New York, March 15, 2011 -- Moody's has assigned the long-term rating of Aaa (sf) to the Series
2011-1 Class A Notes issued by GMAC Mortgage Servicer Advance Funding
Company Ltd.
Issuer: GMAC Mortgage Servicer Advance Funding Company Ltd.
Series 2011-1 Class A Term Notes, Assigned Aaa (sf)
RATINGS RATIONALE
The GMAC Mortgage Servicer Advance Funding Company Ltd. Advance
Receivables Backed Notes, Series 2011-1, Class A Term
Notes ("2011-1 Class A") are part of a servicer advance facility
(SAF). They are issued by the GMAC Mortgage Servicer Advance Funding
Company Ltd, which issues notes backed by a servicer's right
to be reimbursed for advances made on behalf of delinquent accounts to
residential mortgage backed securities (RMBS) trusts. The pledged
assets are made up of advances for a) scheduled principal and interest
payments, b) advances for tax and insurance payments, and
c) advances for maintenance and property upkeep (corporate advances).
SAFs can achieve high ratings due to the strong credit risk of the assets
and the additional protections provided by the transaction structure.
Servicer advances have low credit risk because servicers are entitled
to reimburse themselves for advances made by accessing funds received
from the borrower, liquidation proceeds from the sale of the property,
and ultimately from the general collections of the RMBS if they cannot
recoup the entire advance amounts from the borrower or sale of the property.
In addition, the servicer has the right to take its reimbursements
prior to distributions to note holders of the underlying RMBS.
Servicers also have stop advance policies that ensure that their advances
can be recovered from the liquidation proceeds of the relevant property.
SAFs are structured to provide additional protections from interest rate
risk, credit risk, bankruptcy risk and operational risk.
Liquidity reserve accounts, maximum funding advance rates and trigger
mechanisms that dynamically adjust the advance rates protect investors
against interest rate and credit risks. SAFs are structured as
true sales that isolate the receivables from the bankruptcy of the servicer.
There is typically also a third party verification agent and a clear segregation
of the SAF funds from operational funds to mitigate operational risks.
This transaction is backed by a receivable balance of $1,113,541,421
from advances to 239 RMBS trusts.
Each funding of receivables from the facility is subject to a review by
a third party verification agent. The verification agent follows
agreed upon procedures to review a sample of advances to ensure conformance
with eligibility criteria, funding and recovery timelines and transaction
triggers and amortization events.
The credit enhancement for the notes is provided by a dynamic overcollateralization
amount that is changes depending on the types of advances made.
The structure has a 12 month revolving period, after which the 2011-1
Class A notes will amortize.
KEY RATING ASSUMPTIONS/FACTORS
Our analysis is based on a qualitative analysis of the servicer's
operations and the transaction structure, in addition to a quantitative
analysis of cash flows.
Qualitative Analysis: We review the servicer's technology,
stability and processes to determine if it can effectively administer
and monitor the advance and reimbursement of funds for the servicing advance
facility. We also review the flow of funds to ensure that there
is a clear segregation between the trust's funds and the servicer's
corporate funds.
In addition to an analysis of the servicer's operations, we
evaluate the transaction's legal structure and the scope of third
party oversight. We check to make sure that the sale of the receivables
is structured as a true sale to protect the assets in the event of a servicer
bankruptcy. The presence of a third party auditing procedures,
transaction reporting and triggers also provides comfort that there is
proper oversight.
Quantitative Analysis: Our quantitative analysis consists of running
cash flows of the advance recoveries. The recovery cash flows need
to be able to both pay the note balance in full by the legal final maturity
date, as well as the interest accrued on the notes in a timely manner.
Our cash flow model requires inputs for credit losses, advance recovery
timelines and interest rate forecasts.
Our first assumption used in modeling a SAF collateral cash flows is the
expected loss on different advance types. This is achieved through
an evaluation of the servicer's ability to track advances,
in addition to their own stop advance policies and SAF level advance funding
conditions.
We determine the stressed time to recovery for a given servicer by stressing
the historical recovery timelines of that servicer and comparing the results
to the industry baseline. If a servicer's stressed timelines
are longer than the stressed industry baseline, we will use the
servicer's stressed timelines in our cash flow simulations.
If they are shorter, we typically will use the stressed industry
baseline. GMAC's stressed timelines for corporate and T&I
advance reimbursement were shorter than the stressed industry baseline
and their stressed timelines for P&I advance reimbursements were slightly
longer. Due to recent problems in the foreclosure process,
and the possibility for future slowdowns, we have added additional
stresses to all timelines.
Finally, for adjustable rate notes, we also stress our forecast
for the index rate of the notes. We use 14 different interest rate
paths, and the transaction needs to survive each scenario without
incurring a loss in order to achieve a Aaa rating.
RATING METHODOLOGY
The principal methodology used in this rating was Moody's Approach to
Rating RMBS Servicer Advance Facilities published in January 2010.
Other methodologies and factors that may have been considered in the process
of rating this issuer can also be found on Moody's website.
SENSITIVITY ANALYSIS
Our Aaa (sf) rating for the 2011-1 Class A notes is a result of
a qualitative analysis of the servicer's operations and the transaction's
legal structure, in addition to a quantitative modeling of cash
flows. Our cash flow modeling is subject to assumptions of credit
losses, advance recovery timelines and interest rate stresses.
Given the current operating environment for RMBS servicers, we view
the recovery timelines as a potential source of future volatility.
We stress tested our model assumptions for the Aaa advance recovery timelines.
Based on those tests, the model output indicated that Class A1 would
have achieved a Aa1 (sf) rating if the stressed advance recovery timelines
in our model would have increased by ten months, all else being
equal.
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 Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or financial
instruments in this transaction.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
and public information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory of the purposes of assigning
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.
New York
Todd Swanson
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Kruti Muni
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's assigns Aaa (sf) rating to Series 2011-1 Class A Term Notes issued by GMAC Mortgage Servicer Advance Funding Company Ltd.
