MOODY'S RATES GMAC-RFC'S RASC SERIES 2003-KS4 SUBPRIME DEAL Aaa
Approximately $1.3 Billion of Mortgage-Backed Securities Rated.
New York, July 31, 2003 -- Moody's Investors Service has assigned a Aaa rating to the senior certificates
of GMAC-RFC's securitization of adjustable-rate subprime
mortgage loans, RASC 2003-KS4. Moody's has also assigned
ratings ranging from Aa2 to Baa2 to the mezzanine certificates of the
deal. The Class A-II-A, Class A-II-B
and Class A-III certificates are insured by a certificate guaranty
insurance policy from Ambac Assurance Corporation (Ambac), whose
insurance financial strength is rated Aaa by Moody's.
According to Moody's analyst, Karin Kelner, the ratings on
the Class A-II and Class A-III certificates is based primarily
on the Ambac policy. Ambac receives some protection against losses
through a combination of excess spread, overcollateralization,
and deep loan-level mortgage insurance. Based on these features,
Moody's concluded that the risk to Ambac from insuring the certificates
was "investment grade."
The ratings on the Class A-I and Class M-I certificates
are based primarily on the credit enhancement provided through a combination
of primary mortgage insurance, excess spread, overcollateralization,
and subordination, according to Moody's. The ratings also
reflect the credit quality of the underlying mortgage loans and take into
account the structure of the transaction.
The loan pool consists of four loan groups. Group I includes the
fixed-rate mortgage (FRM) loans (approximately $650 million
of the deal), Group II-A includes adjustable-rate
mortgage (ARM) loans that had principal balances at origination which
were less than or equal to the conforming balance (approximately $250
million of the deal), Group II-B includes ARM loans that
had principal balances at origination which were less than, equal
to or greater than the conforming loan balance (approximately $200
million of the deal), and Group III also includes ARM loans that
are had principal balances at origination which were less than,
equal to or greater than the conforming loan balance (approximately $200
million of the deal).
The FRM loans have average credit quality compared to a typical subprime
FRM loan pool. For example, the borrower quality of the pool
is average, with the group's relatively high FICO of 623,
offset by the inclusion of approximately 8.8% of B&C
grade borrowers. At the same time, the group's weighted-average
loan-to-value (LTV) ratio of about 78.8% is
slightly higher than the subprime average of about 77%.
The FRM group also benefits from good geographic diversification of the
loans. Each of the three states with the highest geographic concentrations-California,
Florida and Texas -- represents about 16.14%,
8.93% and 8.09% of the FRM loan group respectively.
No other state makes up more than 6% of the pool. Good geographic
distribution of the loans reduces the effects of regional economic cycles
on the loan pool.
The ARM loans are also about average when compared to a typical subprime
ARM pool. While the groups' average LTV of 81.5%
is slightly higher than the subprime average, the borrower quality
is slightly better. The weighted-average FICO score of 611
is about 10 points higher than that reported for other recent subprime
ARM loan securitizations. The ARM loans are also well diversified
geographically, with California, Michigan and Minnesota,
the three states with the highest geographic concentrations, accounting
for only 15.0%, 8.7% and 7.5%
of the loan groups.
The transaction's structure utilizes deep loan-level lender-paid
mortgage insurance (MI). Mortgage Guaranty Insurance Corporation
(MGIC), rated Aa2 by Moody's, provides the MI coverage on
approximately 59.9% of the Group I loans, 70.2%
of the Group II loans, and 63.0 of the Group III loans.
The MGIC insurance absorbs a significant amount of the risk associated
with the underlying loans by reducing severity of loss if the insured
loans default. The lender-paid mortgage insurance covers
mortgages that have an LTV ratio of greater than 50% and that also
meet MGIC's criteria for mortgage insurance coverage.
Because of the loan-level mortgage insurance, the loans'
higher LTV does not necessarily have a negative impact on the overall
credit risk. In fact, the higher-LTV loans derive
more benefit from mortgage insurance because of the larger coverage.
The complete rating actions are as follows:
Issuer: RASC Series 2003-KS4 Trust
Securities: Home Equity Mortgage Asset-Backed Pass-Through
Certificates, Series 2003-KS4
Class A-I-1 Adjustable Rate $228,041,000
Class A-I-2 2.080% $38,207,000
Class A-I-3 2.510% $136,457,000
Class A-I-4 3.490% $47,105,000
Class A-I-5 4.670% $60,440,000
Class A-I-6 3.870% $65,000,000
Class A-I-IO 3.50% Notional Amount Rated Aaa
Class A-II-A Adjustable Rate $250,000,000
Class A-II-B Adjustable Rate $200,000,000
Class A-III Adjustable Rate $200,000,000 Rated
Class M-I-1 4.610% $34,125,000
Class M-I-2 5.010% $24,375,000
Class M-I-3 6.030% $16,250,000
Residential Funding Corporation is the master servicer of the loans.
HomeComings Financial Network, Inc., a wholly owned
subsidiary of RFC, will be the primary servicer for approximately
84.3% of the Group I loans, 90.8% of
the Group II-A loans, 91.4% of the Group II-B
loans, and 92.0% of the Group III loans. HomeComings
is considered to be a highly capable servicer of residential mortgage
Additional research will be available at www.moodys.com.
Structured Finance Group
Moody's Investors Service
Karin J. Kelner
Structured Finance Group
Moody's Investors Service