Approximately $59.9 Million of Structured Securities Affected
New York, October 28, 2010 -- Moody's Investors Service (Moody's) upgraded the ratings of one class,
downgraded one class and affirmed four classes of GMAC Commercial Mortgage
Securities, Inc. Mortgage Pass-Through Certificates,
Series 1999-C3 as follows:
Cl. X, Affirmed at Aaa (sf); previously on Sep 13,
1999 Definitive Rating Assigned Aaa (sf)
Cl. G, Upgraded to A1 (sf); previously on Mar 8,
2007 Upgraded to Baa3 (sf)
Cl. H Affirmed at Ba2 (sf); previously on Mar 8, 2007
Upgraded to Ba2 (sf)
Cl. J, Affirmed at B3 (sf); previously on Mar 8,
2007 Upgraded to B3 (sf)
Cl. K, Downgraded to C (sf); previously on Nov 22,
2005 Downgraded to Caa3 (sf)
Cl. L, Affirmed at C (sf); previously on Mar 8,
2007 Downgraded to C (sf)
The upgrade is due to the significant increase in subordination due to
loan payoffs and amortization and the pool's high exposure to defeased
loans, which represent 27% of the current pool balance.
The pool has paid down 92% since Moody's prior review.
The downgrades are due to higher expected losses for the pool resulting
from realized and anticipated losses from specially serviced and troubled
loans and concerns about loans approaching maturity in an adverse environment.
Nine loans, representing 58% of the pool, either have
matured or mature within the next six months. All of these loans
are in special servicing.
Moody's is affirming Classes H, J, L and X because current
subordination levels for these classes are sufficient for the current
Moody's rating action reflects a cumulative base expected loss of
30.9% of the current balance. At last review,
Moody's cumulative base expected loss was 1.0%.
Moody's stressed scenario loss is 32.4% of the current
balance. Moody's provides a current list of base and stress
scenario losses for conduit and fusion CMBS transactions on moodys.com
Depending on the timing of loan payoffs and the severity and timing of
losses from specially serviced loans, the credit enhancement level
for investment grade classes could decline below the current levels.
If future performance materially declines, the expected level of
credit enhancement and the priority in the cash flow waterfall may be
insufficient for the current ratings of these classes.
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 2010
and 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 methodologies used in rating GMAC Commercial Mortgage Securities,
Inc. Mortgage Pass-Through Certificates, Series 1999-C3
were "CMBS: Moody's Approach to Rating U.S. Conduit
Transactions" published in September 2000 and "CMBS: Moody's
Approach to Rating Large Loan/Single Borrower Transactions" published
in July 2000. Other methodologies and factors that may have been
considered in the process of rating this issuer can also be found on Moody's
In addition to methodologies and research available on moodys.com,
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 as well as the excel-based CMBS Large Loan Model v.
8.0 which is used for Large Loan 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 9,
compared to 39 at last review.
In cases where the Herf falls below 20, Moody's also employs
the large loan/single borrower methodology. This methodology uses
the excel-based Large Loan Model v 8.0 and then reconciles
and weights the results from the two models in formulating a rating recommendation.
The large loan model derives credit enhancement levels based on an aggregation
of adjusted loan level proceeds derived from Moody's loan level
LTV ratios. Major adjustments to determining proceeds include leverage,
loan structure, property type, and sponsorship. These
aggregated proceeds are then further adjusted for any pooling benefits
associated with loan level diversity, other concentrations and correlations.
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 January 8, 2009. 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 October 15, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 95% to $59.9
million from $1.15 billion at securitization. The
Certificates are collateralized by 14 mortgage loans ranging in size from
1% to 14% of the pool, with the top ten loans representing
90% of the pool. The pool only contains three conduit loans.
The remaining loans are either defeased (two loans representing 27%
of the pool) or are in special servicing (nine loans representing 58%
of the pool). One of the performing loans, representing 4%
of the pool, is on the master servicer's watchlist due to
Twenty loans have been liquidated from the pool, resulting in an
aggregate realized loss of $19.7 million (10% loss
severity on average). All of the loans in special servicing were
transferred to special due to imminent maturity default. The largest
specially serviced loan is the Lakeside Place Office Building Loan ($6.6
million -- 11.0% of the pool), which is secured
by a 84,000 square foot office building located in Cleveland,
Ohio. The loan was transferred to special servicing in May 2009
and is currently in the process of foreclosure. The servicer has
recognized a $4.0 million appraisal reduction on the loan.
The remaining eight specially serviced loans are secured by a mix of property
types. Moody's has estimated an aggregate $20.1
million loss (57% expected loss on average) for the specially serviced
Based on the most recent remittance statement, Classes J through
L have experienced cumulative interest shortfalls totaling $2.0
million. Moody's anticipates that the pool will continue
to experience interest shortfalls because of the high exposure to specially
serviced loans. Interest shortfalls are caused by special servicing
fees, including workout and liquidation fees, appraisal subordinate
entitlement reductions (ASERs) and extraordinary trust expenses.
Moody's was provided with full year 2009 operating results for 100%
of the pool's three performing conduit loans. Moody's
weighted average LTV for these loans is 68% compared to 79%
for the conduit pool at Moody's prior review. Moody's
net cash flow reflects a weighted average haircut of 14.8%
to the most recently available net operating income. Moody's
value reflects a weighted average capitalization rate of 9.8%.
Moody's actual and stressed DSCRs for the performing conduit loans
are 1.34X and 1.64X, respectively, compared
to 1.35X and 1.50X for the pool 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.
Due to the high percentage of loans in special servicing, Moody's
analysis was largely based on a a loss and recovery analysis for specially
serviced loans. The performance of the conduit component,
which only represents 15% of the pool, is stable and performing
in-line with Moody's expectations.
Information sources used to prepare the credit rating 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
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purpose of maintaining
a credit rating.
MOODY'S adopts all necessary measures so that the information it uses
in assigning a credit rating 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.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service 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 the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Structured Finance Group
Moody's Investors Service
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's Upgrades One, Downgrades One and Affirms Four CMBS Classes of GMAC 1999-C3
250 Greenwich Street
New York, NY 10007