New York, September 17, 2020 -- Moody's Investors Service, ("Moody's") has assigned definitive ratings
to 34 classes of residential mortgage-backed securities (RMBS)
issued by CIM Trust (CIM) 2020-INV1. The ratings range from
Aaa (sf) to B3 (sf).
CIM Trust 2020-INV1 (CIM 2020-INV1) the second rated transaction
sponsored by Chimera Investment Corporation (Chimera or the sponsor) in
2020, is a prime RMBS securitization of fixed-rate agency-eligible
mortgages secured by first liens on non-owner occupied residential
investor properties with original term to maturity of up to 30 years.
This transaction represents the first investor prime issuance by the sponsor
in 2020. The mortgage loans were acquired by the affiliate of the
sponsor, Fifth Avenue Trust (seller) from Bank of America National
Association (BANA). BANA acquired the mortgage loans through its
whole loan purchase program from various originators.
As of the cut-off date of September 1, 2020, the pool
contains 1,009 mortgage loans with an aggregate principal balance
of $335,064,756 secured by one- to four family
residential properties, planned unit developments and condominiums.
The average stated principal balance is $332,076 and the
weighted average (WA) current mortgage rate is 4.3%.
The mortgage pool has a WA original term of approximately 30 years (359
months). The mortgage pool has a WA seasoning of 7.7 months.
The borrowers have a WA credit score of 770, WA combined loan-to-value
ratio (CLTV) of 64.3% and WA debt-to-income
ratio (DTI) of 35.5%. Approximately 13.1%
of the pool balance is related to borrowers with more than one mortgage
loan in the pool (a total of 121 loans among 55 unique borrowers).
There are 70 loans (6.4% by stated principal balance) which
had at least 1 month delinquency in the past 12 months, of which
22 are coronavirus (or COVID-19) related (1.8% by
stated principal balance), and approximately 42 loans (4.2%
by stated principal balance) experienced a delinquency due to servicing
transfers. As of the cut-off date, no borrower under
any mortgage loan is currently in an active COVID-19 related forbearance
plan with the servicer. All loans in the pool are current as of
the cut-off date.
There are 7 originators in the transaction, the largest of which
are United Shore Financial Services, LLC (45.0%),
loanDepot.com, LLC (43.1%), and Provident
Funding Associates, L.P. (5.7%).
Each mortgage loan was represented by the related originator to be secured
by an investment property (which includes for such purpose both business
purpose loans and personal use loans). None of the "business-purpose"
mortgage loans included in this transaction are qualified residential
mortgages under U.S. risk retention rules. All of
the personal use loans are "qualified mortgages" under Regulation Z as
result of the temporary provision allowing qualified mortgage status for
loans eligible for purchase, guaranty, or insurance by Fannie
Mae and Freddie Mac (and certain other federal agencies). As of
the closing date, the sponsor or a majority-owned affiliate
of the sponsor will retain an eligible horizontal residual interest with
a fair value of at least 5% of the aggregate fair value of the
certificates issued by the trust, which is expected to satisfy U.S.
risk retention rules.
Shellpoint Mortgage Servicing (Shellpoint), a division of NewRez
LLC, f/k/a New Penn Financial, LLC, will service all
the mortgage loans in the transaction. Wells Fargo Bank,
N.A. (Wells Fargo) will be the master servicer. Three
third-party review (TPR) firms verified the accuracy of the loan
level information that we received from the sponsor. These firms
conducted detailed credit, property valuation, data accuracy
and compliance reviews on 100% of the mortgage loans in the collateral
pool. The TPR results indicate that there are no material compliance,
credit, or data issues and no appraisal defects.
We analyzed the underlying mortgage loans using Moody's Individual Loan
Analysis (MILAN) model. In addition, we adjusted our expected
losses based on qualitative attributes, including the financial
strength of the representation and warranties (R&W) provider and TPR
results.
CIM 2020-INV1 has a shifting interest structure with a five-year
lockout period that benefits from a senior subordination floor and a subordinate
floor. We coded the cash flow to each of the certificate classes
using Moody's proprietary cash flow tool. In our analysis of tail
risk, we considered the increased risk from borrowers with more
than one mortgage in the pool.
The complete rating actions are as follows:
Issuer: CIM Trust 2020-INV1
Cl. A-1, Assigned Aaa (sf)
Cl. A-2, Assigned Aaa (sf)
Cl. A-3, Assigned Aaa (sf)
Cl. A-4, Assigned Aaa (sf)
Cl. A-5, Assigned Aaa (sf)
Cl. A-6, Assigned Aaa (sf)
Cl. A-7, Assigned Aaa (sf)
Cl. A-8, Assigned Aaa (sf)
Cl. A-9, Assigned Aaa (sf)
Cl. A-10, Assigned Aaa (sf)
Cl. A-11, Assigned Aaa (sf)
Cl. A-12, Assigned Aaa (sf)
Cl. A-13, Assigned Aa1 (sf)
Cl. A-14, Assigned Aa1 (sf)
Cl. A-15, Assigned Aaa (sf)
Cl. A-16, Assigned Aaa (sf)
Cl. A-IO1*, Assigned Aaa (sf)
Cl. A-IO2*, Assigned Aaa (sf)
Cl. A-IO3*, Assigned Aaa (sf)
Cl. A-IO4*, Assigned Aaa (sf)
Cl. A-IO5*, Assigned Aaa (sf)
Cl. A-IO6*, Assigned Aaa (sf)
Cl. A-IO7*, Assigned Aaa (sf)
Cl. A-IO8*, Assigned Aa1 (sf)
Cl. A-IO9*, Assigned Aaa (sf)
Cl. B-1, Assigned Aa3 (sf)
Cl. B-IO1*, Assigned Aa3 (sf)
Cl. B-1A, Assigned Aa3 (sf)
Cl. B-2, Assigned A3 (sf)
Cl. B-IO2*, Assigned A3 (sf)
Cl. B-2A, Assigned A3 (sf)
Cl. B-3, Assigned Baa2 (sf)
Cl. B-4, Assigned Ba2 (sf)
Cl. B-5, Assigned B3 (sf)
*Reflects Interest Only Classes
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected loss for this pool in a baseline scenario-mean
is 1.04%, in a baseline scenario-median is
0.68%, and reaches 9.43% at a stress
level consistent with our Aaa ratings.
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to disrupt
economies and credit markets across sectors and regions. Our analysis
has considered the effect on the performance of residential mortgage loans
from the current weak US economic activity and a gradual recovery for
the coming months. Although an economic recovery is underway,
it is tenuous and its continuation will be closely tied to containment
of the virus. As a result, the degree of uncertainty around
our forecasts is unusually high.
The contraction in economic activity in the second quarter was severe
and the overall recovery in the second half of the year will be gradual.
However, there are significant downside risks to our forecasts in
the event that the pandemic is not contained and lockdowns have to be
reinstated. As a result, the degree of uncertainty around
our forecasts is unusually high. We increased our model-derived
median expected losses by 15.00% (11.39% for
the mean) and our Aaa losses by 5.00% to reflect the likely
performance deterioration resulting from of a slowdown in US economic
activity in 2020 due to the coronavirus outbreak.
We regard the COVID-19 outbreak as a social risk under our ESG
framework, given the substantial implications for public health
and safety.
We base our ratings on the certificates on the credit quality of the mortgage
loans, the structural features of the transaction, our assessments
of the origination quality and servicing arrangement, the strength
of the third-party due diligence and the R&W framework of the
transaction.
Collateral Description
We assessed the collateral pool as of the cut-off date of September
1, 2020. As of the cut-off date, the $335,064,756
pool consisted of 1,009 fixed rate agency-eligible mortgage
loans secured by first liens on non-owner occupied residential
investor properties with original terms to maturity up to 30 years (99.5%
of pool balance between 25-30 years). All of the loans were
originated in accordance with Freddie Mac and Fannie Mae guidelines,
which take into consideration, among other factors, the income,
assets, employment and credit score of the borrower. All
the loans were run through one of the government sponsored enterprises'
(GSE) automated underwriting systems (AUS) and received an "Approve" or
"Accept" recommendation.
Pool strengths include the high credit quality of the underlying borrowers.
The borrowers in this transaction have high FICO scores and sizeable equity
in their properties. The WA original primary borrower credit score
is 770 and the CLTV is 64.3%. Only one loan in the
pool has an LTV ratio greater than 80%. High LTV loans generally
have a higher probability of default and higher loss severity compared
to lower LTV loans. Additionally, the borrowers have a high
WA total monthly income of $17,921 and significant WA liquid
cash reserves of $192,626 (approximately 75.6%
of the pool has more than the amount of 12 months of mortgage payments
in reserve).
Approximately 73.9% (by loan balance) of the properties
backing the mortgage loans are located in five states: California,
New York, Washington, Colorado and Arizona, with 54.6%
(by loan balance) of the properties located in California. Properties
located in the states of New Jersey, Texas, Virginia,
Oregon and Florida, round out the top ten states by loan balance.
Approximately 87.5% (by loan balance) of the properties
backing the mortgage loans included in CIM 2020-INV1 are located
in these ten states. The top five MSAs by loan balance are Los
Angeles (22.1%), New York (9.0%),
San Francisco (8.3%), San Diego (5.5%)
and San Jose (4.0%). We made adjustments in our analysis
to account for this geographic concentration risk.
Overall, the credit quality of the mortgage loans backing this transaction
is in line with other transactions issued by other prime issuers.
There are 70 loans which had at least 1 month delinquency in the past
12 months, of which 22 are COVID-19 related (1.8%
by stated principal balance), and approximately 42 loans (4.2%
by stated principal balance) experienced a delinquency due to servicing
transfers. However, all loans in the pool are current as
of the cut-off date. Furthermore, as of the cut-off
date, no borrower under any mortgage loan is currently in an active
COVID-19 related forbearance plan with the servicer. Certain
borrowers under mortgage loans in the mortgage pool (44 loans or 4.5%
by stated principal balance) previously have entered into a COVID-19
related forbearance plan loans with the servicer and such borrowers have
since been reinstated (of which 1.8%, by stated principal
balance, experienced a delinquency in the past 12 months).
In the event that after the cut-off date a borrower enters into
or requests a COVID-19 related forbearance plan, such mortgage
loan will remain in the mortgage pool and the servicer will be required
to make advances in respect of delinquent interest and principal (as well
as servicing advances) on such mortgage loan during the forbearance period
(to the extent such advances are deemed recoverable). Furthermore,
any mortgage loan that becomes subject to a forbearance plan will be reported
by the servicer as delinquent with respect to each scheduled monthly payment
that is subject to the forbearance plan and not made by the related mortgagor
during the related forbearance period.
Origination
The seller acquired the mortgage loans from BANA. BANA acquired
the loans in the pool from 7 different originators. The largest
originators in the pool with more than 10% by balance are United
Shore Financial Services, LLC (44.7%) and LoanDepot.com,
LLC (43%). The mortgage loans acquired by the seller pursuant
to the CIM 2020-INV1 acquisition criteria. Generally,
each mortgage loan must (i) be underwritten to conform to the GSE's underwriting
standards and have valid findings and an "Approve" or "Accept" response
from the requirements of the DU/LP Programs, (ii) have a representative
FICO score of greater than or equal to 680, (iii) have a maximum
DTI of 45% and (iv) have a LTV ratio of less than or equal to 80%.
United Shore Financial Services, LLC (United Shore): United
Shore was founded in 1986 and is headquartered in Pontiac, Michigan.
United Wholesale Mortgage, the company's primary business unit,
conducts wholesale mortgage lending. United Shore is licensed to
originate loans in all 50 states. United Shore funds loans brokered
by its broker clients and buys loans originated by its correspondent clients.
Its clients include mortgage banks, smaller lenders, credit
unions and mortgage brokers and its loan product offerings include FHA,
VA and USDA loans, Fannie Mae and Freddie Mac eligible loans,
and certain non-conforming loan products. United Shore underwrites
all of the loans of its broker and correspondent clients and such underwriting
is performed according to, as applicable, agency, investor,
private mortgage insurer and United Shore guidelines, United Shore
overlays and United Shore product descriptions.
loanDepot.com, LLC (loanDepot): Headquartered in Foothill
Ranch, CA, loanDepot is a national retail focused franchise,
non-bank lender which originates both agency and non-agency
loans. Founded in 2009 and launched in 2010 by Chairman and CEO
Anthony Hsieh, loanDepot has funded approximately $180 billion
residential mortgage loans as of FY 2019. After its initial launch,
loanDepot's growth strategy included acquiring independent retail platforms
across the country and using mobile, licensed lending officers to
build a nationwide retail presence. loanDepot is primarily engaged
in the origination of residential mortgages and home equity loans.
loanDepot has management team of experienced operators and lenders,
licensed mortgage lender in all 50 states, 6,600 employee,
2,300+ licensed loan officers, 5 national fulfillment
centers, 225 local branch offices across the U.S.,
and generates 900,000+ new leads each month. The company
had $180 billion of loan originations in FY19 and is currently
originating around ~$7 billion/month. The company had a
compounded growth in originations of 40% annually from FY 2010-Q1
2020. In addition to its core lending activities and established
capital markets relationships, loanDepot has also invested in several
strategic joint ventures whose services complement its core mortgage lending
business such as escrow, settlement, title, closing,
new home construction and investment management. Partners range
from private to public, national and regional, financial services
to homebuilders.
With one exception, we did not make an adjustment for GSE-eligible
loans, regardless of the originator, since those loans were
underwritten in accordance with agency guidelines. We increased
our loss assumption for the loans originated by Home Point Financial Corporation
(4.4% by stated principal balance) due to limited historical
performance data, reduced retail footprints which limits the seller's
oversight on originations, and lack of strong controls to support
recent rapid growth.
Servicing Arrangement
We consider the overall servicing arrangement for this pool to be adequate,
and as a result we did not make any adjustments to our base case and Aaa
stress loss assumptions based on the servicing arrangement.
Shellpoint will service all the mortgage loans in the transaction.
Shellpoint is generally obligated to fund monthly advances of cash (to
the extent such advances are deemed recoverable) and to make interest
payments to compensate in part for any shortfall in interest payments
due to prepayment of the mortgage loans. Shellpoint services a
variety of residential mortgage products including conforming first lien
mortgages, super-jumbo mortgages, non-conforming
first and second lien mortgages and both open and closed home equity lines
of credit (HELOCS). Shellpoint is an approved servicer in good
standing with Ginnie Mae, Fannie Mae and Freddie Mac. As
of August 31, 2020, the company's servicing portfolio totaled
approximately 1,526,989 loans with an unpaid principal balance
of approximately $268 billion. Shellpoint's senior management
team has an average of more than 15 years' industry experience,
providing a solid base of knowledge and leadership to the company's servicing
division.
Wells Fargo, the master servicer, will monitor the performance
of the servicer and will be obligated to fund any required advance and
interest shortfall payments if a servicer fails in its obligation to do
so. We consider the presence of a strong master servicer to be
a mitigant for any servicing disruptions. Our evaluation of Wells
Fargo as a master servicer takes into account the bank's strong reporting
and remittance procedures, servicer compliance and monitoring capabilities
and servicing stability. Wells Fargo's oversight encompasses loan
administration, default administration, compliance and cash
management.
Also, at its option, the controlling holder may engage,
at its own expense, an asset manager to review the actions of any
party servicing the mortgage loans with respect to their actions (including
making determinations regarding whether a servicer is making modifications
or servicing the mortgage loans in accordance with the terms of the respective
agreement.
We did not make any adjustments to our base case and Aaa stress loss assumptions
based on the servicing arrangement. We consider the presence of
a strong master servicer and the ability of the controlling holder to
appoint an asset manager to review the actions of any party servicing
the mortgage loans to be a mitigant against the risk of any servicing
disruptions.
Servicing Fee
Shellpoint will be paid a monthly fee calculated as the product of (i)
0.0700% per annum, multiplied by (ii) the stated principal
balance of the loans it services as of the first day of the related period
divided by (iii) twelve. The per annum servicing fee rate for Shellpoint
for any distribution date will not exceed an amount equal to 0.0900%
of the aggregate stated principal balance of the mortgage loans as of
the first day of the related period.
Wells Fargo will be paid amount equal to the greater of (i) the product
of one-twelfth of the master servicing fee rate (0.0265%
per annum) and the stated principal balance of each mortgage loan as of
the first day of the related due period and (ii) $2,500.
Third Party Review
Three TPR firms verified the accuracy of the loan level information.
These firms conducted detailed credit, property valuation,
data accuracy and compliance reviews on 100% of the mortgage loans
in the collateral pool. The TPR results indicate that the majority
of reviewed loans were in compliance with respective originators' underwriting
guidelines, no material compliance or data issues, and no
appraisal defects. The majority of the data integrity errors were
due to minor discrepancies which were corrected in the final collateral
tape and thus we did not make any adjustments to our credit enhancement.
The overall property valuation review for this transaction is weaker than
other prime transactions we have rated, which typically had third-party
valuation products, such as desktop appraisals or field reviews,
ordered for the vast majority of the collateral pool. In this transaction,
for most of the mortgage loans, the original appraisal was evaluated
using only an Automatic Valuation Model (AVM). We applied an adjustment
to the loss for such loans, since we consider AVMs to be less accurate
than desk reviews and field reviews due to inherent data limitations that
could adversely impact the reliability of AVM results.
For 29 loans (2.4% by stated principal balance), the
file was missing an appraisal because such loan was approved via a property
inspection/appraisal waiver program. An appraisal waiver loan is
a loan for which a traditional appraisal has been waived. Since
the product was only introduced relatively recently, in a positive
macro-economic environment, sufficient time has not passed
to determine whether the loan level valuation risk related to a GSE-eligible
loan with an appraisal waiver is the same as a GSE-eligible loan
with a traditional appraisal due to lack of significant data. Thus,
to account for the risk associated with this product, we increased
our base case and Aaa loss expectations for all such loans.
Representation & Warranties
Overall, we assessed R&W framework for this transaction as adequate,
consistent with that of other prime transactions for which the breach
review process is thorough, transparent and objective, and
the costs and manner of review are clearly outlined at issuance.
We assessed the R&W framework based on three factors: (a) the
financial strength of the remedy provider; (b) the strength of the
R&Ws (including qualifiers and sunsets) and (c) the effectiveness
of the enforcement mechanisms.
Each originator will provide comprehensive loan level R&Ws for their
respective loans. Overall, the loan-level R&Ws
are strong and, in general, either meet or exceed the baseline
set of credit-neutral R&Ws we identified for US RMBS.
BANA will assign each originator's R&W to the seller, who will
in turn assign to the depositor, which will assign to the trust.
To mitigate the potential concerns regarding the originators' ability
to meet their respective R&W obligations, the seller (an affiliate
of the sponsor) will backstop the R&Ws for all originators loans.
The R&W provider's obligation to backstop third party R&Ws will
terminate 5 years after the closing date, subject to certain performance
conditions. The R&W provider will also provide the gap R&Ws.
The R&W framework is adequate in part because the results of the independent
TPRs revealed a high level of compliance with underwriting guidelines
and regulations, as well as overall adequate appraisal quality.
These results give confidence that the loans do not systemically breach
the R&Ws the originators have made and that the originators are unlikely
to face material repurchase requests in the future. Furthermore,
the transaction has reasonably well-defined processes in place
to identify loans with defects on an ongoing basis. In this transaction,
an independent reviewer, when appointed, must review loans
for breaches of representations and warranties when certain clearly defined
triggers have been breached (review event). A review event will
be in effect for a mortgage loan if (i) such mortgage loan has become
120 days or more delinquent, (ii) such mortgage loan is liquidated
and such liquidation results in a realized loss, or (iii) the related
servicer determines that a monthly advance for a mortgage loan is nonrecoverable.
Of note, in a continued effort to focus breach reviews on loans
that are more likely to contain origination defects that led to or contributed
to the delinquency of the loan, an additional carve out has been
in recent transactions we have rated from other issuers relating to the
delinquency review trigger. Similarly, in this transaction,
exceptions exist for certain excluded disaster mortgage loans that trip
the review event. These excluded disaster loans include COVID-19
forbearance loans.
Transaction Structure
The transaction has a shifting interest structure in which the senior
bonds benefit from a number of protections. Funds collected,
including principal, are first used to make interest payments to
the senior bonds. Next, principal payments are made to the
senior bonds. Next, available distribution amounts are used
to reimburse realized losses and certificate write-down amounts
for the senior bonds (after subordinate bond have been reduced to zero
i.e. the credit support depletion date). Finally,
interest and then principal payments are paid to the subordinate bonds
in sequential order. Realized losses are allocated in a reverse
sequential order, first to the lowest subordinate bond. After
the balance of the subordinate bonds is written off, losses from
the pool begin to write off the principal balance of the senior support
bond, and finally losses are allocated to the super senior bonds.
Tail Risk and Subordination Floor
The transaction cash flows follow a shifting interest structure that allows
subordinated bonds to receive principal payments under certain defined
scenarios. Because a shifting interest structure allows subordinated
bonds to pay down over time as the loan pool shrinks, senior bonds
are exposed to increased performance volatility, known as tail risk.
The transaction provides for a senior subordination floor of 1.40%
of the closing pool balance, which mitigates tail risk by protecting
the senior bonds from eroding credit enhancement over time. Additionally,
there is a subordination lock-out amount which is 0.70%
of the closing pool balance.
Other Considerations
In CIM 2020-INV1, the controlling holder has the option to
hire at its own expense the independent reviewer upon the occurrence of
a review event. If there is no controlling holder (no single entity
holds a majority of the class principal amount of the most subordinate
class of certificates outstanding), the trustee shall, upon
receipt of a direction of the certificate holders of more than 25%
of the aggregate voting interest of all certificates and upon receipt
of the deposit, appoint an independent reviewer at the cost of the
trust. However, if the controlling holder does not hire the
independent reviewer, the holders of more than 50% of the
aggregate voting interests of all outstanding certificates may direct
(at their expense) the trustee to appoint an independent reviewer.
In this transaction, the controlling holder can be the depositor
or a seller (or an affiliate of these parties). If the controlling
holder is affiliated with the depositor, seller or sponsor,
then the controlling holder may not be motivated to discover and enforce
R&W breaches for which its affiliate is responsible.
The servicer will not commence foreclosure proceedings on a mortgage loan
unless the servicer has notified the controlling holder at least five
business days in advance of the foreclosure and the controlling holder
has not objected to such action. If the controlling holder objects,
the servicer has to obtain three appraisals from the appraisal firms as
listed in the pooling and servicing agreement. The cost of the
appraisals are borne by the controlling holder. The controlling
holder will be required to purchase such mortgage loan at a price equal
to the highest of the three appraisals plus accrued and unpaid interest
on such mortgage loan as of the purchase date. If the servicer
cannot obtain three appraisals there are alternate methods for determining
the purchase price. If the controlling holder fails to purchase
the mortgage loan within the time frame, the controlling holder
forfeits any foreclosure rights thereafter.
We consider this credit neutral because a) the appraiser is chosen by
the servicer from the approved list of appraisers, b) the fair value
of the property is decided by the servicer, based on third party
appraisals, and c) the controlling holder will pay the fair price
and accrued interest.
Servicing Arrangement / COVID-19 Impacted Borrowers
As of the cut-off date, no borrower under any mortgage loan
has entered into a Covid-19 related forbearance plan with the servicer.
In the event that after the cut-off date a borrower enters into
or requests an active COVID-19 related forbearance plan,
such mortgage loan will remain in the mortgage pool and the servicer will
be required to make advances in respect of delinquent interest and principal
(as well as servicing advances) on such mortgage loan during the forbearance
period (to the extent such advances are deemed recoverable) and the mortgage
loan will be considered delinquent for all purposes under the transaction
documents. At the end of the forbearance period, as with
any other modification, to the extent the related borrower is not
able to make a lump sum payment of the forborne amount, the servicer
may, subject to the servicing matrix, offer the borrower a
repayment plan, enter into a modification with the borrower (including
a modification to defer the forborne amounts) or utilize any other loss
mitigation option permitted under the pooling and servicing agreement.
As with any other modification, it is anticipated that the servicer
will reimburse itself at the end of the forbearance period for any advances
made by it with respect to such mortgage loan, whether that be from
any lump sum payments made by the related borrower, from any increased
payments received with respect to any repayment plan entered into by the
borrower, or, if modified and capitalized in connection therewith,
at the time of such modification as a reimbursement of such capitalized
advances from principal collections on all of the mortgage loans.
The servicer also has the right to reimburse itself for any advance from
all collections on the mortgage loans when such advance is deemed to be
non-recoverable. With respect to a mortgage loan that was
the subject of a servicing modification, the amount of principal
of the mortgage loan, if any, that has been deferred and that
does not accrue interest will be treated as a realized loss and to the
extent any such amount is later recovered, will result in the allocation
of a subsequent recovery.
Factors that would lead to an upgrade or downgrade of the ratings:
Down
Levels of credit protection that are insufficient to protect investors
against current expectations of loss could drive the ratings down.
Losses could rise above Moody's original expectations as a result of a
higher number of obligor defaults or deterioration in the value of the
mortgaged property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and housing market.
Other reasons for worse-than-expected performance include
poor servicing, error on the part of transaction parties,
inadequate transaction governance and fraud.
Up
Levels of credit protection that are higher than necessary to protect
investors against current expectations of loss could drive the ratings
up. Losses could decline from Moody's original expectations as
a result of a lower number of obligor defaults or appreciation in the
value of the mortgaged property securing an obligor's promise of payment.
Transaction performance also depends greatly on the US macro economy and
housing market.
Methodology
The principal methodology used in rating all classes except interest-only
classes was "Moody's Approach to Rating US RMBS Using the MILAN Framework"
published in April 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1201303.
The methodologies used in rating interest-only classes were "Moody's
Approach to Rating US RMBS Using the MILAN Framework" published in April
2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1201303
and "Moody's Approach to Rating Structured Finance Interest-Only
(IO) Securities" published in February 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1111179.
Please see the list of ratings at the top of this announcement to identify
which classes are interest-only (indicated by the *).
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of these methodologies.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
Further information on the representations and warranties and enforcement
mechanisms available to investors are available on http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1245318
.
The analysis relies on an assessment of collateral characteristics to
determine the collateral loss distribution, that is, the function
that correlates to an assumption about the likelihood of occurrence to
each level of possible losses in the collateral. As a second step,
Moody's evaluates each possible collateral loss scenario using a
model that replicates the relevant structural features to derive payments
and therefore the ultimate potential losses for each rated instrument.
The loss a rated instrument incurs in each collateral loss scenario,
weighted by assumptions about the likelihood of events in that scenario
occurring, results in the expected loss of the rated instrument.
Moody's quantitative analysis entails an evaluation of scenarios
that stress factors contributing to sensitivity of ratings and take into
account the likelihood of severe collateral losses or impaired cash flows.
Moody's weights the impact on the rated instruments based on its
assumptions of the likelihood of the events in such scenarios occurring.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
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.
Philip Rukosuev
Analyst
Structured 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
Sonny Weng
Vice President - Senior Analyst
Structured 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
