Approximately $120.95 Million of Structured Securities Affected
New York, February 16, 2011 -- Moody's Investors Service (Moody's) affirmed two classes of Washington
Mutual Multifamily Mortgage 2001-1 Limited, Secured Notes,
Series 2001-1 as follows:
Cl. B-4, Affirmed at A3 (sf); previously on Nov
6, 2008 Upgraded to A3 (sf)
Cl. B-5, Affirmed at Baa2 (sf); previously on
Nov 6, 2008 Upgraded to Baa2 (sf)
Moody's rating action did not address the ratings of Classes A1,
A2, A3, A4, A5, B1, B2, B3 and X,
which are all currently rated Aaa and Aa1, on review for possible
downgrade. These classes were placed on review on January 19,
2011. KeyCorp Real Estate Capital Markets, Inc. (KRECM)
is the master servicer on this transaction and deposits collection,
escrow and other accounts in KeyBank, National Association (Keybank).
Keybank no longer meets Moody's rating criteria for an eligible depository
account institution for Aaa and Aa1 rated securities. Moody's is
reviewing arrangements that KeyBank has proposed, and that it may
propose, to mitigate the incremental risk indicated by the lower
rating of the depository account institution, so as possibly to
allow the classes on review to maintain their current ratings.
The affirmations are due to key parameters, including Moody's
loan to value (LTV) ratio, Moody's stressed debt service coverage
ratio (DSCR) and the Herfindahl Index (Herf), remaining within acceptable
ranges. Based on our current base expected loss, the credit
enhancement levels for the affirmed classes are sufficient to maintain
their current ratings.
This transaction is classified as a small balance CMBS transaction.
Small balance transactions, which represent approximately 1%
of the Moody's rated conduit/fusion universe, have generally
experienced higher defaults and losses than traditional conduit and fusion
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these
expectations. Performance that falls outside an acceptable range
of the key parameters may indicate that the collateral's credit
quality is stronger or weaker than Moody's had anticipated during
the current review. Even so, deviation from the expected
range will not necessarily result in a rating action. There may
be mitigating or offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to amortization
and loan payoffs or a decline in subordination due to realized losses.
Primary sources of assumption uncertainty are the current stressed macroeconomic
environment and continuing weakness in the commercial real estate and
lending markets. Moody's currently views the commercial real
estate market as stressed with further performance declines expected in
the industrial, office, and retail sectors. Hotel performance
has begun to rebound, albeit off a very weak base. Multifamily
has also begun to rebound reflecting an improved supply / demand relationship.
The availability of debt capital is improving with terms returning towards
market norms. Job growth and housing price stability will be necessary
precursors to commercial real estate recovery. Overall, Moody's
central global scenario remains "hook-shaped" for 2011;
we expect overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal deficits
and persistent unemployment levels.
The principal methodology used in this rating was "CMBS: Moody's
Approach to Small Loan Transactions" published in December 2004.
In addition, Moody's publishes a weekly summary of structured finance
credit, ratings and methodologies, available to all registered
users of our website, at www.moodys.com/SFQuickCheck.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR,
and Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit
model results at the B2 level are driven by a paydown analysis based on
the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity,
is a primary determinant of pool level diversity and has a greater impact
on senior certificates. Other concentrations and correlations may
be considered in our analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or determined based
on a multiple or ratio of either of these two data points. For
fusion deals, the credit enhancement for loans with investment-grade
credit estimates is melded with the conduit model credit enhancement into
an overall model result. Fusion loan credit enhancement is based
on the underlying rating of the loan which corresponds to a range of credit
enhancement levels. Actual fusion credit enhancement levels are
selected based on loan level diversity, pool leverage and other
concentrations and correlations within the pool. Negative pooling,
or adding credit enhancement at the underlying rating level, is
incorporated for loans with similar credit estimates in the same transaction.
Moody's uses a variation of Herf to measure diversity of loan size,
where a higher number represents greater diversity. Loan concentration
has an important bearing on potential rating volatility, including
risk of multiple notch downgrades under adverse circumstances.
The credit neutral Herf score is 40. The pool has a Herf of 57
compared to 81 at Moody's prior full review.
Moody's ratings are determined by a committee process that considers
both quantitative and qualitative factors. Therefore, the
rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance
of commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through two sets of quantitative
tools -- MOST® (Moody's Surveillance Trends) and CMM
(Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated November 6, 2008.
Please see the ratings tab on the issuer / entity page on moodys.com
for the last rating action and the ratings history.
Moody's Investors Service did not receive or take into account a
third-party due diligence report on the underlying assets or financial
instruments related to the monitoring of this transaction in the past
As of the January 18, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 67% to $137.7
million from $419.0 million at securitization. The
Certificates are collateralized by 57 mortgage loans ranging in size from
less than 1% to 6% of the pool, with the top ten loans
representing 31% of the pool.
Seven loans, representing 10% of the pool, are on the
master servicer's watchlist. The watchlist includes loans
which meet certain portfolio review guidelines established as part of
the CRE Finance Council (CREFC) monthly reporting package. As part
of our ongoing monitoring of a transaction, Moody's reviews the
watchlist to assess which loans have material issues that could impact
There have been no realized losses since securitization. Currently
there are no specially serviced or delinquent loans.
Moody's was provided with full and partial year 2009 operating results
for 87% of the pool. Moody's weighted average LTV
is 71% compared to 65% at Moody's prior review.
Moody's net cash flow reflects a weighted average haircut of 10%
to the most recently available net operating income. Moody's
value reflects a weighted average capitalization rate of 9.1%.
Moody's actual and stressed DSCRs are 1.45X and 1.49X,
respectively, compared to 1.61X and 1.64X at last
review. Moody's actual DSCR is based on Moody's net
cash flow (NCF) and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25%
stressed rate applied to the loan balance.
The top three conduit loans represent 16% of the pool balance.
The largest loan is the Victoria Square Apartments Loan ($8.7
million -- 6.3%), which is secured by a 96-unit
multifamily property located in Milpitas, California. Moody's
LTV and stressed DSCR are 94% and 1.07X, respectively,
compared to 93% and 1.08X at last review. The second
largest loan is the Royal Fir Apartments Loan ($7.6 million
-- 5.5%), which is secured by a 186-unit
multifamily property located in Kent, Washington. Moody's
LTV and stressed DSCR are 77% and 1.26X, respectively,
compared to 80% and 1.21X at last review. The third
largest loan is the Lincoln Terrace Loan ($5.6 million --
4.1%), which is secured by a 170-unit multifamily
property located in Anaheim, California. Moody's LTV
and stressed DSCR are 52% and 1.88X, respectively,
compared to 45% and 2.18X at last review.
Structured Finance Group
Moody's Investors Service
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's Affirms Two CMBS Classes of WMMM 2001-1
250 Greenwich Street
New York, NY 10007