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22 Jul 2009
New York, July 22, 2009 -- After analysis of the credit impact of amendments, dated June 1,
2009, to the Servicing Agreements related to the transactions listed
below, Moody's Investors Service stated that the amendments,
in and of themselves and at this time, did not result in the downgrade
or withdrawal of the ratings on the Moody's-rated securities
issued in those transactions.
American Home Mortgage Assets Trust 2005-2
American Home Mortgage Assets Trust 2006-2
American Home Mortgage Assets Trust 2006-3
American Home Mortgage Assets Trust 2006-4
American Home Mortgage Assets Trust 2006-5
American Home Mortgage Assets Trust 2006-6
American Home Mortgage Assets Trust 2007-1
The amendments permit the servicer, American Home Mortgage Servicing,
Inc. (American Home), to modify the interest rates of loans
that are in default or for which default is reasonably foreseeable.
Prior to the execution of the Amendment, loan modifications to lower
interest rates were not permitted by the Servicing Agreements.
American Home requested that Moody's provide its opinion to them
as to whether its ratings on the Moody's-rated securities
issued in the affected transactions would be downgraded or withdrawn as
a result of the execution of the amendments. Moody's believed that
the amendments did not have an adverse effect on the credit quality of
the securities such that the Moody's ratings were impacted.
Moody's did not express an opinion as to whether the amendment could have
other, non credit-related effects.
In assessing the credit impact of the amendments, Moody's
evaluated whether permitting rate reduction modifications would be likely
to have a negative impact on expected losses on the Moody's rated
securities. In making this determination, Moody's took
into account market information relating to recidivism rates (i.e.,
the percentage of modified loans that ultimately re-default),
as well as projections of loss severities on modified loans that may re-default.
Furthermore, Moody's evaluated the likelihood of whether the
increased ability to modify delinquent loans could result in the erosion
of credit protection for the senior securities. This could occur
if cash, that would otherwise be available to pay senior securities,
was instead diverted to pay subordinate securities due to the passage
of transaction loss and delinquency triggers which would otherwise be
likely to fail. Moody's rating view was based primarily on
its opinion that (a) judicious use of loan modifications will not increase
losses on the loans in the aggregate, and (b) the incidence of passage
or failure of transaction loss and delinquency triggers is unlikely to
be impacted by the ability to do interest rate modifications since the
total number of modifications is unlikely to increase to any great extent
as other forms of modifications had already been permitted and were already
Other methodologies and factors that may have been considered in the process
of providing this opinion can also be found at www.moodys.com
in the Credit Policy & Methodologies directory, in the Ratings
Structured Finance Group
Moody's Investors Service
Moody's: No Negative Ratings Impact From Amendment to Servicing Agreements for American Home Transactions
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.
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