Moody's Downgrades Jumbo deals issued by Wells Fargo Mortgage Backed Securities Trust in 2006 and 2007
New York, November 24, 2008 -- Moody's Investors Service has downgraded seventy-seven tranches
and confirmed fifteen tranches from fifteen jumbo transactions issued
by Wells Fargo Mortgage Backed Securities Trust in 2006 and 2007.
The collateral backing these transactions consists primarily of first-lien,
adjustable-rate, prime Jumbo mortgage loans. The actions
are triggered by higher than anticipated rates of delinquency, foreclosure,
and REO in the underlying collateral relative to currently available credit
enhancement levels. The actions listed below reflect Moody's revised
expected losses on the Jumbo sector announced in a press release on September
18th, and are part of Moody's on-going review process.
Moody's final rating actions are based on current ratings,
level of credit enhancement, collateral performance and updated
pool-level loss expectations. Moody's also took into
account credit enhancement provided by seniority, cross-collateralization,
time tranching, and other structural features within the Aaa waterfalls.
General loss estimation methodology is outlined below.
Complete rating actions are as follows:
Issuer: Wells Fargo Mortgage Backed Securities 2006-AR1 Trust
Cl. I-A-1, Downgraded to Baa1 from Aaa
Cl. II-A-1, Downgraded to Aa3 from Aaa
Cl. II-A-2, Downgraded to Aa2 from Aaa
Cl. II-A-3, Downgraded to Aa3 from Aaa
Cl. II-A-4, Downgraded to Aa3 from Aaa
Cl. II-A-5, Downgraded to Aa3 from Aaa
Cl. II-A-6, Downgraded to Baa2 from Aaa
Cl. B-1, Downgraded to B3 from Aa2
Cl. B-2, Downgraded to Caa1 from A2
Cl. B-3, Downgraded to Caa2 from Baa1
Cl. B-4, Downgraded to Caa3 from Ba2
Issuer: Wells Fargo Mortgage Backed Securities 2006-AR5 Trust
Cl. I-A-1, Downgraded to Baa3 from Aaa
Cl. I-A-2, Downgraded to Caa1 from Aa1
Cl. II-A-1, Downgraded to Baa1 from Aaa
Cl. II-A-2, Downgraded to Caa1 from Aa1
Cl. B-1, Downgraded to Caa3 from Aa2
Cl. B-2, Downgraded to Ca from A2
Cl. B-3, Downgraded to Ca from Baa2
Issuer: Wells Fargo Mortgage Backed Securities 2006-AR6 Trust
Cl. I-A-1, Downgraded to Aa3 from Aaa
Cl. II-A-1, Confirmed at Aaa
Cl. II-A-2, Downgraded to A2 from Aaa
Cl. III-A-1, Downgraded to Aa1 from Aaa
Cl. III-A-2, Downgraded to A2 from Aaa
Cl. IV-A-1, Confirmed at Aaa
Cl. IV-A-2, Downgraded to A2 from Aaa
Cl. V-A-1, Confirmed at Aaa
Cl. V-A-2, Downgraded to A1 from Aaa
Cl. VI-A-1, Confirmed at Aaa
Cl. VI-A-2, Downgraded to A1 from Aaa
Cl. VII-A-1, Confirmed at Aaa
Cl. VII-A-2, Downgraded to A1 from Aaa
Issuer: Wells Fargo Mortgage Backed Securities 2006-AR7 Trust
Cl. I-A-1, Downgraded to A3 from Aaa
Cl. I-A-2, Downgraded to Ba3 from Aa1
Cl. II-A-1, Downgraded to A1 from Aaa
Cl. II-A-2, Downgraded to Aa2 from Aaa
Cl. II-A-4, Downgraded to Aa3 from Aaa
Cl. II-A-5, Downgraded to A1 from Aaa
Cl. II-A-6, Downgraded to A1 from Aaa
Cl. II-A-3, Downgraded to A1 from Aa1
Cl. II-A-7, Downgraded to Ba3 from Aa1
Issuer: Wells Fargo Mortgage Backed Securities 2006-AR8 Trust
Cl. I-A-1, Downgraded to Aa1 from Aaa
Issuer: Wells Fargo Mortgage Backed Securities 2006-AR12
Trust
Cl. I-A-1, Downgraded to A3 from Aaa
Cl. I-A-2, Downgraded to Ba3 from Aa1
Cl. II-A-1, Downgraded to Aa1 from Aaa
Cl. II-A-2, Downgraded to A1 from Aa1
Issuer: Wells Fargo Mortgage Backed Securities 2006-AR14
Trust
Cl. I-A-1, Downgraded to A1 from Aaa
Cl. I-A-2, Downgraded to Aa2 from Aaa
Cl. I-A-3, Downgraded to Aa1 from Aaa
Cl. I-A-4, Downgraded to Aa3 from Aaa
Cl. I-A-5, Downgraded to Aa1 from Aaa
Cl. I-A-6, Downgraded to Aa1 from Aaa
Cl. I-A-7, Downgraded to Aa2 from Aaa
Cl. I-A-8, Downgraded to A2 from Aa1
Cl. I-A-9, Downgraded to Aa2 from Aaa
Cl. I-A-10, Downgraded to Aa2 from Aaa
Cl. II-A-1, Downgraded to A3 from Aaa
Cl. II-A-2, Downgraded to A3 from Aaa
Cl. II-A-3, Downgraded to A3 from Aaa
Cl. II-A-4, Downgraded to Ba3 from Aa1
Cl. III-A-1, Downgraded to Aa1 from Aaa
Cl. III-A-2, Downgraded to A2 from Aa1
Cl. III-A-3, Downgraded to Aa1 from Aaa
Issuer: Wells Fargo Mortgage Backed Securities 2006-AR15
Trust
Cl. A-1, Downgraded to Aa2 from Aaa
Cl. A-3, Downgraded to Baa1 from Aaa
Issuer: Wells Fargo Mortgage Backed Securities 2006-AR16
Trust
Cl. A-1, Downgraded to Aa2 from Aaa
Cl. A-IO, Downgraded to Aa2 from Aaa
Cl. A-2, Downgraded to A2 from Aa1
Issuer: Wells Fargo Mortgage Backed Securities 2006-AR18
Trust
Cl. I-A-1, Downgraded to Aa2 from Aaa
Cl. I-A-IO, Downgraded to Aa2 from Aaa
Cl. I-A-2, Downgraded to A2 from Aa1
Cl. II-A-1, Downgraded to A2 from Aaa
Cl. II-A-IO, Downgraded to A2 from Aaa
Cl. II-A-2, Downgraded to Ba3 from Aa1
Issuer: Wells Fargo Mortgage Backed Securities 2006-AR19
Trust
Cl. A-1, Confirmed at Aaa
Cl. A-2, Confirmed at Aaa
Cl. A-3, Confirmed at Aaa
Cl. A-4, Confirmed at Aaa
Cl. A-5, Confirmed at Aaa
Cl. A-6, Confirmed at Aaa
Cl. A-7, Downgraded to Aa3 from Aaa
Cl. A-8, Confirmed at Aaa
Cl. A-IO, Confirmed at Aaa
Issuer: Wells Fargo Mortgage Backed Securities 2007-AR3 Trust
Cl. A-1, Downgraded to Baa2 from Aaa
Cl. A-2, Downgraded to Baa3 from Aaa
Cl. A-3, Downgraded to Baa3 from Aaa
Cl. A-4, Downgraded to Baa3 from Aaa
Cl. A-5, Downgraded to B3 from Aa1
Issuer: Wells Fargo Mortgage Backed Securities 2007-AR7 Trust
Cl. A-1, Downgraded to Ba2 from Aaa
Issuer: Wells Fargo Mortgage Backed Securities 2007-AR8 Trust
Cl. A-1, Downgraded to Ba2 from Aaa
Issuer: Wells Fargo Mortgage Backed Securities 2007-AR9 Trust
Cl. A-1, Confirmed at Aaa
Cl. A-2, Downgraded to A2 from Aaa
Cl. A-IO, Confirmed at Aaa
Moody's calculates estimated losses for Jumbo RMBS in a two-stage
process. First, serious delinquencies are projected through
late 2009, primarily based upon recent historical performance.
These projected delinquencies are converted into projected losses using
lifetime roll rates (the probability of transition to default) averaging
40% for 60-day delinquencies, 75% for delinquencies
greater than 90 days, and 90-100% for foreclosure
or REO, and severity assumptions averaging 35%.
The second step is to determine losses for the remaining life of the deal,
following the projection period. Depending on a deal's performance,
including delinquency, default, and prepayment rates,
as well as collateral characteristics, such as loan type (fixed
or adjustable), or loan-to-value ratios and geographic
concentrations of remaining current loans, Moody's assumes
varying degrees of slowing in the loss rate (which is measured by loss-to-liquidation)
for the remaining life of the deal. Typical degrees of slowing
in loss rate after late 2009 range from no slowing at all to 40%
slowing. To take an example, a deal with very poor early
performance due to relatively high loan-to-value ratios
and dropping regional home values would be expected to see markedly high
delinquency and loss rates for the next year. But the high rate
of losses may be expected to slow afterwards, as economic factors
and real estate values begin to stabilize, and a slowing of 20-40%
may be used in the projection. On the other hand, a deal
with stronger early performance that is demonstrating relative resiliency
in the current market environment may not be expected to have high losses
in the near-term, but may be expected to sustain a similar
level of losses for the life of the deal, as the pool continues
to be subject to factors that have more historically driven prime performance
such as borrower life events, unemployment, and so on.
Loss estimates are subject to variability and, as a result,
realized losses could ultimately turn out higher or lower than our current
expectations. Moody's will continue to evaluate performance
data as it becomes available and will assess the pattern of potential
future defaults and adjust loss expectations accordingly if necessary.
A list of these actions including CUSIP identifiers may be found at:
Excel: http://www.moodys.com/cust/getdocumentByNotesDocId.asp?criteria=PBS_SF149181
For more information please see www.moodys.com.
New York
Navneet Agarwal
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Juan Lopez
Senior Associate
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653