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Rating Action:

Moody's Takes Action on $297 million of US Scratch and Dent RMBS issued by various financial institutions

18 Jul 2012

New York, July 18, 2012 -- Moody's Investors Service has downgraded the ratings of 7 tranches, and confirmed the rating of 1 tranche from six RMBS transactions, backed by Scratch and Dent loans, issued by various financial institutions.

RATINGS RATIONALE

The actions are a result of the recent performance review of Scratch and Dent pools and reflect Moody's updated loss expectations on these pools.

The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "US RMBS Surveillance Methodology for Scratch and Dent" published in May 2011. 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

Moody's adjusts the methodologies noted above for Moody's current view on 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 scratch and dent pools with fewer than 100 loans, Moody's first calculates an annualized delinquency rate based on strength of the collateral, number of loans remaining in the pool and the level of current delinquencies in the pool. For scratch and dent, Moody's first applies a baseline delinquency rate of 11% for standard transactions and 3% for strongest prime-like deals. 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 standard pool with 75 loans, the adjusted rate of new delinquency is 11.1%. 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 0.75 to 2.5 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 the bonds, in addition to the methodologies described above, we considered the volatility of the projected losses and timeline of the expected defaults.

Certain securities are insured by financial guarantors. For securities insured by a financial guarantor, the rating on the securities is the higher of (i) the guarantor's financial strength rating and (ii) the current underlying rating (i.e., absent consideration of the guaranty) on the security. The principal methodology used in determining the underlying rating is the same methodology for rating securities that do not have a financial guaranty and is as described earlier.

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: ACE Securities Corp. Home Equity Loan Trust, Series 2006-SD1

Cl. A-1B, Downgraded to Aa1 (sf); previously on Mar 29, 2006 Assigned Aaa (sf)

Cl. M-1, Downgraded to Caa2 (sf); previously on Apr 19, 2012 B3 (sf) Placed Under Review for Possible Downgrade

Issuer: Impac CMB Trust Series 2007-A

Cl. A, Downgraded to Aa3 (sf) and Remains On Review for Possible Downgrade; previously on Apr 19, 2012 Aa2 (sf) Placed Under Review for Possible Downgrade

Underlying Rating: Downgraded to A3 (sf); previously on Apr 19, 2012 Aa2 (sf) Placed Under Review for Possible Downgrade

Financial Guarantor: Assured Guaranty Corp. (Aa3, under review for possible downgrade on )

Issuer: Merrill Lynch Mortgage Investors Trust Series 2006-SD1

Cl. A, Confirmed at Caa2 (sf); previously on Apr 19, 2012 Caa2 (sf) Placed Under Review for Possible Upgrade

Issuer: PPT ABS LLC Asset-Backed Certificates, Series 2004-1

Cl. A, Downgraded to B1 (sf); previously on Apr 19, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade

Issuer: SACO I Inc. Mortgage Pass-Through Certificates, Series 2000-1

Cl. 1-B-1, Downgraded to Baa1 (sf); previously on Apr 19, 2012 Aa2 (sf) Placed Under Review for Possible Downgrade

Cl. 1-B-2, Downgraded to Caa1 (sf); previously on May 26, 2011 Downgraded to B2 (sf)

Issuer: Salomon Brothers Mortgage Trust 2001-2

Cl. M-3, Downgraded to B1 (sf); previously on Apr 19, 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_SF292003

A list of updated estimated pool losses and sensitivity analysis is being posted on an ongoing basis for the duration of this review period and may be found at:

Excel: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF247004

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.

Minxi Qiu
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

Amita Shrivastava
VP - Senior Credit Officer
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 $297 million of US Scratch and Dent RMBS issued by various financial institutions
No Related Data.
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