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Rating Action:

Moody's assigns Aaa (sf) rating to GNMAG Asset Backed Securitizations Trust, Series 2018-1

13 Mar 2018

New York, March 13, 2018 -- Moody's Investors Service has assigned Aaa (sf) to the proposed $100 million of Series 2018-1 Class A Certificates (the 2018-1 Certificates) to be issued by GNMAG Asset Backed Securitizations Trust, Series 2018-1 (the Trust). GNMAG Asset Backed Securitizations, LLC is the depositor.

RATING RATIONALE

The Aaa (sf) rating reflects the high quality Ginnie Mae II mortgage backed security (GNMA MBS) collateral and the transaction's legal and structural provisions.

Ginnie Mae, a wholly-owned corporate instrumentality of the United States of America (Aaa/STA), guarantees the full and timely payment of principal and interest on GNMA MBS. Ginnie Mae's obligation is backed by the full faith and credit of the U.S. government. Payments from the underlying GNMA MBS collateral received by the Trust, net of trust expenses, will be passed through by the Trustee, Citibank, N.A. (A1/P-1; outlook positive), to the Certificate holders within five (5) days.

FACTORS THAT COULD LEAD TO AN UPGRADE

• N/A

FACTORS THAT COULD LEAD TO A DOWNGRADE

• Downgrade of the US government rating

LEGAL SECURITY

The 2018-1 Certificates will be issued by the Trust for the securitization of a portfolio of GNMA MBS. The 2018-1 Certificates issued by the Trust represent an undivided interest in the GNMA MBS receivables, net of fees and expenses of the Trust.

USE OF PROCEEDS

Proceeds from the Certificates will be used to (1) acquire GNMA MBS and (2) pay cost of issuance including upfront fees of the trustee, the underwriters and the asset representations reviewer.

PROFILE

Strengths

- High quality GNMA MBS collateral

- Payments from the underlying GNMA MBS collateral received by the Trust, net of trust expenses (if any), will be passed through to the certificate holders within five (5) days

Challenges

- While the regular fees and expenses of the Trust are expected to be paid up front by closing, there would be unexpected third party expenses if a deficiency event occurs, which will exacerbate the deficiency and result in a steeper downgrade

The Collateral

The 2018-1 Certificates represent undivided interest in the underlying GNMA MBS collateral in the Trust. We expect the collateral to be 100% GNMA II MBS. GNMA II MBS pays on the 20th of the month (or the next business day if the 20th is not one) and the Trustee will pass through principal repayment and prepayments plus interest (net of Trust expenses, if any) received by the Trust to the Certificate holders on the 25th of the month.

GNMA MBS is the highest quality collateral for the certificate holders because they are guaranteed as to the full and timely payments of principal and interest by Ginnie Mae, regardless of the performance of the underlying mortgage loans. As a result, certificate holders will be protected from cash flow disruptions and losses associated with defaults of the mortgages underlying any GNMA MBS.

Fees and Expenses

After the closing, the only fees and expenses that the Trust will incur would be of unexpected nature and only upon occurrence of an Deficiency Event which is defined as "inability of the Trustee to distribute to holders of one or more regular classes of Certificate in accordance with the terms of the Trust Agreement". Because the Trust will only incur these unexpected fees upon an Deficiency Event, and net revenues received by the Trust will have been fully passed through to the certificate holders monthly, unexpected fees will exacerbate the deficiency in the Trust and result in a steeper downgrade.

There are two types of unexpected expenses contemplated by the Trust Agreement. The first is accountants' fee. In the event there is an Deficiency Event, the Trustee is required to notify the accountants and request a review of future cash flow sufficiency of the Trust.

If a distribution of principal and interest is 30 days or more delinquent, 5% or more of the current Certificate holders may demand a vote for a new asset representation review. If majority of the Certificate holders vote in favor of such, there will be a second fee payable to the asset representation reviewer for the new review ordered. The Trust Agreement requires a third party independent accounting firm and an asset representation reviewing firm be engaged at closing, for the life of the Trust. The annual expenses of the Trust, if incurred, are capped at $500,000.

It is also worth noting that the Trust Agreement provides another option to the Certificate holders in the event of deficiency, as opposed to automatically incurring additional third party expenses. Holders of greater than 50% of the regular Certificates outstanding may direct the Trustee, in writing, to sell the assets and collapse the Trust after the insufficiency determination is made by the accountants.

Permitted Investments

During the short 5-day period between when the Trustee receives the GNMA MBS payments and pays the Certificate holders, the funds received will be invested in an Eligible Account (defined as an interest bearing deposit account with a bank with a short-term rating of P-1 from Moody's). We expect the funds be invested in an interest bearing account with Citibank who is the Trustee.

The Trust account is required to be maintained as an Eligible Account at all times. So if the P-1 rated bank holding the trust assets is downgraded, the Trustee is required to move the account to another properly rated account with a different bank.

METHODOLOGY

The principal methodology used in this rating was US Stand-Alone Housing Bond Programs Secured by Credit Enhanced Mortgages published in October 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

Further information on the representations and warranties and enforcement mechanisms available to investors are available on http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1115356

Moody's did not use any models, or loss or cash flow analysis, in its analysis.

Moody's did not use any stress scenario simulations in its analysis.

For ratings issued on a program, series or category/class of debt, this announcement provides certain 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 certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain 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.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Ping Hsieh
VP - Senior Credit Officer
Public Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Florence Zeman
Associate Managing Director
Public Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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