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Rating Action:

Moody's assigns provisional Aaa (sf) ratings to Prime RMBS issued by EverBank Mortgage Loan Trust 2013-2

31 May 2013

New York, May 31, 2013 -- Moody's Investors Service has assigned provisional ratings of Aaa (sf) to two classes of residential mortgage-backed securities (RMBS) issued by EverBank Mortgage Loan Trust 2013-2 (EBMLT) 2013-2. The certificates are backed by a pool of prime quality, first-lien mortgage loans. The borrowers in this transaction have high FICO scores, significant liquid cash reserves, and sizeable equity in their properties. Our credit opinion reflects our analysis of a wide array of quantitative and qualitative factors, including our originator assessment and an extensive third-party review of the loan pool. The credit quality of the transaction is also strong because of unambiguous representations and warranties and a structure with a subordination floor.

The complete rating actions are as follows:

Issuer: EverBank Mortgage Loan Trust 2013-2

Cl. A, Assigned (P) Aaa (sf)

Cl. A-IO, Assigned (P) Aaa (sf)

RATINGS RATIONALE

Summary Credit Analysis and Rating Rationale

Moody's expected losses on the pool is 0.45% in a base case scenario and reach 7.60% at a stress level consistent with the Aaa ratings on the senior classes. Aaa (sf) subordination for this transaction is 8.00%, which is consistent with Moody's collateral loss and structural analyses. In addition to using Mortgage Portfolio Analyzer to determine pool loss levels, Moody's performed a supplementary analysis of frequency and severity for prime loans in a stressed economy. Moody's determined the lifetime frequency of default for the worst performing jumbo loan vintage—the 2007 vintage—and augmented the 2007 vintage's actual default performance with its projection of future defaults by applying its RMBS surveillance methodology. Moody's severity analysis stressed home prices on a state-by-state, and in some cases an MSA basis, assuming another 33% decline on a national basis.

Comparable Pool Analysis.

Our Aaa stress loss for the aggregate pool is 7.60%, which is similar to the EBMLT 2013-1 transaction and is higher than that of Sequoia (Redwood) transactions that we have rated recently. This pool has a similar weighted average LTV and FICO to EBMLT, which had a Aaa stress loss of 7.65%. In addition, this pool has a similar concentration of properties in the Los Angeles MSA as the EBMLT 2013-1. Transactions with significant California concentrations are particularly sensitive to the concentration in Los Angeles because of the probability and severity of a large earthquake. The expected loss in this pool also reflects our adjustments to the pool loss coverage levels to account for findings by the TPR firm. A positive feature of this pool is the 13% concentration of mortgages maturing in 15 years as well the absence of Hybrid-ARM or interest-only loans in this pool.

Collateral Description

The EBMLT 2013-2 transaction is a securitization of 367 first lien residential mortgage loans, with an aggregate unpaid principal balance of $303,295,158. All of the loans were originated by Everbank, which is unrated. However, Moody's has assessed EverBank as a strong originator of prime Jumbo residential mortgage loans, based on its collateral performance over the past couple of years, strong lending practices, and above-average operational stability. The vast majority of the loans in this pool either qualified under EverBank's 'preferred credit profile' program or had significant compensating factors.

Third-party Review

One third-party review (TPR) firm conducted a detailed credit, collateral, and regulatory compliance review on 100% of the mortgage pool. The TPR results indicated the majority of loans were in compliance with EverBank's underwriting guides and government regulations, there were no appraisal defects. The loans that did not meet Everbank's credit criteria had good compensating factors and senior underwriter sign off. There were few loans for which we recalculated the LTV using the original sales price rather than the new appraised value because the purchase of the home was within one year of the refinance. This was the primary driver of approximately a 15 bps increase to Aaa loss expectation.

Reps & Warranties

The seller has provided unambiguous representations and warranties (R&Ws) including an unqualified fraud R&W. There is a provision for binding arbitration in the event of a dispute between investors and the R&W provider concerning R&W breaches. The provider of the R&W is unrated but Moody's was comfortable with the R&W provided because a TPR company conducted 100% due diligence on the loans confirming conformance with the underwriting guidelines.

Trustee & Master Servicer

The transaction trustee, Christiana Trust, has very limited experience in RMBS, which raises some operational concerns. However, the legal documents delegate most of the functions that an RMBS trustee traditionally performs, such as the custodian and paying agent functions, to Wells Fargo. Wells Fargo is also the securities administrator and master servicer for this transaction. Wells Fargo is a Aa3-rated bank with significant experience serving as a trustee and custodian for RMBS transactions.

Earthquake Risk Analysis

We adjusted our expected losses on a portion of the pool that contain a significant proportion of their loans in earthquake-prone MSAs in order to account for the risk that a serious earthquake could damage a large concentration of the properties backing the pool. About 20% of loans in this pool are for properties that do not have earthquake insurance and are located in the Los Angeles MSA, which lies near the southern San Andreas, San Jacinto, and Elsinore fault lines.

Tail Risk & Subordination Floor

The transaction has a standard shifting-interest structure, but it also has a floor for the subordination amount that augments the senior bonds' ability to withstand losses that occur late in the life of the pool when relatively few loans remain (tail risk). When the total current balance of a given subordinate tranche plus the aggregate balance of the subordinate tranches that are junior to it amount to a floor of less than 2.1% of the original pool balance, those tranches do not receive principal distributions.

Sensitivity Analysis

We tested the sensitivity of the senior notes to increases in our Aaa stressed losses. Our current Aaa stressed loss is 7.60%, without taking into account the transaction structure. If our Aaa stressed loss level for the pool were to increase above 9.10%, all else being equal, the quantitative calculation would indicate a rating level of Aa2 (sf) for senior certificates, or two notches below the Aaa (sf) rating. If our Aaa stressed loss level for the pool were to increase above 12.05%, all else being equal, the quantitative calculation would indicate a rating of A1 (sf) for senior certificates, or four notches below the Aaa (sf) rating.

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 Sensitivity analysis.

Volatility Assumption Score

The V Score for this transaction is medium/high, which is equal to the medium/high score assigned for the US Prime Jumbo RMBS sector. However, there are differences between the drivers of the sector's V Score and this transaction's V Score.

The ratings and performance of US jumbo prime RMBS have been very volatile. Therefore, any transaction in this sector will have a 'high' V score pertaining to ratings and performance. In addition, this transaction includes a multiple group structure, which makes it the most complex structure that we have rated since 2008. On the other hand, there are many stabilizing factors for this transaction. The disclosure of loan level data for this new issuance is superior to historical transactions. Information pertaining to borrower cash reserves, time in current job and origination channel analysis was not only provided, but reviewed by an independent third party.

Also, the structure for this RMBS incorporates a subordination floor of 2.1% and fewer number of tranches as compared to an average existing transaction in the sector. These factors add to the stability of ratings. Additionally, deal governance mechanisms are stronger than the sector average. Specifically, reps and warranties are much better and stronger than the sector average, and have a workable remedial process. While not all of the rep providers are financially strong entities, all of the loans originated by those rep providers have been reviewed by a third party for credit, valuation and regulatory compliance. V Scores are a relative assessment of the quality of available credit information and of the degree of uncertainty around various assumptions used in determining the rating. High variability in key assumptions could expose a rating to a greater likelihood of rating changes. The V Score has been assigned consistent with the report "V Scores and Parameter Sensitivities in the US RMBS Sector," published in April 2009.

Rating Methodology: The principal methodology used in this rating was "Moody's Approach to Rating U.S. Residential Mortgage-Backed Securities," published in December 2008. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

While assessing the ratings on this transaction, Moody's deviated from its published methodology as outlined below:

The output of Mortgage Portfolio Analyzer was used as one input for loss estimation. Alternative analytical inputs including a frequency and severity analysis based upon 2007 vintage performance, with significant weight put on expert judgment were also taken into account, including the aggregate impact of the third-party review and the quality of the servicers and originators.

In addition, Moody's publishes a weekly summary of structured finance credit ratings and methodologies, available to all registered users of our website, www.moodys.com/SFQuickCheck.

REGULATORY DISCLOSURES

Moody's received and took into account a third-party assessment on the due diligence performed regarding the underlying assets or financial instruments in this transaction and the assessment had a negative impact on the credit rating.

Further information on the representations and warranties and enforcement mechanisms available to investors are available on http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF330182

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 rating action on the support provider and in relation to each particular 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 rating action, and whose ratings may change as a result of this 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.

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.

Gerard Mazi
Associate Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Linda Stesney
MD - Structured Finance
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

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

Moody's assigns provisional Aaa (sf) ratings to Prime RMBS issued by EverBank Mortgage Loan Trust 2013-2
No Related Data.
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