pool. Loss expectations are generally in line
with the prior rating action. There are thirteen (30.4%) Fitch
Loans of Concern (FLOCs), including three loans (13.7%) in special
servicing. Fitch's current ratings incorporate a base case loss of
9.8%.
The Outlook revision for classes A-S, B, C and PST to Stable from
Negative reflect the stable loss expectations and paydown. The
Negative Outlook for class D reflects the potential for downgrades
should any of the loans in the pool fail to repay at their
respective maturities and experience prolonged workout periods
and/or losses.
The largest contributor to expected loss is the largest loan in the
pool, Westfield Citrus Park (10.7% of the pool), which was modified
and assumed prior to being transferred back to the master servicer
in June 2022. The loan had previously transferred to special
servicing in July 2020 due to imminent default after missing its
May 2020 debt service payment. The former sponsor, Westfield
America, relinquished control of the property and the loan has been
assumed by Hull Property Group. The modified loan terms include an
extension of the maturity date to June 2028 and IO payments.
The loan is secured by a 494,189-sf portion of a 1.0 million-sf
regional mall located in Tampa, FL. The mall is anchored by
non-collateral Dillard's, Macy's and JCPenney. A dark
non-collateral former Sears is being redeveloped as a multipurpose
entertainment center. The largest collateral tenants include Regal
Cinemas (whose parent company Cineworld recently filed Chapter 11
bankruptcy) and Dick's Sporting Goods.
The TTM June 2021 comparable in-line sales were approximately $120
psf compared to $379 psf at YE 2019, and $378 psf at issuance (TTM
April 2013). The 20-screen Regal Cinemas, which reopened in May
2021 after closing in October 2020 due to COVID, had reported sales
of $292,100/screen in 2019, compared to $365,400/screen in 2017 and
$407,050/screen in 2016. The reported occupancy was 91% as of YE
2021 with a NOI DSCR of 1.04x.
Fitch expected loss of approximately 50% factors a discount to a
recent valuations and weak financial performance.
The second largest contributor to expected loss is the specially
serviced The Mall at Tuttle Crossing loan (2.3%), which is secured
by a regional mall located in Dublin, OH. The loan transferred to
special servicing in July 2020 due to imminent monetary default. In
August 2020, the sponsor, Simon Property Group, disclosed that they
plan to return the collateral to the lender. The receiver, who was
appointed in January 2021, has been working on stabilizing the
property and preparing it for a potential receivership sale.
The mall's non-collateral anchors include Macy's, JCPenney and
Scene 75. Sears, a non-collateral anchor, closed in March 2019 at
the property. Macy's previously had a second location at this mall
which went dark and was re-leased to Scene 75 which opened in
October 2019. As of March 2022, occupancy has improved to 81% from
76% at YE 2021, and 69% as of 2Q20, but remains below occupancy of
91% as of YE 2019. The reported NOI remains well below issuance
with March 2022 NOI DSCR declining to 0.73x, from 0.81x at YE 2021,
and 1.55x at YE 2020 and 3.13x at issuance. Recent sales were
unavailable, but comparable in-line tenant sales were $299 psf in
2019, compared to $324 in 2018, $337 psf in 2017 and $365 psf in
2016.
Fitch expected loss of approximately 82% factors a discount to a
recent appraisal value and reflects low historical sales, refinance
risk and lack of sponsor commitment.
The third largest contributor to expected loss is the specially
serviced Oak Brook Center (1.7%), which transferred to special
servicing in April 2022 for payment default. The suburban Chicago
office property has experienced the departure of large tenants at
their respective lease expirations. The reported March 2022
occupancy was 32%. Fitch's loss expectations of 36% reflects a
value of $40 per square foot and is driven by significant occupancy
and value decline along with weak submarket fundamentals.
Defeasance and Improved Credit Enhancement: As of the September
2022 distribution date, the pool's aggregate principal balance has
paid down by 23.6% to $1.134 billion from $1.486 billion at
issuance. Sixteen loans (30.3%) have been defeased. Six loans paid
in full (4.4% of original deal balance) since Fitch's prior rating
action. One loan (2.3% of original deal balance) was disposed with
a 29% loss severity and impacted the non-rated class J. Excluding
specially serviced loans, 61.6% of the remaining pool is amortizing
and 72.3% is scheduled to mature in 2023. The largest loan,
Westfield Citrus Park (10.7%), was modified and pays IO with its
maturity date extended to June 2028.
Alternative Loss Scenario: Due to the large concentration of loan
maturities in 2023, Fitch performed a sensitivity and liquidation
analysis, which grouped the remaining loans based on their current
status and collateral quality and ranked them by their perceived
likelihood of repayment and/or loss expectation. This analysis
contributed to the affirmations, outlook revisions for classes A-S,
B, C and PST and the continued Negative Outlook for class D.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
The 'AAAsf' classes are unlikely to be downgraded given the credit
enhancement (CE) and significant defeasance, but could be
downgraded should they suffer interest shortfalls. Classes B, C and
D could be subject to downgrade should overall loss expectations
increase, in particular the loans secured by regional mall loans
and loans in special servicing. The distressed classes E and below
are subject to further downgrade should additional loans transfer
to special servicing, losses are realized or become more certain on
specially serviced loans.
Fitch has identified both a baseline and a worse-than-expected,
adverse stagflation scenario based on fallout from the
Russia-Ukraine war whereby growth is sharply lower amid higher
inflation and interest rates; even if the adverse scenario should
play out, Fitch expects virtually no impact on ratings performance,
indicating very few rating or Outlook changes. However, for some
transactions with concentrations in underperforming retail
exposure, the ratings impact may be mild to modest, indicating some
changes on sub-investment grade notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Upgrades to classes B through C would only occur with significant
improvement in CE and/or defeasance and additional loan payoffs.
Classes would not be upgraded above 'Asf' if there is a likelihood
of interest shortfalls. Upgrades to classes D and below are
considered unlikely unless the specially serviced loans and
modified loans liquidate with recoveries well above expectations.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
MORGAN STANLEY 2013-C12: Fitch Affirms 'CCCsf' Rating on 2 Tranches
-------------------------------------------------------------------
Fitch Ratings has affirmed 12 classes of Morgan Stanley Bank of
America Merrill Lynch Trust, Commercial Mortgage Pass-Through
Certificates, series 2013-C12 (MSBAM 2013-C12). In addition, Fitch
has revised the Rating Outlooks on one class to Positive from
Stable and two classes to Stable from Negative.
Debt Rating Prior
---- ------ -----
MSBAM 2013-C12
A-3 61762XAT4 LT AAAsf Affirmed AAAsf
A-4 61762XAU1 LT AAAsf Affirmed AAAsf
A-S 61762XAW7 LT AAAsf Affirmed AAAsf
A-SB 61762XAS6 LT AAAsf Affirmed AAAsf
B 61762XAX5 LT AA-sf Affirmed AA-sf
C 61762XAZ0 LT A-sf Affirmed A-sf
D 61762XAC1 LT BBsf Affirmed BBsf
E 61762XAE7 LT Bsf Affirmed Bsf
F 61762XAG2 LT CCCsf Affirmed CCCsf
G 61762XAJ6 LT CCCsf Affirmed CCCsf
PST 61762XAY3 LT A-sf Affirmed A-sf
X-A 61762XAV9 LT AAAsf Affirmed AAAsf
KEY RATING DRIVERS
Stable Loss Expectations: Overall loss expectations remain in-line
with expected losses from the prior rating action. Higher expected
losses on the Westfield Countryside mall were offset by lower
losses on loans that continue to stabilize from the effects of the
pandemic and includes the return of the third largest loan to
master servicing from special. The revised Outlook to Stable from
Negative on Classes D and E reflects stabilizing performance of the
pool coupled with expected repayment of the classes primarily from
performing loans as evaluated in a paydown analysis. The Positive
Outlook on Class B reflects the potential for upgrade with further
paydown of the pool and continued stable performance.
Fitch's ratings incorporate a base case loss of 8.4%. Nine loans
have been identified as FLOC's (30.2%) which include the three
loans in special servicing (10.2%). An additional sensitivity was
applied assuming a full recognition of losses on loans in the pool
flagged as maturity defaults to reflect imminent refinance risk as
loans approach maturity. The additional sensitivity did not affect
the overall stabilization of pool performance and revision of the
Outlooks on classes B, D and E.
Largest Contributors to Loss: The largest contributor to loss is
the specially serviced Westfield Countryside (6%), which is secured
by a 464,836-sf collateral portion of a 1.26 million-sf regional
mall located in Clearwater, FL. The special servicer is pursuing
foreclosure as the sponsor (a joint venture between Westfield and
O'Connor Capital Partners) will no longer support the asset and is
cooperating with a consensual foreclosure. A receiver was installed
in January 2021. The special servicer is determining an appropriate
time to market the property for sale.
The mall is anchored by Macy's, Dillard's and JC Penney. Sears, a
non-collateral anchor, closed in July 2018 after downsizing its
space to accommodate a 37,000-sf Whole Foods, leaving a significant
portion of the remaining Sears space as vacant. The mall's
occupancy and NOI continues to decline from issuance. As of March
2022, occupancy declined to 71% from 82% at YE 2021 and a
substantial decline from 88% at YE 2020. YE 2021 NOI fell 7% from
YE 2020 and remains 37% below the originator's underwritten NOI at
issuance. As of March 2022, NOI DSCR was 1.11x, in-line with YE
2021.
Fitch's loss estimate of 70% factors a discount to the most recent
appraisal value. The stressed value represents an implied 21% cap
rate on YE 2021 NOI. The outsized loss reflects the continued
deteriorating performance and movement toward foreclosure.
Hurricane Ian, which made landfall on Florida's Gulf Coast and has
since been downgraded to a tropical storm, is expected to generate
substantial economic and insured losses in affected areas. Fitch
continues to monitor the potential impact of the hurricane on
affected properties. CMBS master servicers are expected to release
Significant Insurance Event reports within two to three weeks of
the event; these reports track the status of insurance claims and
repairs, if needed.
Deer Springs Town Center (3.0%) is secured by a 184,403-sf anchored
retail center located in North Las Vegas, NV. The loan transferred
to special servicing in October 2018 following the bankruptcy and
closure of Toys/Babies "R" Us (35.6% of NRA) and a receiver was
appointed in July 2019. Collateral occupancy was 64% as of the July
2022. Collateral tenants include Michaels (16.6% of NRA; through
June 2026), Ross Dress for Less (16.4%; January 2025), PetSmart
(14.9%; March 2025) and Staples (11.1%; November 2024). All of the
junior anchors have renewed since the transfer to special
servicing. According to the servicer Burlington Coat Factory has
executed a lease for half of the vacant Toys R Us space.
Fitch's loss estimate of 44% reflects a stress to a recent
appraisal value. The high loss severity reflects the loan's
movement toward foreclosure and longer-term concerns related to
stabilization.
The Marriott Chicago River North Hotel (5.9%) is a 523-key extended
stay property consisting of two hotels (Springhill Suites and
Residence Inn). The loan has returned to the master servicer as of
January 2022 after having been in special servicing starting in
July 2020 due to the effects of the pandemic. Although the loan has
returned to master servicing, the loan continues to underperform
and reflects a slow recovery from the effects of the pandemic. TTM
June 2022 NOI remains 46% below NOI at YE 2019 and is 59% below NOI
at issuance. The TTM NOI DSDCR as of June 2022 was 0.68x.
As of the June 2022 STR reports, the Residence Inn reported running
12-month RevPAR of $112 and RevPAR penetration of 119% as compared
with RevPAR of $149 at issuance. The Springhill Suites reported
RevPAR of $110 and RevPAR penetration of 110% as compared with
RevPAR of $144 at issuance. While the hotels have exhibited
strength against its competitive set, the hotels continue
underperform from expectations at issuance.
Recent sales within the market include the 419-key Hyatt Centric
Chicago Magnificent Mile, which sold for approximately $161,000 per
key in February 2022 and the 368-key Embassy Suites by Hilton
Chicago Downtown, which sold for approximately $184,000 per key in
March 2022.
Fitch applied a cap rate of 11.25% and 10% stress on YE 2019 NOI to
account for the ongoing recovery in performance. The analysis
reflects a stressed value of $164,000 per key
Change in Credit Enhancement: As of the September 2022 distribution
date, the pool's aggregate principal balance has been paid down by
32.5% to $861.5 million from $1.276 billion at issuance. Twenty
loans (29.4% of current pool) are fully defeased. Nineteen loans
(19.7% of original pool balance) have paid off since issuance.
There have been no realized losses since issuance. Loan maturities
are concentrated in 2023 when 99.6% of the pool matures.
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 of the
'AA-sf' and 'AAAsf' categories are not likely due to the position
in the capital structure and the relatively stable performance of
the pool, but may occur should interest shortfalls affect these
classes. Downgrades of the 'A-sf' and 'BBsf' categories could occur
if expected losses increase significantly or the performance of the
FLOCs continue to decline further and/or fail to stabilize.
Downgrades to the 'CCCsf' and 'Bsf' categories would occur should
loss expectations increase due to performance declines or as losses
are realized.
Fitch has identified both a baseline and a worse-than-expected,
adverse stagflation scenario based on fallout from the
Russia-Ukraine war whereby growth is sharply lower amid higher
inflation and interest rates; even if the adverse scenario should
play out, Fitch expects virtually no impact on ratings performance,
indicating very few rating or Outlook changes. However, for some
transactions with concentrations in underperforming retail
exposure, the ratings impact may be mild to modest, indicating some
changes on sub-investment-grade notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Upgrades would occur with 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 credit enhancement (CE) and/or defeasance; however, adverse
selection, increased concentrations and further underperformance of
the FLOCs and/or loans considered to be negatively impacted by the
coronavirus pandemic could cause this trend to reverse.
An upgrade to the 'BBsf' category is unlikely and 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 'CCCsf' and
'Bsf' 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.
NEW RESIDENTIAL 2022-NQM5: Fitch Assigns B-(EXP) Rating on B2 Notes
-------------------------------------------------------------------
Fitch Ratings expects to rate the residential mortgage-backed notes
to be issued by New Residential Mortgage Loan Trust 2022-NQM5
(NRMLT 2022-NQM5).
Debt Rating
---- ------
NRMLT 2022-NQM5
A1 LT AAA(EXP)sf Expected Rating
A2 LT AA-(EXP)sf Expected Rating
A3 LT A-(EXP)sf Expected Rating
AIOS LT NR(EXP)sf Expected Rating
B1 LT BB-(EXP)sf Expected Rating
B2 LT B-(EXP)sf Expected Rating
B3 LT NR(EXP)sf Expected Rating
M1 LT BBB-(EXP)sf Expected Rating
R LT NR(EXP)sf Expected Rating
XS1 LT NR(EXP)sf Expected Rating
XS2 LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
The notes are supported by 529 newly originated loans that have a
balance of $262.3 million as of the Sept. 1, 2022 cutoff date. The
pool consists of loans originated by NewRez LLC, which was formerly
known as New Penn Financial, LLC, and Caliber Home Loans, a Rithm
Capital subsidiary.
The notes are secured mainly by non-qualified mortgage (QM) loans
as defined by the Ability-to-Repay (ATR) Rule. Of the loans in the
pool, 71.0% are designated as non-QM while the remainder are not
subject to the ATR Rule.
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 12.5% above a long-term sustainable level (relative
to 12.2% on a national level as of 3Q22). 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 18.6% yoy nationally as of June 2022.
Non-Prime Credit Quality (Negative): The collateral consists of 529
loans, totaling $262 million and seasoned approximately three
months in aggregate, according to Fitch (as calculated from
origination date). The borrowers have a stronger credit profile
when compared with other non-QM transactions, with a 751 Fitch
model FICO score and 40% debt/income ratios (DTI), as determined by
Fitch after converting the debt service coverage ratio (DSCR)
values. However, leverage (81.2% sustainable loan/value [sLTV])
within this pool is relatively high compared to previous NRMLT
transactions this year.
The pool consists of 63.9% of loans where the borrower maintains a
primary residence, while 36.1% are considered an investor property
or second home. Additionally, only 36% of the loans were originated
through a retail channel. Moreover, 71% are considered non-QM and
the remainder are not subject to QM. NewRez and Caliber originated
100% of the loans, which have been serviced since origination by
Shellpoint Mortgage Servicing (SMS).
Modified Sequential-Payment Structure (Mixed): The structure pays
principal pro rata among the senior notes while shutting out the
subordinate bonds from principal until all senior classes are
reduced to zero. If a cumulative loss trigger event or delinquency
trigger event occurs in a given period, principal will be paid
sequentially to class A-1, A-2 and A-3 notes until they are reduced
to zero.
After the 48th payment date, the A-1 through A-3 classes will be
contractually due the lower of the fixed rate for the class plus
1.0% or the Net WAC rate. This increases the principal and interest
(P&I) allocation for the A-1 through A-3, and decreases the amount
of excess spread available in the transaction. Furthermore, at this
time, amounts otherwise distributable to the class B-3 will be
redirected to pay Cap Carryover amounts to classes A-1 through A-3
sequentially.
Loan Documentation (Negative): 89% of the pool was underwritten to
less than full documentation, according to Fitch. Approximately 61%
was underwritten to a 12-month or 24-month bank statement program
for verifying income, which is not consistent with 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 Protection Bureau's (CFPB)
ATR Rule. The standards are meant to reduce the risk of borrower
default arising from lack of affordability, misrepresentation or
other operational quality risks due to rigor of the ATR Rule's
mandates with respect to the underwriting and documentation of the
borrower's ATR. Additionally, 19% are DSCR product and 4% are Asset
Depletion product.
High Investor Property Concentrations (Negative): Approximately 29%
of the pool comprises investment property loans, including 19%
underwritten to a cash flow ratio rather than the borrower's DTI
ratio. Investor property loans exhibit higher probability of
defaults (PDs) and higher loss severities (LS) than owner-occupied
homes. Fitch increased the PD by approximately 2.0x for the cash
flow ratio loans, relative to a traditional income documentation
investor loan, to account for the increased risk.
RATING SENSITIVITIES
Factors 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 43.1% 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:
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.
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."
Recovco, Infinity, and Clayton 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.
OBX TRUST 2022-NQM8: Fitch Assigns 'Bsf' Rating on Class B-2 Debt
-----------------------------------------------------------------
Fitch Ratings has assigned ratings to OBX 2022-NQM8 Trust.
Debt Rating Prior
---- ------ -----
OBX 2022-NQM8
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 BBBsf New Rating BBB(EXP)sf
B-1 LT BBsf New Rating BB(EXP)sf
B-2 LT Bsf New Rating B(EXP)sf
B-3 LT NRsf New Rating NR(EXP)sf
A-IO-S LT NRsf New Rating NR(EXP)sf
XS LT NRsf New Rating NR(EXP)sf
R LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Fitch rates the residential mortgage-backed notes issued by OBX
2022-NQM8 Trust (OBX 2022-NQM8) as indicated. The notes are
supported by 765 loans with a total unpaid principal balance of
approximately $397.5 million as of the cutoff date. The pool
consists of fixed-rate mortgages and adjustable-rate mortgages
acquired by Annaly Capital Management, Inc. from various
originators and aggregators.
Distributions of P&I and loss allocations are based on a modified
sequential-payment structure. The transaction has a stop-advance
feature where the P&I advancing party or AmWest Funding Corp., with
respect to the AmWest-serviced mortgage loans, will advance
delinquent P&I for up to 120 days. Of the loans, approximately
59.4% are designated as nonqualified mortgages (non-QM) and 38.8%
are investment properties not subject to the Ability to Repay (ATR)
Rule.
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 10.2% above a long-term sustainable level, versus
11% on a national level as of August 2022, up 1.8% since last
quarter. Underlying fundamentals are not keeping pace with the
growth in prices, resulting from a supply/demand imbalance driven
by low inventory, favorable 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 19.8% yoy
nationally as of May 2022.
Non-Prime Credit Quality (Mixed): The collateral consists of
30-year and 40-year fixed-rate and adjustable-rate loans.
Adjustable-rate loans constitute 17.1% of the pool; 9.8% are
interest-only loans and the remaining 73.1% are fully amortizing
loans. The pool is seasoned approximately seven months in aggregate
as calculated by Fitch. Borrowers in this pool have a moderate
credit profile with a Fitch-calculated weighted average (WA) FICO
score of 742, debt-to-income ratio of 46.9% and moderate leverage
of 79.0% sustainable loan-to-value ratio. Pool characteristics
resemble recent non-prime collateral.
Investor Properties, Non-QM and Alternative Documentation
(Negative): The pool contains a meaningful amount of investor
properties (38.8%) and non-QM loans (59.4%). Fitch's loss
expectations reflect the higher default risk associated with these
attributes as well as loss severity (LS) adjustments for potential
ATR challenges. Higher LS assumptions are assumed for the investor
property product to reflect potential risk of a distressed sale or
disrepair.
Fitch viewed approximately 92.9% of the pool as less than full
documentation, and alternative documentation was used to underwrite
the loans. Of this, 25.8% were underwritten to a bank statement
program to verify income, which is not consistent with Appendix Q
standards or Fitch's view of a full documentation program. To
reflect the additional risk, Fitch increases the probability of
default (PD) by 1.6x on the bank statement loans. Besides loans
underwritten to a bank statement program, 29.6% are a debt service
coverage ratio product, 10.6% are a WVOE product, 22.9% are P&L
loans and 2.2% constitute an asset depletion product.
High California Concentration (Negative): Approximately 49.6% of
the pool is located in California. Additionally, the top three MSAs
- Los Angeles (25%), Riverside (9%) and Miami (6%) — account for
40% of the pool. As a result, a geographic concentration penalty of
1.05x was applied to the PD.
Modified Sequential-Payment Structure with Limited Advancing
(Mixed): The structure distributes principal pro rata among the
senior notes while shutting out the subordinate bonds from
principal until all senior classes are reduced to zero. If a
cumulative loss trigger event, delinquency trigger event or credit
enhancement (CE) trigger event occurs in a given period, principal
will be distributed sequentially to class A-1, A-2 and A-3 notes
until they are reduced to zero.
The structure includes a step-up coupon feature where the classes
A-1, A-2 and A-3 fixed interest rate will increase by 100 bps
starting on the October 2026 payment date. This reduces the modest
excess spread available to repay losses. However, the interest rate
is subject to the net WAC, and any unpaid cap carryover amount for
classes A-1, A-2 and A-3 may be reimbursed from the monthly excess
cash flow, to the extent available.
Prior to the October 2026 payment date, any interest and interest
carryforward amounts otherwise allocable to class B-3 will be
redirected to in an amount up to the cap carryover amount of the
class A-1. Additionally, starting on the October 2026 payment date,
any interest and interest carryforward amounts otherwise allocable
to class B-3 will be redirected and will be used to pay any cap
carryover amount to class A-1, A-2 and A-3 prior to being paid to
the class B-3.
Advances of delinquent P&I will be made on the mortgage loans for
the first 120 days of delinquency, to the extent such advances are
deemed recoverable. The P&I advancing party (Onslow Bay Financial
LLC) is obligated to fund delinquent P&I advances for the SPS
loans. AmWest will be responsible for making P&I advances with
respect to the AmWest serviced mortgage loans. If AmWest or the P&I
advancing party, as applicable, fails to remit any P&I advance
required to be funded, the master servicer (Wells Fargo) will fund
the advance.
The stop-advance feature limits the external liquidity to the bonds
in the event of large and extended delinquencies, but the
loan-level LS are less for this transaction than for those where
the servicer is obligated to advance P&I for the life of the
transaction, as P&I advances made on behalf of loans that become
delinquent and eventually liquidate reduce liquidation proceeds to
the trust.
RATING SENSITIVITIES
Factors 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 41.6% at 'AAAsf'. 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:
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 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'.
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.
PRPM TRUST 2022-NQM1: Fitch Assigns 'B(EXP)' Rating on B-2 Certs
----------------------------------------------------------------
Fitch Ratings has assigned expected ratings to PRPM 2022-NQM1
Trust.
Debt Rating
---- ------
PRPM 2022-NQM1 Trust
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AA(EXP)sf Expected Rating
A-3 LT A(EXP)sf Expected Rating
M-1 LT BBB(EXP)sf Expected Rating
B-1 LT BB(EXP)sf Expected Rating
B-2 LT B(EXP)sf Expected Rating
B-3 LT NR(EXP)sf Expected Rating
XS LT NR(EXP)sf Expected Rating
A-IO-S LT NR(EXP)sf Expected Rating
P LT NR(EXP)sf Expected Rating
R LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Fitch expects to rate the residential mortgage-backed certificates
to be issued by PRPM 2022-NQM1 Trust, Mortgage Pass-Through
Certificates, Series 2022-NQM1 (PRPM 2022-NQM1 Trust), as indicated
above. The certificates are supported by 668 loans with a balance
of $319.43 million as of the cut-off date. This will be the first
PRPM transaction rated by Fitch and the sixth PRPM transaction in
2022.
The certificates are secured by a pool of fixed and adjustable rate
mortgage loans (some of which have an initial interest-only period)
that are primarily fully amortizing with original terms to maturity
of primarily 30 to 40 years and are secured by first liens
primarily on one- to four-family residential properties, units in
planned unit developments, condominiums, mixed use properties,
townhouses and 5-20 unit multi-family properties. 30.6% of the
loans are nonqualified mortgages (non-QM) as defined by the Ability
to Repay (ATR) rule (the Rule) and the remaining 69.4% are exempt
from QM rule as they are investment properties.
Sprout Mortgage, LLC originated 43.2% of the loans, Nexera Holding
LLC d/b/a Newfi Lending (Newfi) originated 27.2% of the loans, and
the remaining 29.6% of the loans were originated by various other
third-party originators. Fitch assesses both Sprout Mortgage and
Newfi Lending as 'Average' originators.
Servis One, Inc. d/b/a BSI Financial Services (BSI) will service
61.6% of the loans in the pool, NewRez LLC d/b/a Shellpoint
Mortgage Servicing (Shellpoint) servicing 31.1% of the loans, and
the remaining 7.3% of the loans will be serviced by Fay Servicing,
LLC (Fay Servicing). Fitch rates all of these servicers as follows:
'RPS3', 'RPS2' and 'RSS2-'.
There is limited Libor exposure in this transaction. While the
majority of the loans in the collateral pool comprise fixed-rate
mortgages, 4.4% of the pool is comprised of adjustable rate loans.
4.0% of the pool consists of ARM loans based on SOFR, and 0.4% of
the pool consists of loans based on one-year LIBOR. The offered
certificates do not have LIBOR exposure as the coupons are fixed
rate and capped at the net weighted average coupon (WAC) or based
off of the net WAC.
Similar to other NQM transactions, classes A-1, A-2, and A-3 have a
step-up coupon feature at year four that is capped at the net 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 10.8% above a long-term sustainable level (vs. 11%
on a national level as of August 2022, up 1.8% since last quarter).
Underlying fundamentals are not keeping pace with the growth in
prices, resulting from a supply/demand imbalance driven by low
inventory, favorable 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 19.8% yoy nationally as
of May 2022.
Non-prime Credit Quality (Mixed): Collateral consists of fixed and
adjustable rate loans with maturities of up to 40 years.
Specifically, the pool is comprised of 64.1% 30-year fully
amortizing loans, 34.7% 30-year and 40-year loans with a five-year
or 10-year interest-only (IO) period and 0.8% 30-year balloon
loans. The pool is seasoned at about five months in aggregate, as
determined by Fitch. The borrowers in this pool have relatively
strong credit profiles with a 743 weighted average (WA) FICO score
(745 WA FICO per the transaction documents) and a 53.9%
debt-to-income ratio (DTI), both as determined by Fitch, as well as
moderate leverage, with an original combined loan-to-value ratio
(CLTV) of 70.5%, translating to a Fitch-calculated sustainable
loan-to-value ratio (sLTV) of 78.3%.
Fitch considered 30.2% of the pool to consist of loans where the
borrower maintains a primary residence, while 69.4% comprises
investor property and 0.4% represents second homes.
The majority of the loans (67.3% according to Fitch's analysis) are
to single family homes, townhomes, and PUDs, 7.1% are to condos,
and 25.6% are to multi-family, mixed use and other. Fitch treated
mixed use properties and other occupancy types as multi-family in
its analysis, and the PD was increased for these loans as a
result.
There are also cross-collateralized loans (one loan to multiple
properties) that were underwritten to DSCR/Investor guidelines in
the pool, these loans account for less than 5% of the pool. Fitch
used the most conservative collateral attributes of the properties
associated with the loan in its analysis, and all properties are in
the same MSA.
There were 24 loans made to foreign nationals in the pool. If the
co-borrower is a U.S. citizen or permanent resident, Fitch does not
count these loans as loans to foreign nationals. Fitch does not
make adjustments for loans to non-permanent residents since
historical performance has shown they perform the same or better
than those to U.S. citizens. For foreign nationals, Fitch treated
them as investor occupied, and having no documentation for income,
employment and assets.
Since assets were not always confirmed as located in U.S. banks or
GSIBS, no credit was given to liquid reserves for the loans to
foreign nationals in the analysis. If a FICO was not provided for
the foreign national, a FICO of 650 was assumed.
In total, 81% of the loans were originated through a non-retail
channel. Additionally, 31% of the loans are designated as non-QM,
while the remaining 69% are exempt from QM status.
The pool contains 51 loans over $1.0 million, with the largest loan
at $2.89 million. The largest loan in the pool is a purchase loan
for an owner-occupied planned unit development home in Austin, TX
and has the following collateral attributes: 730 borrower FICO and
80% LTV.
Fitch determined that self-employed, non-debt service coverage
ratio (non-DSCR) borrowers make up 21.8% of the pool; salaried
non-DSCR borrowers make up 10.8%; and 67.4% comprises investor cash
flow DSCR loans. About 69.4% of the pool comprises loans for
investor properties (2.0% underwritten to borrowers' credit
profiles and 67.4% comprising investor cash flow loans). There are
no second liens in the pool and no loans have subordinate
financing.
99% of the pool is current as of Sept. 1, 2022. Overall, the pool
characteristics resemble non-prime collateral; therefore, the pool
was analyzed using Fitch's non-prime model.
Geographic Concentration (Negative) Around 39% of the pool is
concentrated in California. The largest MSA concentration is in the
Los Angeles MSA (20.2%), followed by the New York MSA (15.6%) and
the Miami MSA (5.9%). The top three MSAs account for 41.7% of the
pool. As a result, there was a 1.03x probability of default (PD)
penalty for geographic concentration, which increased the 'AAAsf'
loss by 0.39%.
Loan Documentation: Bank Statement, Asset Depletion, DSCR Loans
(Negative): Approximately 90.7% of the pool was underwritten to
less than full documentation, according to Fitch (per the
transaction documents, 85.3% was underwritten to less than full
documentation). Specifically, 16.5% was 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.
Additionally, 0.8% comprises an asset depletion product, 0.5% is a
CPA or P&L product and 67.4% is a DSCR product. One loan in the
pool is a no ratio loan, which Fitch assumed to have a 100% DTI in
addition to treating the loan as a no documentation loan. Overall,
Fitch increased the PD on the non-full documentation loans to
reflect the additional risk.
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 Protection Bureau's (CFPB)
ATR Rule. This 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 underwriting and documentation of the borrower's ATR.
No Advancing (Mixed): The servicers will not be advancing
delinquent monthly payments of principal and interest (P&I).
Because P&I advances made on behalf of loans that become delinquent
and eventually liquidate reduce liquidation proceeds to the trust,
the loan-level loss severities (LS) are less for this transaction
than for those where the servicer is obligated to advance P&I.
To provide liquidity and ensure timely interest will be paid to the
'AAA' and 'AA' rated classes and ultimate interest on the remaining
rated classes, principal will need to be used to pay for interest
accrued on delinquent loans. This will result in stress on the
structure and the need for additional credit enhancement compared
to a pool with limited advancing.
Modified Sequential Payment Structure (Neutral): The structure
distributes collected principal pro rata among the class A notes
while excluding subordinate bonds from principal until classes A-1,
A-2 and A-3 are reduced to zero. To the extent that either a
cumulative loss trigger event or delinquency trigger event occurs
in a given period, principal will be distributed sequentially to
classes A-1, A-2 and A-3 until they are reduced to zero.
The transaction has excess spread that will be available to
reimburse the certificates for losses or interest shortfalls. The
excess spread may be reduced on and after October 2026, since
classes A-1, A-2 and A-3 have a step-up coupon feature that goes
into effect on and after that date. To mitigate the impact of the
step-up feature, interest payments are redirected from class B-3 to
pay any cap carryover interest for the A-1, A-2 and A-3 classes on
and after October 2026.
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
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 42.0%, at 'AAA'. The analysis indicates 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.
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." AMC,
Infinity, Opus and Evolve 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.
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5 designated website. Fitch received
loan-level information based on the American Securitization Forum's
(ASF) data layout format, and the data are considered to be
comprehensive. The ASF data tape layout was established with input
from various industry participants, including rating agencies,
issuers, originators, investors and others to produce an industry
standard for the pool-level data in support of the U.S. RMBS
securitization market. The data contained in the ASF layout data
tape were reviewed by the due diligence companies, and no material
discrepancies were noted.
ESG CONSIDERATIONS
PRPM 2022-NQM1 Trust has an ESG Relevance Score of '4' for
Transaction Parties & Operational Risk due to elevated operational
risk, which resulted in an increase in expected losses. While the
reviewed originators, and servicing parties did not have an impact
on the expected losses, the Tier 2 R&W framework with an unrated
counterparty along with ~20% of the loans in the pool being
underwritten by originators who have not been assessed by Fitch
resulted in an increase in the expected losses and are relevant to
the ratings.
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.
REALT 2015-1: Fitch Affirms 'Bsf' Rating on Class G Certs
---------------------------------------------------------
Fitch Ratings has upgraded two classes and affirmed six classes of
Real Estate Asset Liquidity Trust's (REAL-T) commercial mortgage
pass-through certificates, series 2015-1. The Rating Outlook for
class C is Positive following the upgrade. The Rating Outlook for
class D has been revised to Positive from Stable. All currencies
are in Canadian dollars (CAD).
Debt Rating Prior
---- ------ -----
REAL-T 2015-1
A-1 75585RMA0 LT AAAsf Affirmed AAAsf
A-2 75585RMB8 LT AAAsf Affirmed AAAsf
B 75585RMD4 LT AAAsf Upgrade AAsf
C 75585RME2 LT AAsf Upgrade Asf
D 75585RMF9 LT BBBsf Affirmed BBBsf
E 75585RMG7 LT BBB-sf Affirmed BBB-sf
F 75585RMH5 LT BBsf Affirmed BBsf
G 75585RMJ1 LT Bsf Affirmed Bsf
KEY RATING DRIVERS
Improved Credit Enhancement (CE): The upgrades of classes B and C
reflect improving CE, primarily due to loan payoffs and continued
scheduled amortization. The Positive Outlooks for classes C and D
reflect the potential for upgrades with additional paydown and/or
defeasance combined with continued stable performance within the
pool.
As of the September 2022 distribution date, the pool's aggregate
principal balance has been paid down by 36.5% to $212.3 million
from $334.8 million at issuance. Since Fitch's prior rating action,
three loans (including one crossed loan group: $12.6 million) were
repaid at or around their scheduled 2021 and 2022 maturity dates.
Three loans (28.6%) are defeased. All loans in the pool are
amortizing, including 12 fully amortizing loans (4.6%). Five loans
(12.2%) mature in 2024, 16 loans (83.5%) in 2025 and one loan
(4.3%) in 2035.
Stable Loss Expectations: Fitch's loss expectations are stable
compared to the prior rating action. Fitch's current ratings
reflect a base case loss of 1.9%. There are no loans currently in
special servicing. Two loans (16.7%) have been designated as Fitch
Loans of Concern (FLOC) due to continued underperformance. With the
exception of the FLOCs, the pool has exhibited generally stable to
improving performance since issuance.
The largest loan in the pool, Alta Vista Manor Retirement Ottawa,
remains a FLOC and is the primary contributor to overall loss
expectations. The loan is secured by a 174-unit independent living
property located in Ottawa, ON. Property performance had declined
prior to the pandemic and decreased further in 2020. The year-end
(YE) 2020 cash flow declined 80% from YE 2019 and is down 85% from
YE 2017. The debt service coverage ratio (DSCR) was reported to be
0.13x at YE 2020 compared to 0.62x at YE 2019. The borrower's
reporting for the TTM period ending August 2022 reflects a negative
NOI.
According to the August 2022 rent roll, occupancy has increased to
75% from 68% in August 2021 and 66% at YE 2020, but remains well
below the 97% at issuance. The servicer reports that competition
and other economic factors have caused the drop in occupancy.
Fitch's base case loss of 10% reflects a stressed value per unit of
approximately $125,000. Given the continued performance concerns
and to test the durability of the upgrades, Fitch also performed a
sensitivity that applied a potential outsized loss of 20% to the
loan's maturity balance and reflects a value per unit of
approximately $111,500.
Fitch expects further performance volatility as the property
recovers from the pandemic. The loan, however, remains current and
is fully guaranteed by the sponsor, which is a joint venture (JV)
between Welltower, Inc. and Revera, Inc., two leading
owner/operators in the senior housing sector. The JV acquired the
original sponsor, Regal Lifestyle Communities, Inc., in October
2015. Fitch considered the significant recourse of the
borrowers/sponsors in its analysis and recommendations.
The Hilton Mississauga Meadowdale loan (4.7%) has also been
designated as a FLOC due to the impact to the hotel industry from
the coronavirus pandemic. In addition, the property has
historically had approximately 45% of its total revenue from food
and beverage due to its large meeting/conference space
(approximately 45,000sf).
Prior to the pandemic, property performance had been relatively
stable. The YE 2019 DSCR and occupancy were reported to be 4.13x
and 75%, respectively. However, the YE 2020 DSCR dropped to -0.75x
and occupancy declined to 18%. The borrower has been granted
forbearance due to economic hardship sustained from the ongoing
pandemic. Fitch applied a 26% haircut to the servicer provided YE
2019 NOI given the significant impact on performance from the
pandemic.
Alternative Loss Considerations: Fitch's analysis included an
additional sensitivity scenario that factored an outsized loss on
the Alta Vista Manor Retirement Ottawa loan, in addition to the
expected paydown from defeasance and non-FLOCs with upcoming 2024
maturities. This sensitivity scenario supported the upgrade of
classes B and C and the Positive Outlooks on classes C and D.
Canadian Loan Attributes: The ratings reflect strong historical
Canadian commercial real estate loan performance, including a low
delinquency rate and low historical losses of less than 0.1%, as
well as positive loan attributes, such as short amortization
schedules, recourse to the borrower and additional guarantors on
many loans. Approximately 80% of the pool features full or partial
recourse to the borrowers, sponsors or additional guarantor.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Sensitivity factors that lead to downgrades include an increase in
pool-level losses from underperforming or specially serviced loans.
Downgrades to the 'Asf', 'AAsf' and 'AAAsf' categories are not
likely due to the increasing CE and expected continued paydowns
from loan payoffs and amortization, but may occur at the 'AAsf' and
'AAAsf' categories should interest shortfalls affect these
classes.
Downgrades to the 'BBBsf' and 'BBB-sf' categories would occur
should overall pool losses increase significantly and/or one or
more large loans experience an outsized loss, which would erode CE.
Downgrades to the 'Bsf' and 'BBsf' categories would occur should
loss expectations increase with further performance deterioration
of the FLOCs and/or loans default and/or transfer to special
servicing.
Fitch has identified both a baseline and a worse-than-expected,
adverse stagflation scenario based on fallout from the
Russia-Ukraine war whereby growth is sharply lower amid higher
inflation and interest rates; even if the adverse scenario should
play out, Fitch expects virtually no impact on ratings performance,
indicating very few rating or Outlook changes. However, for some
transactions with concentrations in underperforming retail
exposure, the ratings impact may be mild to modest, indicating some
changes on sub-investment grade notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Sensitivity factors that could lead to upgrades would include
stable to improved asset performance coupled with pay down and/or
defeasance. A further upgrade to the 'AAsf' category 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 'BBBsf' and 'BBB-sf' categories would also take in
to account these factors, but would be limited based on sensitivity
to concentrations or the potential for future concentration. The
Positive Outlook for the 'BBBsf' category reflects the more likely
possibility of an upgrade in the near term with improved credit
enhancement and stable pool performance. However, classes would not
be upgraded above 'Asf' if there were likelihood for interest
shortfalls. Upgrades to the 'Bsf' and 'BBsf' 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.
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.
SANTANDER BANK 2022-B: Moody's Assigns B2 Rating to $49MM F Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to the
Santander Bank Auto Credit-Linked Notes, Series 2022-B (SBCLN
2022-B) notes issued by Santander Bank, N.A. (SBNA).
SBCLN 2022-B is the second credit linked notes transaction issued
by SBNA in 2022 to transfer credit risk to noteholders through a
hypothetical tranched financial guaranty on a reference pool of
auto loans.
The complete rating actions are as follows:
Issuer/Deal: Santander Bank, N.A./Santander Bank Auto Credit-Linked
Notes, Series 2022-B
$17,500,000, 5.587%, Class A-2 Notes, Definitive Rating Assigned
Aaa (sf)
$122,500,000, 5.721%, Class B Notes, Definitive Rating Assigned Aa2
(sf)
$70,000,000, 5.916%, Class C Notes, Definitive Rating Assigned A2
(sf)
$59,500,000, 6.793%, Class D Notes, Definitive Rating Assigned Baa2
(sf)
$26,250,000, 8.681%, Class E Notes, Definitive Rating Assigned Ba2
(sf)
$49,000,000, 11.910%, Class F Notes, Definitive Rating Assigned B2
(sf)
RATINGS RATIONALE
The rated notes are fixed-rate obligations secured by a cash
collateral account. This deal is unique in that the source of
principal payments for the notes will be a cash collateral account
held by a depository institution with a rating of A2 or P-1 by
Moody's, initially Citibank, N.A. SBNA will pay principal in the
unlikely event that the cash collateral account does not have
enough funds. The transaction also benefits from a Letter of
Credit provided by a depository institution with a rating of A2 or
P-1 by Moody's, initially JPMorgan Chase Bank, N.A. The letter of
credit is sized to cover up to five months of interest in case of a
failure to pay by Santander Bank, N.A. or as a result of a FDIC
conservator or receivership. As a result, the rated notes are not
capped by the LT Issuer rating of Santander Bank, N.A. (Baa1).
The credit risk exposure of the notes depends on the actual
realized losses incurred by the reference pool. This transaction
has a modified pro-rata structure, which is more beneficial to the
subordinate bondholders than the typical sequential-pay structure
for US auto loan transactions. However, the subordinate bondholders
will not receive any principal unless performance tests are
satisfied.
The ratings are based on the quality of the underlying collateral
and its expected performance, the strength of the capital
structure, and the experience and expertise of Santander Consumer
USA Inc. as the servicer.
Moody's median cumulative net loss expectation for the 2022-B
reference pool is 2.00% and a loss at a Aaa stress of 8.00%.
Moody's based its cumulative net loss expectation on an analysis of
the credit quality of the underlying collateral; the historical
performance of similar collateral, including securitization
performance and managed portfolio performance; the ability of
Santander Consumer USA Inc. to perform the servicing functions; and
current expectations for the macroeconomic environment during the
life of the transaction.
At closing, the Class A-2, B notes, Class C notes, Class D notes,
Class E notes and Class F notes benefit 12.00%, 8.50%, 6.50%,
4.80%, 4.05%, and 2.65% of hard credit enhancement, respectively.
Hard credit enhancement for the notes consists of subordination.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Auto Loan- and Lease-Backed ABS" published in
July 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the Class B, Class C, Class D, Class E, and
Class F notes if levels of credit enhancement are higher than
necessary to protect investors against current expectations of
portfolio losses. 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 vehicles securing an obligor's
promise of payment. Portfolio losses also depend greatly on the US
job market and the market for used vehicles. Other reasons for
better-than-expected performance include changes to servicing
practices that enhance collections or refinancing opportunities
that result in prepayments.
Down
Moody's could downgrade the notes if given current expectations of
portfolio losses, levels of credit enhancement are consistent with
lower ratings. Credit enhancement could decline if realized losses
reduce available subordination. Moody's expectation of pool losses
could rise as a result of a higher number of obligor defaults or
deterioration in the value of the vehicles securing an obligor's
promise of payment. Portfolio losses also depend greatly on the US
job market, the market for used vehicles, and poor servicing. Other
reasons for worse-than-expected performance include error on the
part of transaction parties, inadequate transaction governance, and
fraud.
TOWD POINT 2022-4: Fitch Assigns 'B-sf' Rating on Class B2 Debt
---------------------------------------------------------------
Fitch Ratings has assigned final ratings to Towd Point Mortgage
Trust 2022-4 (TPMT 2022-4).
Debt Rating Prior
---- ------ -----
TPMT 2022-4
A1 LT AAAsf New Rating AAA(EXP)sf
A2 LT AA-sf New Rating AA-(EXP)sf
M1 LT A-sf New Rating A-(EXP)sf
M2 LT BBB-sf New Rating BBB-(EXP)sf
B1 LT BB-sf New Rating BB-(EXP)sf
B2 LT B-sf New Rating B-(EXP)sf
B3 LT NRsf New Rating NR(EXP)sf
B4 LT NRsf New Rating NR(EXP)sf
B5 LT NRsf New Rating NR(EXP)sf
A1A LT AAAsf New Rating AAA(EXP)sf
A1AX LT AAAsf New Rating AAA(EXP)sf
A1B LT AAAsf New Rating AAA(EXP)sf
A1BX LT AAAsf New Rating AAA(EXP)sf
A2A LT AA-sf New Rating AA-(EXP)sf
A2AX LT AA-sf New Rating AA-(EXP)sf
A2B LT AA-sf New Rating AA-(EXP)sf
A2BX LT AA-sf New Rating AA-(EXP)sf
A2C LT AA-sf New Rating AA-(EXP)sf
A2CX LT AA-sf New Rating AA-(EXP)sf
M1A LT A-sf New Rating A-(EXP)sf
M1AX LT A-sf New Rating A-(EXP)sf
M1B LT A-sf New Rating A-(EXP)sf
M1BX LT A-sf New Rating A-(EXP)sf
M1C LT A-sf New Rating A-(EXP)sf
M1CX LT A-sf New Rating A-(EXP)sf
M2A LT BBB-sf New Rating BBB-(EXP)sf
M2AX LT BBB-sf New Rating BBB-(EXP)sf
M2B LT BBB-sf New Rating BBB-(EXP)sf
M2BX LT BBB-sf New Rating BBB-(EXP)sf
M2C LT BBB-sf New Rating BBB-(EXP)sf
M2CX LT BBB-sf New Rating BBB-(EXP)sf
TRANSACTION SUMMARY
The bond sizes in this rating action commentary reflect the final,
closing bond sizes. The remainder of the commentary reflects the
data as of the statistical calculation date.
Fitch rates the residential mortgage-backed notes to be issued by
Towd Point Mortgage Trust 2022-4 (TPMT 2022-4). The transaction is
expected to close on Sept. 27, 2022. The notes are supported by one
collateral group that consists of 6,129 seasoned performing loans
(SPLs) and re-performing loans (RPLs) with a total balance of
approximately $1.03 billion, including $15.18 million, or 1.5%, of
the aggregate pool balance in non-interest-bearing deferred
principal amounts, as of the statistical calculation date.
Distributions of principal and interest (P&I) and loss allocations
are based on a traditional senior-subordinate sequential structure.
The sequential-pay structure locks out principal to the
subordinated notes until the most senior notes outstanding are paid
in full. The servicers will not advance delinquent (DQ) monthly
payments of P&I.
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 11.5% above a long-term sustainable level (versus
11.0% on a national level as of August 2022, up 1.8% since last
quarter). 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 19.8% yoy
nationally as of May 2022.
SPL and RPL Collateral (Mixed): The collateral pool consists
primarily of peak-vintage SPLs and RPLs, as defined by Fitch. Of
the pool, approximately 2.1% were DQ as of the statistical
calculation date. Approximately 81.6% have had clean pay histories
for 24 months or more (defined by Fitch as "clean current"), 0.8%
are newly originated loans with clean pay histories of at least 12
months, and the remaining 15.5% of the loans are current but have
had recent delinquencies or incomplete 24-month pay strings. Fitch
applied a probability of default (PD) credit to account for the
pool's large concentration of clean current loans. Roughly 57.5%
have been modified.
Low Leverage (Positive): The pool consists of loans with a weighted
average (WA) original combined loan to value (CLTV) ratio of 82.5%.
All loans received updated property values, translating to a WA
current MtM CLTV ratio of 49.1% and sustainable LTV (sLTV) of 55.7%
at the base case. This reflects low leverage borrowers and is
stronger than in recently rated SPL/RPL transactions.
Sequential-Pay Structure (Positive): The transaction's cash flow is
based on a sequential-pay structure, whereby the subordinate
classes do not receive principal until the senior classes are
repaid in full. Losses are allocated in reverse-sequential order.
Furthermore, the provision to re-allocate principal to pay interest
on the 'AAAsf' and 'AA-sf' rated notes prior to other principal
distributions is highly supportive of timely interest payments to
that class in the absence of servicer advancing.
No Servicer P&I Advances (Mixed): The servicers will not advance DQ
monthly payments of P&I, which reduces liquidity to the trust. P&I
advances made on behalf of loans that become DQ and eventually
liquidate reduce liquidation proceeds to the trust. Due to the lack
of P&I advancing, the loan-level loss severity (LS) is less for
this transaction than for those where the servicer is obligated to
advance P&I. Structural provisions and cash flow priorities,
together with increased subordination, provide for timely payments
of interest to the 'AAAsf' and 'AA-sf' rated classes.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
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 42.5% at 'AAAsf'. 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:
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’.
CRITERIA VARIATION
Fitch's analysis incorporated four criteria variations from the
"U.S. RMBS Rating Criteria."
The first variation is that a tax and title review was not
completed on 100% of seasoned first lien loans. Approximately 0.4%
by loan count (22 loans) did not receive an updated tax and title
search. This was viewed as an immaterial amount relative to the
overall pool. FirstKey confirmed that the servicers are monitoring
the tax and title status as part of standard practice and that the
servicer will advance where deemed necessary to keep the first lien
position. Additionally, for all loans, FirstKey confirmed it will
complete a clear chain of assignment within 18 months of the
transaction or will repurchase the loan. Given this, the variation
had no rating impact.
The second variation is that a due diligence compliance and data
integrity review was not completed on 100% of RPLs and SPLs from
unknown originators. Approximately 50.3% by loan count (44.1% by
UPB) did not receive a due diligence compliance and data integrity
review. The transferring trusts and securitization trust seller
originally acquired the mortgage loans from various unrelated
third-party sellers. The due diligence results from the loans
reviewed were extrapolated to the loans that did not receive a due
diligence review based on the expected losses of the loans that did
receive a due diligence review. The loss expectations were
increased by approximately 18bps at 'AAAsf' to account for this.
This variation had no rating impact.
The third variation relates to the pay history review. Fitch
expects a pay history review to be completed on 100% of RPLs and
expects the review to reflect the past 24 months. The pay history
sample completed on SPLs meets Fitch's criteria. A pay history
review either was not completed, was outdated or a pay string was
not received from the servicer for approximately 35.0% of the RPLs
by loan count (29.2% by UPB). Of the RPLs, 859 loans received a
review. For the loans where a pay history review was conducted, the
results verified what was provided on the loan tape. Additionally,
the pay strings on the loan tape were provided to FirstKey by the
current servicer. This variation had no rating impact.
The fourth variation is that a full new origination due diligence
review, including credit, compliance and property valuation, was
not completed on loans seasoned at less than 24 months.
Approximately 2.1% by UPB (67 loans) are seasoned at less than 24
months as of the statistical calculation date and are considered
newly originated. These loans received only a compliance review.
While a full credit review was not completed, the ATR status was
confirmed and updated values were provided in lieu of a valuation
review. Additionally, although these loans did not receive credit
and valuation grades, credit exceptions and property exceptions
were noted and provided by AMC Diligence, LLC (AMC). This variation
had no rating impact.
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, Clayton and Westcor. A third party due diligence
was performed on approximately 49.7% (by loan count) of the pool by
AMC and Clayton, both of which are assessed as 'Acceptable'
third-party review (TPR) firms by Fitch. The scope primarily
focused on regulatory compliance review to ensure loans were
originated in accordance with predatory lending regulations. The
results of the review indicated low operational risk with an 5.5%
portion of the pool assigned final compliance grades of 'C' or
'D'.
Of the loans graded 'C' or 'D', 1.9% by loan count (117 loans)
reflected missing final HUD-1 or estimated final HUD-1 documents
that are subject to testing for compliance with predatory lending
regulations. Fitch adjusted its loss expectation at the 'AAAsf'
stress by approximately 25 bps to reflect missing final HUD-1
files, modification agreements or assignment/endorsement and title
issues, as well as to address outstanding liens and taxes that
could take priority over the subject mortgage. Additionally, loss
multiples were extrapolated from the portion of loans provided due
diligence and applied at each rating category to estimate full
diligence review findings and adjustment.
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.
UBS-BARCLAYS COMMERCIAL 2013-C5: Fitch Lowers Cl. F Certs to 'Csf'
------------------------------------------------------------------
Fitch Ratings has downgraded seven classes and affirmed four
classes of UBS-Barclays Commercial Mortgage Trust (UBS-BB)
commercial mortgage pass-through certificates series 2013-C5. Fitch
has assigned classes B and X-B Stable Rating Outlooks.
Debt Rating Prior
---- ------ -----
UBS-BB 2013-C5
A-4 90270YBF5 LT AAAsf Affirmed AAAsf
A-AB 90270YBG3 LT AAAsf Affirmed AAAsf
A-S 90270YAA7 LT AAAsf Affirmed AAAsf
B 90270YAG4 LT Asf Downgrade AA-sf
C 90270YAL3 LT BBB-sf Downgrade A-sf
D 90270YAN9 LT B-sf Downgrade BBsf
E 90270YAQ2 LT CCsf Downgrade CCCsf
EC 90270YAJ8 LT BBB-sf Downgrade A-sf
F 90270YAS8 LT Csf Downgrade CCsf
XA 90270YAC3 LT AAAsf Affirmed AAAsf
XB 90270YAE9 LT Asf Downgrade AA-sf
KEY RATING DRIVERS
Increased Loss Expectations: The downgrades reflect increased loss
expectations due to an anticipated increase in defaults as loans
approach maturity in 2023, most notably on Valencia Town Center
maturing in January 2023. Ten loans (42.8% of pool) were designated
Fitch Loans of Concern (FLOCs) due to tenant concerns and/or
deteriorating performance including three loans in special
servicing (10.5%). Fitch's current ratings incorporate a base case
loss of 13.9%.
Fitch Loans of Concern: The largest contributor to losses Valencia
Town Center (23.5%), is secured by an 657,837-sf interest in a
1,106,145-sf regional mall located in Valencia, CA. Anchors at the
property include Macy's and JC Penney, which are subject to ground
leases. Sears vacated during the first half of 2018, prior to its
September 2045 ground lease expiration date. Fitch received no
further details on re-leasing efforts of the vacant space as the
space is not part of the loan's collateral. Major collateral
tenants include Edwards Theaters (10.2%; exp May 31, 2024), Gold's
Gym (4.4%; exp Nov. 30, 2028) and H&M (3.5%; exp Jan. 31, 2025).
Occupancy has fluctuated over the past several years: 84% (YE
2018), 95% (YE 2019), 83% (YE 2020), 82% (YE 2021) and 92% (June
2022). Debt service coverage ratio (DSCR) has shown a consistent
volatility during the same period: 3.21x (YE 2018), 2.69x (YE
2019), 2.43x (YE 2020), 1.36x (YE 2021) and 2.11x (June 2022).
Upcoming rollover is as follows: 10.1% (2022), 11.3% (2023) and
12.6% (2024). Annualized sales as of December 2021 for Macy's and
JC Penney were $148 psf and $67 psf, respectively, compared to $288
psf and $111 psf in September 2018 and $276 psf and $146 psf at
issuance.
Excluding the non-collateral anchor tenants and Apple, annualized
sales as of December 2021 were $499 psf compared to $490 psf in
September 2018 and $492 psf at issuance. With Apple, annualized
sales as of December 2021 were $596 psf compared to $556 psf in
September 2018 and $527 in September 2016. Fitch's base case loss
of 35.2% was based on a 12% cap rate, normalized June 2022 NOI and
the likelihood of the loan not paying off at its Jan. 2023 maturity
date given the large amount of outstanding debt and the current
economic environment.
The second largest contributor to losses and largest specially
serviced loan, Harborplace (7.4%), is secured by a 148,928-sf
retail center located in the heart of Baltimore's Inner Harbor at
the intersection of Pratt and Light streets, and situated steps
away from the harbor itself. Major restaurant tenants include Bubba
Gump Shrimp Company, Pizzeria Uno and The Cheesecake Factory. The
loan transferred to special servicing in February 2019 due to
imminent monetary default and is 90+ days delinquent. Occupancy has
remained below 75% since YE 2016 and has steadily declined
following the loss of several tenants. As of June 2022, occupancy
was reported at 49%. Fitch's base case loss of 47.4% reflects a
stressed value of approximately $308 psf.
The third largest contributor to losses, The Village of Cross Keys
(2.2%), is secured by a 296,766-sf mixed-use property (147,140-sf
retail space, 119,334-sf office space, and a 30,292-sf tennis club)
located just east of Interstate 83 in central Baltimore
approximately seven miles north of Baltimore's Inner Harbor. The
loan was previously in special servicing in 2019 due to imminent
monetary default, and recently was returned back to the master in
September 2020.
Occupancy has remained in the low 60s since 2017 and declined to
the 50s at YE 2020. As of YE 2021, the property was 56.1% occupied.
NOI DSCR has been well below 1.0x since YE 2017 and was reported at
0.63x as of YE 2021. Approximately 17.1% NRA and 3.4% NRA expire in
2022 and 2023 respectively. An updated rent roll was requested but
was not received. Fitch's modeled loss of 42.7% reflects a 9.75%
cap rate on YE 2021 NOI.
Defeasance/Improved Credit Enhancement Since Issuance: 37 loans
(37.3%) are fully defeased including six loans in the top 15. Since
the last rating action, 11 loans (11.2%) defeased and four loans
prepaid in full during their open period or prior to their
scheduled maturities. Recoveries were higher than expected on Santa
Anita Mall; Fitch previously modeled a 5% LS on this asset. As of
the September 2022 distribution date, the pool's aggregate balance
has been reduced by 44.2% to $828.3 million from $1.5 billion at
issuance. Realized losses total $2.4 million and interest
shortfalls in the amount of $2.7 million are currently affecting
non-rated class G. Three loans (27.6% of the pool) are full-term
interest-only, one loan (0.02%) is fully amortizing and the
remaining 68 loans are amortizing.
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
'AAAsf' category are not likely due to sufficient credit
enhancement (CE) and expected continued amortization but could
occur if interest shortfalls affect these classes.
Downgrades to the 'Asf' and 'BBB-sf' categories 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', 'CCsf' and 'Csf' 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.
Fitch has identified both a baseline and a worse-than-expected,
adverse stagflation scenario based on fallout from the
Russia-Ukraine war whereby growth is sharply lower amid higher
inflation and interest rates; even if the adverse scenario should
play out, Fitch expects virtually no impact on ratings performance,
indicating very few rating or Outlook changes. However, for some
transactions with concentrations in underperforming retail
exposure, the ratings impact may be mild to modest, indicating some
changes on sub-investment grade notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Factors that could lead to upgrades would include stable to
improved asset performance coupled with pay down and/or defeasance.
Upgrades of the 'Asf' and 'BBB-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.
The 'BBB-'-rated classes would not be upgraded above 'Asf' if there
is likelihood for interest shortfalls.
Upgrades to 'B-sf', 'CCsf' and 'Csf' categories are not likely but
could occur if performance of the FLOCs improves significantly,
recoveries are higher than expected and there is sufficient CE.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
VERUS 2022-8: S&P Assigns Prelim B- (sf) Rating on Class B-2 Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Verus
Securitization Trust 2022-8's mortgage-backed notes.
The note issuance is an RMBS transaction backed by U.S. residential
mortgage loans.
The preliminary ratings are based on information as of Oct. 5,
2022. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The pool's collateral composition;
-- The transaction's credit enhancement, associated structural
mechanics, representations and warranties framework, and geographic
concentration;
-- The mortgage aggregator, Invictus Capital Partners (Invictus);
and
-- The potential impact current and near-term macroeconomic
conditions may have on the performance of the mortgage borrowers in
the pool. S&P said, "On April 17, 2020, we updated our mortgage
outlook and corresponding archetypal foreclosure frequency levels
to account for the potential impact of the COVID-19 pandemic on the
overall credit quality of collateralized pools. While
pandemic-related performance concerns have waned, given our current
outlook for the U.S. economy considering the impact of the
Russia-Ukraine military conflict, supply-chain disruptions, and
rising inflation and interest rates, we continue to maintain our
updated 'B' foreclosure frequency for the archetypal pool at
3.25%."
Preliminary Ratings(i) Assigned
Verus Securitization Trust 2022-8
Class A-1, $268,657,000: AAA (sf)
Class A-2, $52,553,000: AA (sf)
Class A-3, $61,037,000: A (sf)
Class M-1, $33,465,000: BBB- (sf)
Class B-1, $21,681,000: BB- (sf)
Class B-2, $16,732,000: B- (sf)
Class B-3, $17,204,057: Not rated
Class A-IO-S, notional(ii): Not rated
Class XS, notional(ii): Not rated
Class R, not applicable: Not rated
(i)The preliminary ratings address the ultimate payment of interest
and principal.
(ii)The notional amount will equal the aggregate stated principal
balance of the mortgage loans as of the first day of the related
due period.
WELLFLEET CLO 2022-2: S&P Assigns BB- (sf) Rating on Class E Notes
------------------------------------------------------------------
S&P Global Ratings assigned ratings to Wellfleet CLO 2022-2
Ltd./Wellfleet CLO 2022-2 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 Wellfleet Credit Partners LLC.
The 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.
Ratings Assigned
Wellfleet CLO 2022-2 Ltd./Wellfleet CLO 2022-2 LLC
Class A-1, $300.00 million: AAA (sf)
Class A-2, $16.25 million: Not rated
Class B, $46.25 million: AA (sf)
Class C (deferrable), $36.25 million: A (sf)
Class D (deferrable), $28.50 million: BBB-(sf)
Class E (deferrable), $17.00 million: BB- (sf)
Subordinated notes, $56.70 million: Not rated
WELLS FARGO 2019-C52: Fitch Affirms 'B-sf' Rating on G-RR Debt
--------------------------------------------------------------
Fitch Ratings has affirmed 14 classes of Wells Fargo Commercial
Mortgage Trust 2019-C52, one class of 2019 C52 III Trust, and one
class of 2019 C52 IV Trust.
Debt Rating Prior
---- ------ -----
MOA 2020-WC52 D
D-RR 90215QAA2 LT BBBsf Affirmed BBBsf
WFCM 2019-C52
A-2 95002MAT6 LT AAAsf Affirmed AAAsf
A-3 95002MAU3 LT AAAsf Affirmed AAAsf
A-4 95002MAW9 LT AAAsf Affirmed AAAsf
A-5 95002MAX7 LT AAAsf Affirmed AAAsf
A-S 95002MBA6 LT AAAsf Affirmed AAAsf
A-SB 95002MAV1 LT AAAsf Affirmed AAAsf
B 95002MBB4 LT AA-sf Affirmed AA-sf
C 95002MBC2 LT A-sf Affirmed A-sf
D-RR 95002MAA7 LT BBBsf Affirmed BBBsf
E-RR 95002MAE9 LT BBB-sf Affirmed BBB-sf
F-RR 95002MAG4 LT BB-sf Affirmed BB-sf
G-RR 95002MAJ8 LT B-sf Affirmed B-sf
X-A 95002MAY5 LT AAAsf Affirmed AAAsf
X-B 95002MAZ2 LT A-sf Affirmed A-sf
MOA 2020-WC52 E
E-RR 90216LAA2 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Stable Performance and Loss Expectations: Overall pool performance
and base case loss expectations have remained relatively stable
since Fitch's prior review and issuance. Fitch has identified six
Fitch Loans of Concern (FLOCs; 5.2% of the pool balance).
Performance has stabilized for the majority of properties affected
by the pandemic. Fourteen loans (21.4%) are on the master
servicer's watchlist for declines in occupancy, performance
declines due to the pandemic, upcoming rollover and/or deferred
maintenance. Fitch's ratings incorporate a base case loss of 3.63%,
consistent with issuance expectations.
The largest contributor to overall loss expectations is the Sugar
Creek Center (3.2%), which is secured by a 193,996-sf office
property located at One Sugar Creek Center Boulevard, Sugar Land,
Texas. Occupancy declined to 69% in March 2021 from 76% in 2020 and
85% in 2019. Several tenants vacated since YE 2019 including Ken
Wood & Associates (3.3% of NRA; 8/20 LXD), Alamo Environmental
(3.2% of NRA; 2/22 LXD), Wauson & Associates (2.1% of NRA; 7/21
LXD), WFG National Title Company of Texas (1.7% of NRA; 7/21 LXD),
Transamerica Premier Life Insurance (1.6% of NRA; 10/21 LXD), and
Core Disaster Services (1.1% of NRA; 4/22 LXD).
Annualized June 2022 NOI DSCR was 1.19x, compared with 1.38x at YE
2020 and 1.20x at YE 2019. Fitch's analysis includes a 10% cap rate
and 10% total haircut to the YE 2020 NOI to account for the low
occupancy, performance concerns resulting in an 11.5% modeled
loss.
The next largest contributor to expected loss is Embassy Suites at
Centennial Olympic Park (4.3% of the pool), which is secured by a
full-service hotel located in Atlanta, GA. Performance declined
during the pandemic and the borrower received temporary payment
relief; however, performance continues to rebound from the pandemic
lows. The servicer reported DSCR as of the second quarter of 2022
was 1.96x compared with 1.08x at YE 2021 and 0.42x at YE 2020. As
of the TTM ended March 2022, the hotel was outperforming its
competitive set with a RevPAR penetration rate of 155.7%. The loan
has not been identified as a FLOC as performance is expected to
continue improving as conditions caused by the pandemic continue to
subside. The loan remains current as of the September 2022
distribution date.
Minimal changes to Credit Enhancement (CE): As of the September
2022 distribution date, the pool's aggregate balance has been
reduced by 4.4% to $860.7 million from $900.2 million at issuance.
No loans have paid off. Five loans (9.6% of current pool) are fully
defeased. Twenty-five full-term interest-only loans comprise 42.4%
of the pool, seventeen loans representing 29.6% of the pool were
partial interest-only, and twenty-four loans representing 28% of
the pool are balloon.
Property Type Concentration: The highest concentration is office
(36.1%), followed by retail (21.3%), industrial (12.6%) and lodging
(11.1%).
Pari Passu Loans: Ten loans (29.7% of pool) are pari passu.
Credit Opinion Loan: At issuance, Moffett Towers - Buildings 3 & 4
was given an investment-grade credit opinion of 'BBB-sf' on a
stand-alone basis.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Sensitivity factors that could lead to downgrades include an
increase in pool-level losses from underperforming loans/assets;
- Downgrades to 'AAAsf' and 'AA-sf' are not likely due to their
position in the capital structure, overall stable performance and
expected continued paydown, but may occur should interest
shortfalls affect these classes.
- Downgrades to 'A-sf' and 'BBBsf' may occur should expected
losses for the pool increase substantially, or all of the loans
susceptible to the coronavirus pandemic suffer losses, which would
erode credit enhancement;
- Downgrades to 'BB-sf' and 'B-sf' would occur should overall pool
loss expectations increase from continued performance decline of
the FLOCs, loans susceptible to the pandemic not stabilize,
additional loans default or transfer to special servicing and/or
higher losses incur on the specially serviced loans than expected.
Fitch has identified both a baseline and a worse-than-expected,
adverse stagflation scenario based on fallout from the
Russia-Ukraine war whereby growth is sharply lower amid higher
inflation and interest rates; even if the adverse scenario should
play out, Fitch expects virtually no impact on ratings performance,
indicating very few rating or Outlook changes. However, for some
transactions with concentrations in underperforming retail
exposure, the ratings impact may be mild to modest, indicating some
changes on sub-investment-grade notes.
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, C and X-B could occur with significant improvement in CE
and/or defeasance and/or the stabilization to the properties
impacted from the coronavirus pandemic.
Upgrades to classes D-RR and E-RR would also consider these
factors, but would be limited based on the sensitivity to
concentrations or the potential for future concentrations. Classes
would not be upgraded above 'A-sf' if there is a likelihood of
interest shortfalls. An upgrade to classes F-RR and G-RR 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
there is sufficient CE to the bonds.
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.
[*] Moody's Takes Action on $272.6MM of US RMBS Issued 2002-2007
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 24 bonds and
downgraded the ratings of two bonds from ten US residential
mortgage-backed transactions (RMBS), backed by Alt-A, option ARM,
and subprime mortgages issued by multiple issuers.
Complete rating actions are as follows:
Issuer: CIT Home Equity Loan Trust 2002-1
Cl. AF-5, Upgraded to Ba1 (sf); previously on May 2, 2012 Confirmed
at B1 (sf)
Cl. AF-6, Upgraded to Baa3 (sf); previously on May 2, 2012
Confirmed at Ba3 (sf)
Cl. AF-7, Upgraded to Ba1 (sf); previously on May 2, 2012 Confirmed
at B1 (sf)
Issuer: First Franklin Mortgage Loan Trust 2006-FF17
Cl. A1, Upgraded to B2 (sf); previously on Apr 9, 2018 Upgraded to
Caa1 (sf)
Issuer: HarborView Mortgage Loan Trust 2004-3
Cl. 1-A, Downgraded to Caa1 (sf); previously on Dec 6, 2021
Downgraded to B2 (sf)
Cl. 2-A, Downgraded to Caa1 (sf); previously on Dec 6, 2021
Downgraded to B2 (sf)
Issuer: Impac CMB Trust Series 2004-5 Collateralized Asset-Backed
Bonds, Series 2004-5
Cl. 1-A-1, Upgraded to Aaa (sf); previously on Dec 3, 2021 Upgraded
to Aa2 (sf)
Cl. 1-A-2, Upgraded to Aaa (sf); previously on Dec 3, 2021 Upgraded
to Aa1 (sf)
Cl. 1-A-3, Upgraded to Aa1 (sf); previously on Dec 3, 2021 Upgraded
to Aa3 (sf)
Cl. 1-M-1, Upgraded to Aa2 (sf); previously on Dec 3, 2021 Upgraded
to A1 (sf)
Cl. 1-M-2, Upgraded to Aa2 (sf); previously on Dec 3, 2021 Upgraded
to A1 (sf)
Cl. 1-M-3, Upgraded to Aa3 (sf); previously on Dec 3, 2021 Upgraded
to A2 (sf)
Cl. 1-M-4, Upgraded to A1 (sf); previously on Dec 3, 2021 Upgraded
to A3 (sf)
Cl. 1-M-5, Upgraded to A2 (sf); previously on Dec 3, 2021 Upgraded
to Baa1 (sf)
Cl. 1-M-6, Upgraded to A3 (sf); previously on Dec 3, 2021 Upgraded
to Baa2 (sf)
Issuer: Fremont Home Loan Trust 2005-E
Cl. 2-A-4, Upgraded to Aa3 (sf); previously on Dec 11, 2018
Upgraded to A2 (sf)
Issuer: IndyMac Home Equity Mortgage Loan Asset-Backed Trust, INABS
2006-B
Cl. 1A-1, Upgraded to Aa3 (sf); previously on Dec 3, 2021 Upgraded
to A2 (sf)
Cl. 1A-2, Upgraded to Aa3 (sf); previously on Dec 3, 2021 Upgraded
to A2 (sf)
Cl. 2A-3, Upgraded to Baa3 (sf); previously on Dec 3, 2021 Upgraded
to Ba2 (sf)
Cl. 2A-4, Upgraded to B1 (sf); previously on Mar 6, 2018 Upgraded
to B3 (sf)
Issuer: Structured Asset Investment Loan Trust 2005-9
Cl. M1, Upgraded to A1 (sf); previously on Dec 6, 2021 Upgraded to
A3 (sf)
Issuer: Structured Asset Mortgage Investments II Trust 2007-AR2
Cl. I-A-1, Upgraded to B1 (sf); previously on Dec 6, 2021 Upgraded
to B3 (sf)
Issuer: Structured Asset Securities Corp Trust 2005-NC2
Cl. M5, Upgraded to Aaa (sf); previously on Dec 6, 2021 Upgraded to
Aa2 (sf)
Cl. M6, Upgraded to Baa1 (sf); previously on Dec 6, 2021 Upgraded
to Ba1 (sf)
Issuer: Structured Asset Securities Corp Trust 2006-EQ1
Cl. A1, Upgraded to Aaa (sf); previously on Dec 3, 2021 Upgraded to
Aa2 (sf)
Cl. A5, Upgraded to A2 (sf); previously on Dec 17, 2018 Upgraded to
Baa1 (sf)
A List of Affected Credit Ratings is available at
https://bit.ly/3rAhiXV
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 increase in credit enhancement
available to the bonds and the rating downgrades are primarily due
to a decline in credit enhancement available to the bonds.
In light of the current macroeconomic environment, Moody's revised
loss expectations based on forecast uncertainties. Specifically,
Moody's have observed an increase in delinquencies, payment
forbearance, and payment, which could result in higher realized
losses. Moody's rating actions also take into consideration the
buildup in credit enhancement of the bonds, which has helped offset
the impact of the increase in expected losses.
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 11% 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.
Principal Methodologies
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in July 2022.
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 130 Classes From 20 US RMBS Deals
------------------------------------------------------------------
S&P Global Ratings completed its review of 130 classes from 20 U.S.
RMBS transactions issued between 2019 and 2021. The review yielded
33 upgrades, one downgrade, and 96 affirmations.
A list of Affected Ratings can be viewed at:
https://bit.ly/3SBxXWL
S&P said, "For each transaction, we performed a credit analysis
using updated loan-level information from which we determined
foreclosure frequency, loss severity, and loss coverage amounts
commensurate for each rating level. We also used the same mortgage
operational assessment, representation and warranty, and due
diligence factors that were applied at issuance. Our geographic
concentration and prior-credit-event adjustment factors reflect the
transactions' current pool composition. Further, we did not apply
additional adjustment factors relating to forbearance or repayment
plan activity.
"We performed a credit analysis for each transaction using updated
loan-level information from which we determined foreclosure
frequency, loss severity, and loss coverage amounts commensurate
for each rating level. We also used the same mortgage operational
assessment, representation and warranty, and due diligence factors
that were applied at issuance. Our geographic concentration and
prior-credit-event adjustment factors reflect the transactions'
current pool composition. We did not apply additional adjustment
factors relating to forbearance or repayment plan activity.
"The upgrades primarily reflect deleveraging due to the respective
transactions benefitting from low or zero accumulated losses and
high observed prepayment speeds, which resulted in a greater
percentage of credit support for the rated classes. The
transactions' improved loan-to-value ratios due to significant home
price appreciation have also resulted in lower projected default
expectations. Ultimately, we believe these classes have sufficient
credit support to withstand projected losses at higher rating
levels."
The downgrade of class B-2 from GCAT 2021-NQM1 Trust reflects the
class's insufficient credit support to withstand projected losses
at higher rating levels due to increased delinquencies.
The affirmations reflect S&P's view that the projected collateral
performance relative to its projected credit support on the
affected classes remains sufficient to cover our projected losses
for those rating scenarios.
Analytical Considerations
S&P incorporates various considerations into its decisions to
raise, lower, or affirm ratings when reviewing the indicative
ratings suggested by the application of its criteria. These
considerations are based on transaction-specific performance or
structural characteristics (or both) and their potential effects on
certain classes. These considerations include:
-- Collateral performance or delinquency trends,
-- Priority of principal payments,
-- Priority of loss allocation, and
-- Available subordination and excess spread.
[*] S&P Takes Various Actions on 18 Classes from 14 U.S. ABS Deals
------------------------------------------------------------------
S&P Global Ratings completed its review of 18 ratings from 14 U.S.
manufactured housing ABS transactions issued between 1997 and 2002.
The review yielded one downgrade and 17 affirmations.
The collateral pools backing the transactions that S&P reviewed
consist of manufactured housing loans that were originated by
Oakwood Acceptance Corp. LLC. The transactions are serviced by
Vanderbilt ABS Corp., which began servicing these transactions in
April 2004.
S&P said, "The affirmed 'CCC (sf)' and 'CC (sf)' ratings reflect
our view that credit support will remain insufficient to cover our
expected losses for these classes. As defined in our criteria, the
'CCC (sf)' level ratings reflect our view that the related classes
are vulnerable to nonpayment and are dependent upon favorable
business, financial, and economic conditions in order to be paid
interest and/or principal according to the terms of each
transaction. The 'CC (sf)' ratings reflect our view that the
related classes remain virtually certain to default."
For Oakwood Mortgage Investors Inc.'s series 1998-D transaction,
while hard credit enhancement (HCE) in the form of subordination
provided by the M-1 class has remained stable as a percentage of
the current pool balance, the class M-1 notes are receiving
principal payments in addition to being written down. As the M-1
notes continue to be written down, the class A-1-ARM's HCE level as
a percent of the current pool balance may decline in the future. As
a result, S&P has lowered the rating on this class.
S&P will continue to monitor the performance of the transactions
relative to their cumulative net loss expectations and the
available credit enhancement. S&P will take rating actions as it
considers appropriate.
Rating Lowered
Oakwood Mortgage Investors Inc.
Series 1998-D, class A1-ARM: to 'BBB (sf)' from 'A (sf)'
ARM--Adjustable rate mortgage.
NR--Not rated.
Ratings Affirmed
Oakwood Mortgage Investors Inc.
Series 1997-A, class B-1: CC (sf)
Series 1998-B, class M-1: CCC- (sf)
OMI Trust
Series 1999-C, class A-2: CC (sf)
Series 1999-D, class A-1: CCC- (sf)
Series 1999-E, class A-1: CC (sf)
Series 2000-A, class A-4: CC (sf)
Series 2000-A, class A-5: CC (sf)
Series 2000-C, class A-1: CCC- (sf)
Series 2000-D, class A-4: CC (sf)
Series 2001-D, class A-3: CC (sf)
Series 2001-D, class A-4: CC (sf)
Series 2001-E, class A-4: CC (sf)
Series 2002-A, class A-3: CCC+ (sf)
Series 2002-A, class A-4: CCC+ (sf)
Series 2002-B, class A-3: CCC (sf)
Series 2002-B, class A-4: CCC (sf)
Series 2002-C, class A-1: CCC+ (sf)
*********
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