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Global Credit Research - 15 Sep 2010
New York, September 15, 2010 -- Moody's Investors Service has assigned ratings to the Series 2010-1
Tax Lien Asset-Backed Pass-Through Certificates to be issued
by Tax Liens Securitization Trust 2010-1. The complete rating
action is as follows:
Issuer: Tax Liens Securitization Trust 2010-1
Series 2010-1 Class I-A-1 Tax Lien Asset Backed Pass-through
Certificates, rated (P)Aaa (sf)
Series 2010-1 Class II-A-1 Tax Lien Asset Backed
Pass-through Certificates, rated (P)Aaa (sf)
The tax lien asset-backed pass-through certificates are
collateralized by tax liens on primarily residential and commercial properties
located in the State of Florida and arising out of delinquent property
taxes, assessments, and other charges imposed by certain counties.
Tax liens are generally senior to mortgage and judgment liens.
This is the first tax lien securitization sponsored by Banc of America
Securities LLC. The transaction consists of two segregated pools
of tax liens: Group I Tax Liens and Group II Tax Liens. The
Group I certificates will be backed by Group I Tax Liens only while the
Group II certificates will be backed by Group II Tax Liens only.
Each group of certificates will have a segregated waterfall and reserve
accounts and there will be no cross default or cross over-collateralization
between them. However, the waterfalls for Group I Tax Liens
will be identical to that for the Group II Tax Liens. Class I-A-1
will be approx. 33% of the initial Group I pool balance
and Class II-A-1 will be approx. 28% of the
initial Group II pool balance. The historical redemption curves
(rate of cumulative repayments) provided by the Issuer have been used
to size the Class I-A-1 certificates and Class II-A-1
certificates as if they were money market tranches using our methodology
as described under the "Principal Methodology" section of
The ratings are based on the assessed quality of the collateral,
the expected redemption patterns for the collections based on observed
redemption patterns for past vintages of tax liens in Florida provided
by Banc America Securities LLC; the relative small size and seniority
of the Class I-A-1 certificates and Class II-A-1
certificates in terms of principal repayments; the available liquidity
support provided by an interest reserve fund cash-funded at closing
for Group I certificates and Group II certificates, respectively,
and master servicer advancing by Bank of America, N.A.
as the master servicer; the experience and capabilities of Bank of
America, N.A. (Aa3, negative) as the master
servicer and MTAG Services, LLC as the servicer; and the integrity
of the transaction's legal structure which reduces the probability
of a bankruptcy proceeding by or against the issuing entity and thus provides
comfort that the underlying collateral will be readily available to support
Key credit metrics considered by Moody's include the Lien to Value
of each group of tax liens and the redemption curves of historical tax
liens in Florida. The weighted average Lien-to-Value
is 2.05% for Group I Tax Liens and 2.08% for
Group II Tax Liens, respectively. Lien --to-Value
is defined as a ratio equal to the tax lien principal balance as of June
1, 2010 divided by the assessed value of property as of January
1, 2009. Historical redemption rates for residential properties
indicate a cumulative redemption rate in the sixties in percentage terms
by month 11 since the acquisition date of such liens and in the eighties
in terms of percentages by month 22 since acquisition. By comparison,
historical redemption rates for commercial properties are lower,
in the early fifties in terms of percentages of the initial balance by
month 11 and in the seventies in terms of percentages by month 22 since
acquisition. In addition, historical data shows that redemption
rates for the past three years have slowed down.
Moody's V Score: The V Score for this transaction is Medium,
higher than that for the tax lien sector for which the score is Low/Medium.
The V Score indicates "Medium" uncertainty about critical assumptions
such as data quality and disclosure, transaction and analytical
complexity as well as market value risk. The Medium score for this
transaction is largely driven by the quality of data and disclosure,
analytical complexity and governance. There is a relatively short
history of redemption data as historical performance data dates back to
2003. There is also a lack of performance data for Group II tax
Moody's V Scores provide a relative assessment of the quality of available
credit information and the potential variability around the various inputs
to a rating determination. The V Score ranks transactions by the
potential for significant rating changes owing to uncertainty around the
assumptions due to data quality, historical performance, the
level of disclosure, transaction complexity, the modeling
and the transaction governance that underlie the ratings. V Scores
apply to the entire transaction (rather than individual tranches).
Moody's Parameter Sensitivities: For this exercise, we analyze
stress scenarios assessing the potential model-indicated ratings
impact if the cumulative redemption rates of tax liens are lower than
the actual historical collection rates. We apply a haircut of 10%,
20%, 30% and 40% to the actual cumulative historical
redemption rates, i.e., the actual cumulative
redemption rates for this transaction might be 10%, 20%
30% or 40% slower than the historical redemption rates.
Using such assumptions, the (P)Aaa (sf) initial rating for the Class
I-A-1 certificates and Class II-A-2 certificates
would remain unchanged if the haircut is 10%, 20%,
30% or 40%.
Parameter Sensitivities are not intended to measure how the rating of
the security might migrate over time, rather they are designed to
provide a quantitative calculation of how the initial rating might change
if key input parameters used in the initial rating process differed.
The analysis assumes that the deal has not aged. Parameter Sensitivities
only reflect the ratings impact of each scenario from a quantitative/model-indicated
standpoint. Qualitative factors are also taken into consideration
in the ratings process, so the actual ratings that would be assigned
in each case could vary from the information presented in the Parameter
The principal methodology used in rating the transaction is summarized
below. Other methodologies and factors that may have been considered
in the process of rating this issue can also be found in the Rating Methodologies
sub-directory on Moody's website.
Moody's believes that lien-to-value is the primary
indicator of the property owner's propensity to redeem the tax lien certificate.
In general, high lien-to-value properties are more
risky than low lien to value properties as recovery rates may be higher
for low lien to value properties, other things being the same.
The performance of the historical redemption rates during the recent economic
recession reinforces our view that the low LTV associated with this transaction
provides a large incentive for the stakeholders to resolve outstanding
tax lien on the property. In addition, the senior position
of the Class I-A-1 and Class II-A-1 certificates
in receiving the principal payments adds an additional layer of protection,
counteracting the effect of tail risk. Furthermore, the rated
certificates also benefits from an interest reserve fund. Therefore,
in consideration of the relatively low lien-to-value ratio
for Group I Tax Liens and Group II Tax Liens, and given the historical
redemption data provided by the Issuer, we are comfortable in assigning
a (P)Aaa (sf) rating to the Class I-A-1 and Class II-A-2
Below is a description of our rating methodology for money market tranches
backed by tax liens:
A unique aspect of this asset class is that all of the assets are by definition
delinquent. By extension there also are no contractually due payments
or rather, technically payments are immediately due and payable
but are delinquent. Thus in sizing money market tranches,
reliance on historical redemption patterns is necessary. Moody's
has received historical redemption rate by vintages dating back to 2003.
Analyzing the redemption curves has been a primary driver in sizing such
We analyzed the historical redemption curves for tax liens backed by residential
and commercial properties, respectively, and adjusted the
historical redemption curves by seasoning -- the time period between
the acquisition of the tax liens and the closing of the transaction (we
assumed a period of three months). Then we calculated the mean
and standard deviation of the adjusted cumulative redemption curves by
Month 11 from expected closing, and then we determined the size
of the money market tranche by applying a multiple of 10 times to the
standard deviation. The large multiple reflects the limited seven
year history of historical data, and the more stringent liquidity
requirement of a short-term Prime-1 rating, which
is based on the probability of default, rather than expected loss
of the certificates. We use the data by month 11 to take into consideration
of the time lag in collections. We calculated an advance rate for
residential and commercial properties, respectively, and then
we determined the advance rate for each pool by calculating the weighted
average advance rates based on the composition of the pool.
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.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
Additional research including a pre-sale report for the previous
transaction is available at www.moodys.com. The special
report, "Updated Report on V Scores and Parameter Sensitivities
for Structured Finance Securities" is also available at moodys.com.
In addition, 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 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.
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's assigns (P)Aaa (sf) rating to two classes of a tax lien backed securitization sponsored by Banc of America Securities
250 Greenwich Street
New York, NY 10007
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