New York, January 24, 2019 -- Moody's Investors Service has assigned Aaa (sf) to the proposed
$250 million of Series 2019-1 Class A Certificates (the
2019-1 Certificates) to be issued by GNMAG Asset Backed Securitizations
Trust, Series 2019-1 (the Trust). GNMAG Asset Backed
Securitizations, LLC is the depositor.
RATINGS 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; outlook stable), 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 to the Certificate holders within five (5) days,
by the Trustee, Citibank, N.A. (A1/P-1;
outlook Ratings Under Review).
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 2019-1 Certificates will be issued by the Trust for the securitization
of a portfolio of GNMA MBS. The 2019-1 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 2019-1 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 - post-closing fees will only be of unexpected
nature
After the closing, the only fees and expenses that the Trust will
incur would be of unexpected nature and only upon occurrence of a Deficiency
Event 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". Unexpected fees will exacerbate
the deficiency in the Trust and result in a steeper downgrade because
net revenues received monthly by the Trust would have been fully passed
through to the certificate holders, leaving no funds available in
the Trust to pay unexpected fees upon a Deficiency Event. The annual
expenses of the Trust, if incurred, are capped at $500,000.
There are two types of unexpected expenses contemplated by the Trust Agreement.
The first is accountants' fee, capped at $5,000.
In the event there is a Deficiency Event, the Trustee is required
to notify the accountants and request a review of future cash flow sufficiency
of the Trust.
The second is a fee payable to the asset representation reviewer if a
new report is ordered. 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, 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.
Sale of Trust assets upon Deficiency Event
However, in the event of deficiency, Certificate holders can
opt for the sale of Trust funds 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
accountants make an insufficiency determination.
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.
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=PBS_1158850
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
