MOODY'S UPGRADES 14 CLASSES, DOWNGRADES 8 CLASSES AND CONFIRMS 6 CLASSES OF METROPOLITAN MORTGAGE TRANSACTIONS.
Moody's Investors Service has upgraded 14 classes from 5 subprime mortgage transactions issued by Metropolitan Asset Funding, Inc. from 1996 through 1999. In addition, Moody's has downgraded 8 classes from 4 subprime mortgage transactions issued by Metropolitan Asset Funding, Inc. and Metropolitan Mortgage Funding, Inc. from 1998 through 2000.
According to Adrian Chan, a Moody's analyst, the ratings changes resulted from an analysis of the potential losses for the pools backing each transaction and the level of credit enhancement available to protect each security from experiencing a loss. In some cases, actual losses experienced varied significantly from original expectations resulting in credit enhancement levels that were either too high or too low for the rating assigned to the security.
Chan said that Metropolitan transactions are usually backed by mortgage pools that include a significant amount of seller-financed loans and loans with small average balances. Seller-financed loans are often of weaker credit quality than lender-originated loans because these borrowers tend to have difficulty obtaining financing from established lending institutions, and also because property sellers who finance these loans frequently lack the underwriting skills of conventional lending institutions. At the same time, mortgages with small balances experience relatively high loss severities as the fixed costs to foreclose and liquidate mortgage loans tend to be high compared to the loan balance.
Although the mortgage loans backing Metropolitan transactions are generally weaker than average for the reasons cited above, the mortgage pools backing the 1996-A, 1997-B, 1999-B, and 1999-C transactions have experienced losses that are either at or below Moody's original expectations. Additionally, the structural integrity of these transaction ensured that credit enhancement remained relatively high. For example, the overcollateralization for the 1996-A transaction has reached 45% of the current mortgage pool balance and can only be reduced by losses.
The pools backing the downgraded classes have experienced higher-than-expected losses, with the performance of the pool backing the 2000-B transaction showing the weakest performance with cumulative losses of 3.24% after 33 months. The weak performance in the 2000-B pool is likely a result of relaxed underwriting standards as lenders competed for a diminishing pool of potential borrowers throughout 2000 as a result of rising interest rates.
Higher-than-expected losses on the mortgage pools backing the five downgraded classes from 1998-A, 1998-B and 1999-A continue to exceed the amount of excess spread available to absorb losses resulting in the erosion of over-collateralization available in these transactions.
The complete rating review is as follows:
Depositor: Metropolitan Asset Funding, Inc.
Metropolitan Mortgage Funding, Inc.
Series Class Current Rating Rating Action
1996-A $4.1 mil Class B-4 certs Aa2 Upgraded to Aaa
$2.9 mil Class B-5 certs A1 Upgraded to Aaa
1997-B $1.3 mil Class B-2 certs Aa2 Upgraded to Aaa
$0.8 mil Class B-3 certs A2 Upgraded to Aaa
$1.1 mil Class B-4 certs Baa2 Upgraded to Aaa
1998-A $9.3 mil Class M-1 certs Aa2 Upgraded to Aaa
$6.1 mil Class M-2 certs A2 Upgraded to Aa2
$4.7 mil Class B-1 certs Baa2 Confirmed
$4.7 mil Class B-2 certs Ba2 Downgraded to Caa3
1998-B $6.8 mil Class M-2 certs A2 Confirmed
$5.8 mil Class B-1 certs Baa2 Downgraded to B3
$1.9 mil Class B-2 certs Ba2 Downgraded to Ca
1999-A $5.0 mil Class M-2 certs A2 Confirmed
$3.6 mil Class B-1 certs Baa2 Downgraded to B3
$1.4 mil Class B-2 certs Ba2 Downgraded to C
1999-B $12.6 mil Class M-1 certs Aa2 Upgraded to Aaa
$5.2 mil Class M-2 certs A2 Upgraded to Aa2
$5.2 mil Class B-1 certs Baa2 Confirmed
1999-C $3.3 mil Class M-1 certs Aa2 Upgraded to Aaa
$3.1 mil Class M-2 certs A2 Upgraded t Aa1
$2.3 mil Class B-1 certs Baa2 Upgraded to A1
$2.1 mil Class B-2 certs Ba2 Upgraded to Baa3
$1.3 mil Class B-3 certs B2 Upgraded to Ba3
2000-B $97.5 mil, Class A-1 certs Aaa Confirmed
$6.0 mil, Class A-1A certs Aaa Confirmed
$15.0 mil, Class M-1 certs Aa2 Downgraded to A1
$10.5 mil, Class M-2 certs A2 Downgraded to Baa3
$9.8 mil, Class B-1 certs Baa2 Downgraded to Caa2
The loans are serviced by Ocwen Federal Bank FSB, which has been assigned Moody's highest service quality rating of SQ1 as a primary servicer of subprime loans and SQ1 as a special servicer.
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