NOTE: On July 9, 2012, the press release was revised as follows: The excel file link to the list of actions and CUSIP identifiers has been corrected. Revised release follows.
New York, July 06, 2012 -- Moody's Investors Service has downgraded the ratings of 56 tranches,
upgraded the rating of one tranche and confirmed the ratings of 20 tranches
from 12 RMBS transactions, backed by Alt-A loans, issued
by Structured Adjustable Rate Mortgage Loan Trust.
RATINGS RATIONALE
The actions are a result of the recent performance of Alt-A pools
originated before 2005 and reflect Moody's updated loss expectations on
these pools.The downgrades in today's rating action are a
result of deteriorating performance and/or structural features resulting
in higher expected losses for certain bonds than previously anticipated.
For example, for shifting interest structures, back-ended
liquidations could expose the seniors to tail-end losses.
In our current approach, we capture this risk by running each individual
pool through a variety of loss and prepayment scenarios in the Structured
Finance Workstation? (SFW), the cash flow model developed by
Moody's Wall Street Analytics. This individual pool level analysis
incorporates performance variances across the different pools and the
structural nuances of the transaction.
In addition, Moody's has corrected the ratings on bonds issued
from the SARM 2004-1 transaction. Moody's prior rating
action was based on credit enhancement calculated per the prospectus supplement,
which allows for the subsequent losses on Pool 2 mortgage loans to be
allocated sequentially to B2-I and B1-I, once subordinate
tranches B3 through B6 have been depleted. The bond administrator,
however, has confirmed that it is following the allocation rules
set forth in the Pooling and Servicing Agreement (PSA), which allocates
these losses sequentially to B2-II and B1-II, once
subordinate tranches B3 through B6 have been depleted. Moody's
has now calculated the credit enhancement per the PSA and corrected the
ratings accordingly.
The methodologies used in these ratings were "Moody's Approach to Rating
US Residential Mortgage-Backed Securities" published in December
2008, and "Pre-2005 US RMBS Surveillance Methodology" published
in January 2012. The methodology used in rating Interest-Only
Securities was "Moody's Approach to Rating Structured Finance
Interest-Only Securities" published in February 2012.
Please see the Credit Policy page on www.moodys.com for
a copy of these methodologies.
Moody's adjusts the methodologies noted above for 1) Moody's current view
on loan modifications; and 2) small pool volatility.
Loan Modifications
As a result of an extension of the Home Affordable Modification Program
(HAMP) to 2013 and an increased use of private modifications, Moody's
is extending its previous view that loan modifications will only occur
through the end of 2012. It is now assuming that the loan modifications
will continue at current levels until the end of 2013.
Small Pool Volatility
The above RMBS approach only applies to structures with at least 40 loans
and a pool factor of greater than 5%. Moody's can withdraw
its rating when the pool factor drops below 5% and the number of
loans in the deal declines to 40 loans or lower. If, however,
a transaction has a specific structural feature, such as a credit
enhancement floor, that mitigates the risks of small pool size,
Moody's can choose to continue to rate the transaction. Please
refer further to Moody's Investors Service's Withdrawal Policy,
which can be found on our website, www.moodys.com.
For pools with loans less than 100, Moody's adjusts its projections
of loss to account for the higher loss volatility of such pools.
For small pools, a few loans becoming delinquent would greatly increase
the pools' delinquency rate. To project losses on Alt-A
pools with fewer than 100 loans, Moody's first calculates an annualized
delinquency rate based on vintage, number of loans remaining in
the pool and the level of current delinquencies in the pool. For
Alt-A and Option Arm pools, Moody's first applies a baseline
delinquency rate of 10% for 2004, 5% for 2003 and
3% for 2002 and prior. Once the loan count in a pool falls
below 76, this rate of delinquency is increased by 1% for
every loan fewer than 76. For example, for a 2004 pool with
75 loans, the adjusted rate of new delinquency is 10.1%.
Further, to account for the actual rate of delinquencies in a small
pool, Moody's multiplies the rate calculated above by a factor ranging
from 0.50 to 2.0 for current delinquencies that range from
less than 2.5% to greater than 30% respectively.
Moody's then uses this final adjusted rate of new delinquency to project
delinquencies and losses for the remaining life of the pool under the
approach described in the methodology publication.
When assigning the final ratings to senior bonds, in addition to
the methodologies described above, we considered the volatility
of the projected losses and timeline of the expected defaults.
For bonds backed by small pools, we also considered the current
pipeline composition as well as any specific loss allocation rules that
could preserve or deplete the overcollateralization available for the
senior bonds at different pace.
The primary source of assumption uncertainty is the uncertainty in our
central macroeconomic forecast and performance volatility due to servicer-related
issues. The unemployment rate fell from 9.0% in April
2011 to 8.2% in June 2012. Moody's forecasts a further
drop to 7.8% for 2013. Moody's expects house prices
to drop another 1% from their 4Q2011 levels before gradually rising
towards the end of 2013. Performance of RMBS continues to remain
highly dependent on servicer procedures. Any change resulting from
servicing transfers or other policy or regulatory change can impact the
performance of these transactions.
Complete rating actions are as follows:
Issuer: Structured Adjustable Rate Mortgage Loan Trust 2004-1
Cl. 1-A, Downgraded to B1 (sf); previously on
Jan 31, 2012 Baa1 (sf) Placed Under Review for Possible Downgrade
Cl. 2-A, Downgraded to Ba1 (sf); previously on
Jan 31, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade
Cl. 2-AX, Downgraded to Ba1 (sf); previously
on Feb 22, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade
Cl. 3-A1, Confirmed at Baa3 (sf); previously
on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade
Cl. 3-A2, Confirmed at Baa3 (sf); previously
on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade
Cl. 3-A3, Confirmed at Baa3 (sf); previously
on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade
Cl. 4-A2, Downgraded to Baa3 (sf); previously
on Mar 10, 2011 Downgraded to Baa1 (sf)
Cl. 4-A3, Downgraded to Baa3 (sf); previously
on Mar 10, 2011 Downgraded to Baa1 (sf)
Cl. 4-A4, Downgraded to Baa3 (sf); previously
on Mar 10, 2011 Downgraded to Baa1 (sf)
Cl. 5-A, Confirmed at Baa3 (sf); previously on
Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade
Cl. 6-A, Confirmed at Baa3 (sf); previously on
Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade
Issuer: Structured Adjustable Rate Mortgage Loan Trust 2004-10
Cl. 1-A1, Downgraded to B1 (sf); previously on
Mar 10, 2011 Downgraded to Ba3 (sf)
Cl. 3-A2, Downgraded to Ba3 (sf); previously
on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade
Issuer: Structured Adjustable Rate Mortgage Loan Trust 2004-11
Cl. A, Downgraded to Ba3 (sf); previously on Jan 31,
2012 Baa2 (sf) Placed Under Review for Possible Downgrade
Issuer: Structured Adjustable Rate Mortgage Loan Trust 2004-12
Cl. 1-A1, Downgraded to Ba2 (sf); previously
on Mar 10, 2011 Downgraded to Baa3 (sf)
Cl. 1-A2, Downgraded to Ba3 (sf); previously
on Mar 10, 2011 Downgraded to Baa3 (sf)
Cl. 2-A, Downgraded to Ba2 (sf); previously on
Mar 10, 2011 Downgraded to Baa3 (sf)
Cl. 3-A1, Downgraded to Ba2 (sf); previously
on Mar 10, 2011 Downgraded to Baa3 (sf)
Cl. 3-A2, Downgraded to Ba2 (sf); previously
on Mar 10, 2011 Downgraded to Baa2 (sf)
Cl. 4-A, Downgraded to Ba2 (sf); previously on
Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade
Cl. 5-A, Downgraded to Ba2 (sf); previously on
Mar 10, 2011 Downgraded to Baa3 (sf)
Cl. 6-A, Downgraded to Ba2 (sf); previously on
Mar 10, 2011 Downgraded to Baa3 (sf)
Cl. 7-A1, Downgraded to Ba2 (sf); previously
on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Upgrade
Cl. 7-A2, Downgraded to Ba2 (sf); previously
on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Upgrade
Cl. 7-A3, Downgraded to Ba2 (sf); previously
on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Upgrade
Cl. 8-A, Downgraded to Ba3 (sf); previously on
Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade
Cl. 9-A, Downgraded to Ba2 (sf); previously on
Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade
Cl. B1, Downgraded to Ca (sf); previously on Mar 10,
2011 Downgraded to Caa3 (sf)
Cl. B1-X, Downgraded to Ca (sf); previously on
Mar 10, 2011 Downgraded to Caa3 (sf)
Cl. B3, Downgraded to C (sf); previously on Mar 10,
2011 Downgraded to Ca (sf)
Cl. B3-X, Downgraded to C (sf); previously on
Mar 10, 2011 Downgraded to Ca (sf)
Issuer: Structured Adjustable Rate Mortgage Loan Trust 2004-14
Cl. 1-A, Downgraded to Ba2 (sf); previously on
Mar 10, 2011 Downgraded to Baa3 (sf)
Cl. 2-A, Downgraded to Ba1 (sf); previously on
Mar 10, 2011 Downgraded to Baa3 (sf)
Cl. 3-A1, Downgraded to Baa3 (sf); previously
on Mar 10, 2011 Downgraded to Baa2 (sf)
Cl. 4-A, Confirmed at Baa3 (sf); previously on
Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Upgrade
Cl. 6-A, Confirmed at Baa3 (sf); previously on
Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Upgrade
Cl. B1, Confirmed at Ca (sf); previously on Jan 31,
2012 Ca (sf) Placed Under Review for Possible Upgrade
Cl. B1-X, Confirmed at Ca (sf); previously on
Feb 22, 2012 Ca (sf) Placed Under Review for Possible Upgrade
Issuer: Structured Adjustable Rate Mortgage Loan Trust 2004-15
Cl. A, Downgraded to Caa1 (sf); previously on Jan 31,
2012 Ba2 (sf) Placed Under Review for Possible Downgrade
Cl. B1, Downgraded to C (sf); previously on Mar 10,
2011 Downgraded to Ca (sf)
Issuer: Structured Adjustable Rate Mortgage Loan Trust 2004-17
Cl. A1, Confirmed at Baa3 (sf); previously on Jan 31,
2012 Baa3 (sf) Placed Under Review for Possible Upgrade
Cl. A1X, Confirmed at Baa3 (sf); previously on Feb 22,
2012 Baa3 (sf) Placed Under Review for Possible Upgrade
Cl. A2, Confirmed at Baa3 (sf); previously on Jan 31,
2012 Baa3 (sf) Placed Under Review for Possible Upgrade
Cl. A2X, Confirmed at Baa3 (sf); previously on Feb 22,
2012 Baa3 (sf) Placed Under Review for Possible Upgrade
Cl. A3, Confirmed at Baa3 (sf); previously on Jan 31,
2012 Baa3 (sf) Placed Under Review for Possible Upgrade
Issuer: Structured Adjustable Rate Mortgage Loan Trust 2004-2
Cl. 1-A1, Downgraded to Ba2 (sf); previously
on Jan 31, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade
Cl. 1-A2, Downgraded to Ba2 (sf); previously
on Jan 31, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade
Cl. 1-AX, Downgraded to Ba2 (sf); previously
on Feb 22, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade
Cl. 3-A, Downgraded to Ba1 (sf); previously on
Mar 10, 2011 Downgraded to Baa3 (sf)
Issuer: Structured Adjustable Rate Mortgage Loan Trust 2004-4
Cl. 1-A1, Downgraded to Ba3 (sf); previously
on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade
Cl. 1-A2, Downgraded to Ba3 (sf); previously
on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade
Cl. 2A, Downgraded to Ba3 (sf); previously on Jan 31,
2012 Ba1 (sf) Placed Under Review for Possible Downgrade
Cl. 3-A1, Downgraded to Ba3 (sf); previously
on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade
Cl. 3-A2, Downgraded to Ba2 (sf); previously
on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade
Cl. 3-A3, Downgraded to Ba3 (sf); previously
on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade
Cl. 3-A4, Downgraded to Ba3 (sf); previously
on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade
Cl. 3-A5, Downgraded to Ba3 (sf); previously
on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade
Cl. 4-A, Downgraded to Ba3 (sf); previously on
Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade
Cl. 5-A, Downgraded to Ba3 (sf); previously on
Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade
Issuer: Structured Adjustable Rate Mortgage Loan Trust 2004-5
Cl. 1-A, Downgraded to Ba1 (sf); previously on
Jan 31, 2012 Baa1 (sf) Placed Under Review for Possible Downgrade
Cl. 2-A, Downgraded to Baa3 (sf); previously
on Jan 31, 2012 Baa1 (sf) Placed Under Review for Possible Downgrade
Cl. 3-A1, Downgraded to Baa1 (sf); previously
on Jan 31, 2012 A3 (sf) Placed Under Review for Possible Downgrade
Cl. 3-A2, Downgraded to Baa3 (sf); previously
on Jan 31, 2012 Baa1 (sf) Placed Under Review for Possible Downgrade
Cl. 3-A3, Downgraded to Baa3 (sf); previously
on Jan 31, 2012 Baa1 (sf) Placed Under Review for Possible Downgrade
Cl. 3-A4, Downgraded to Baa3 (sf); previously
on Jan 31, 2012 Baa1 (sf) Placed Under Review for Possible Downgrade
Cl. 3-A5, Downgraded to Baa3 (sf); previously
on Jan 31, 2012 Baa1 (sf) Placed Under Review for Possible Downgrade
Cl. 4-A, Downgraded to Baa3 (sf); previously
on Jan 31, 2012 Baa1 (sf) Placed Under Review for Possible Downgrade
Cl. 5-A, Downgraded to Ba1 (sf); previously on
Jan 31, 2012 Baa1 (sf) Placed Under Review for Possible Downgrade
Cl. 5-AX, Downgraded to Ba1 (sf); previously
on Feb 22, 2012 Baa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Structured Adjustable Rate Mortgage Loan Trust 2004-6
Cl. 1-A, Confirmed at Baa3 (sf); previously on
Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade
Cl. 2-A, Confirmed at Baa3 (sf); previously on
Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade
Cl. 3-A1, Confirmed at Baa3 (sf); previously
on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade
Cl. 3-A2, Confirmed at Baa2 (sf); previously
on Jan 31, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade
Cl. 5-A3, Upgraded to A2 (sf); previously on
Mar 10, 2011 Downgraded to Baa2 (sf)
Cl. 6-A, Confirmed at Baa3 (sf); previously on
Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade
Issuer: Structured Adjustable Rate Mortgage Loan Trust 2004-9XS
Cl. A, Downgraded to Ba1 (sf); previously on Jan 31,
2012 Baa2 (sf) Placed Under Review for Possible Downgrade
A list of these actions including CUSIP identifiers may be found at:
Excel: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF290368
A list of updated estimated pool losses, sensitivity analysis,
and tranche recovery details is being posted on an ongoing basis for the
duration of this review period and may be found at:
Excel: http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF237256
For more information please see www.moodys.com.
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU are endorsed by Moody's Investors
Service Ltd., One Canada Square, Canary Wharf,
London E 14 5FA, UK, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's office
that has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
Information sources used to prepare each of the ratings are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's Analytics
information.
Moody's received and took into account one or more third party assessments
on the due diligence performed regarding the underlying assets or financial
instruments in these transactions and the assessments had a neutral impact
on the rating.
Moody's considers the quality of information available on the rated entities,
obligations or credits satisfactory for the purposes of issuing these
ratings.
Moody's adopts all necessary measures so that the information it uses
in assigning the ratings is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
third-party sources. However, Moody's is not an auditor
and cannot in every instance independently verify or validate information
received in the rating process.
In addition to the information provided below please find on the ratings
tab of the issuer page at www.moodys.com, for each
of the ratings covered, Moody's disclosures on the lead rating analyst
and the Moody's legal entity that has issued each of the ratings.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
before Moody's ratings were fully digitized and accurate data may not
be available. Consequently, Moody's provides a date that
it believes is the most reliable and accurate based on the information
that is available to it. Please see the ratings disclosure page
on our website www.moodys.com for further information.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Soumya?Vasudevan
Associate Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Deepika Kothari
Vice President - Senior Analyst
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Takes Action on $1.73 billion of US Alt-A RMBS issued by SARM
