MOODY'S ASSIGNS RATINGS TO 18 CLASSES OF AMRESCO RESIDENTIAL MORTGAGE LOAN TRUST 1997-2
New York, 06-26-97 -- Moody's Investors Service has assigned ratings, which range from Aaa to Baa2, to 15 classes of residential mortgage pass-through issued by AMRESCO Residential Securities Corporation Mortgage Loan Trust 1997-2. The collateral includes both adjustable rate mortgages (ARMs) and fixed rate mortgages (FRMs). The ratings are based on the quality of the collateral, the structure of the transaction, and the amount of credit enhancement available through subordination, excess spread, and overcollateralization.
The transaction is structured as a senior/subordinated, overcollateralized pass-through, consisting of two certificate groups: one secured by a pool of fixed-rate mortgage loans, the other secured by a group of adjustable-rate mortgage loans. Classes A-1 through A-8, Class M-1F, and Class M-2F, in the fixed rate group, will be supported by 12.5%, 8.75%, and 3.25%, respectively, of subordinated classes. Class A-9, Class M-1A, Class M-2A, in the adjustable-rate group, will be supported by 17.75%, 11.5%, 5.5%, respectively, of subordinated classes. Classes B-1F and B-1A are not supported by subordination. Their credit support instead is derived exclusively from monthly spread and overcollateralization, which builds from zero to a specified level over time.
Overcollateralization for each group is created by directing excess spread to pay down the senior certificates. The overcollateralization provides first-loss protection by absorbing loan losses before losses are applied to the subordinate certificates. Distributions of interest and principal payments will initially be made sequentially; if, however, certain stepdown criteria are met, principal distributions will be made on a prorata basis to all classes.
If overcollateralization is exhausted, the balances of the subordinate certificates will be written down in reverse priority order in an amount that will reduce the certificate balances to that of the collateral. Certificates which previously had been written down may be reimbursed in the future from principal and excess interest not needed to maintain overcollateralization. Excess cash flow from one group will be used to build overcollateralization and make up shortfalls in another group, if necessary, before payment is made to residual holders.
Moody's analyst, Rod Dubitsky, noted that the credit enhancement levels for this transaction are overall lower than for AMRESCO 97-1. The lower credit enhancement levels are based on several factors, including Moody's review of AMRESCO's acquisition of Quality Mortgage and of AMRESCO's operations. The addition of subordinate performance triggers, which would prevent principal from being paid out to residual holders if cumulative losses and delinquencies exceed certain levels, also enhanced the protection available to the subordinate investors. In addition, the increased overcollateralization cap in the 97-2 transaction helped the lowest class achieve a Baa2 rating, as compared to Baa3 in the 97-1 transaction. Dubitsky says that the higher overcollateralization cap benefits all the 97-2 classes; thus, the amount of subordination of all classes is lower than that of 97-1's. However, 97-2's fixed-rate collateral is riskier, due to a higher concentration of lower quality borrowers. This factor, to some extent, offset the benefit of the higher overcollateralization and operation review discussed above.
AMRESCO Residential Capital Markets, Inc. was incorporated in the State of Delaware on October 13, 1995. The Seller maintains its principal offices in Dallas, Texas. AMRESCO Inc., the holding company, focuses, through its subsidiaries, on asset portfolio acquisition and resolution, commercial and multifamily mortgage banking, residential mortgage securitization , and institutional investment advisory services.
The complete rating actions are as follows:
Issuer: AMRESCO Residential Securities Corporation Mortgage Loan Trust 1997-2
Class A-1, $48,800,000, rated Aaa
Class A-2, $44,500,000, rated Aaa
Class A-3, $ 68,100,000, rated Aaa
Class A-4, $27,900,000, rated Aaa
Class A-5, $21,300,000, rated Aaa
Class A-6, $14,900,000, rated Aaa
Class A-7, $36,975,000, rated Aaa
Class A-8, $28,900,000, rated Aaa
Class A-9, $334,757,000, rated Aaa
Class M-1F, $12,487,000, rated Aa2
Class M-1A, $25,438,000, rated Aa2
Class M-2F, $18,315,000, rated A2
Class M-2A, $24,420,000, rated A2
Class B-1F, $10,823,000, rated Baa2
Class B-1A, $22,385,000, rated Baa2
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