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Rating Action:

Moody's assigns provisional ratings to Citigroup Mortgage Loan Trust Inc. 2020-EXP1

29 Jun 2020

New York, June 29, 2020 -- Moody's Investors Service, ("Moody's") has assigned provisional ratings to seven classes of certificates issued by Citigroup Mortgage Loan Trust Inc. 2020-EXP1 (CMLTI 2020-EXP1). The ratings range from (P)Aaa (sf) to (P)B2 (sf). This deal represents the first CMLTI transaction in 2020 and the tenth rated issue from the shelf since its inception in 2015. However, this is Citigroup's first transaction backed by loans underwritten to sellers' expanded prime programs which typically have certain credit parameters that are outside of traditional prime jumbo programs. Such programs typically expand the low end of the eligible FICO range from 680 to 600, while increasing the high end of the loan to-value (LTV) ratio range from 85% to 95%, and allow loans with non-QM characteristics, such as debt-to-income (DTI) ratios greater than 43% and interest-only loans.

The collateral pool comprises 431 fully amortizing fixed and adjustable-rate and interest only first lien mortgage loans, with 90.0% of the loans having an original term to maturity of 30 years. Approximately 7.7% of the loans are interest only with 40 year maturity. The pool includes loans with non-QM characteristics (43.50%), such as debt-to-income ratios greater than 43% and interest only loans.

Shellpoint Mortgage Servicing ("Shellpoint") and Fay Servicing, LLC ("Fay"), will be primary servicers on the deal, servicing approximately 59.8% and 40.2% of the loans, respectively. There is no master servicer in this transaction. U.S. Bank National Association will be the trust administrator and the trustee is U.S. Bank Trust National Association. Moreover, the servicers will not advance any scheduled principal or interest on delinquent mortgages.

The transaction has a sequential payment structure with an interest reserve account that will be fully funded at closing by the sponsor and will cover interest shortfalls to any certificates that pay principal and interest (P&I certificates) up to and including the Class B-3 certificates. The required amount in the account will equal three months of interest distribution for all the P&I certificates as of the distribution date and will be replenished from interest collections on an ongoing basis, to the extent it falls below the required amount. Any funds in the reserve account in excess of the required amount will be released to the sponsor.

The complete rating action are as follows.

Issuer: Citigroup Mortgage Loan Trust Inc. 2020-EXP1

Cl. A-1-A, Rating Assigned (P)Aaa (sf)

Cl. A-1-B, Rating Assigned (P)Aa1 (sf)

Cl. A-2, Rating Assigned (P)Aa3 (sf)

Cl. A-3, Rating Assigned (P)A3 (sf)

Cl. M-1, Rating Assigned (P)Baa3 (sf)

Cl. B-1, Rating Assigned (P)Ba2 (sf)

Cl. B-2 Rating Assigned (P)B2 (sf)

RATINGS RATIONALE

Summary credit analysis and rating rationale

Moody's expected loss for this pool in a baseline scenario-mean is 1.34%, in a baseline scenario-median is 0.86%, and reaches 14.75% at stress level consistent with our Aaa rating.

Our analysis has considered the effect of the COVID-19 outbreak on the US economy as well as the effects that the announced government measures, put in place to contain the virus, will have on the performance of mortgage loans. Specifically, for US RMBS, loan performance will weaken due to the unprecedented spike in the unemployment rate, which may limit borrowers' income and their ability to service debt. The softening of the housing market will reduce recoveries on defaulted loans, also a credit negative. Furthermore, borrower assistance programs, such as forbearance, may adversely impact scheduled cash flows to bondholders.

The contraction in economic activity in the second quarter will be 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 11% (15% for the mean) and our Aaa losses by 5% to reflect the likely performance deterioration resulting from of a slowdown in US economic activity in 2020 due to the COVID-19 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, the representations and warranties (R&W) framework of the transaction and the degree of alignment of interest between the sponsor and the investors.

Collateral description

CMLTI 2020-EXP1's collateral pool is comprised of 431 first lien mortgage loans with an unpaid principal balance of $364,014,993. Although the pool contains expanded prime loans with some riskier features such as interest only loans with 40-year maturities, a relatively high percentage of investor loans, and pockets of loans with prior derogatory credit events, lower FICOs or higher LTVs, overall, the majority of the borrowers in the transaction have high FICO scores, high monthly residual income, significant liquid cash reserves, high income and sizeable equity in their properties comparable to other expanded prime jumbo pools we have rated. The primary borrower has an average monthly income of $18,545 and average liquid cash reserves of $384,488.

Approximately 43.5% and 3.7% of the mortgage loans are non-QM or QM mortgage loans under rebuttable presumption, respectively. As explained in our methodology, we made an incremental adjustment to our expected loss to account for the potential increased risk of legal challenges from defaulted borrowers, which could result in the trust bearing the legal expenses associated with defending against such claims. This risk is mitigated by the relatively strong credit quality of the borrowers, since they are less likely to default.

Borrowers with more than three mortgages represented 14.5% (by loan balance) of the pool. We evaluate loans to borrowers with multiple properties to determine if the transaction warrants additional loss adjustments. We have made an adjustment on mortgage loans where the borrower owns more than 3 properties to reflect an "investor" level of riskiness associated with multiple properties for loans listed as owner-occupied or second homes.

89.62% of the loans in the pool have never been delinquent since origination. 9.68% of the loans were 30 days delinquent only once, and 0.47% (3 loans) and 0.22% (1 loan) of the loans were 30 days delinquent more than once and 60 days delinquent, respectively; all delinquencies are measures using the Mortgage Banking Association (MBA) method. We made no additional adjustment to our losses given that the 30-day delinquencies were due to a servicing transfer. All loans are current as of the cut-off date.

7.7% of the loans in the pool amortize over 40 years and have either a 7 year or a 10 year initial interest only period. To account for this extended maturity profile and lack of amortization during the early years of the loan, we made an adjustment to our collateral losses.

7.0% of the borrowers in the pool have experienced some forms of prior credit event such as bankruptcy and/or foreclosure. However, except for one loan, all these credit events have taken place more than four years ago. We consider the length of time since the credit event, the higher WA FICO (733), lower WA CLTV (77.7%) and low WA DTI (35.9%) for the affected loans relative to the total pool as mitigating factors, and as a result, we made no additional adjustment to our collateral losses

33 loans (5.4% by loan balance) are shared appreciation loans, i.e. loans where a third party contributed

equity towards the down payment of the mortgage loan. In the loan tape for this transaction, the equity contribution is accounted for as a junior lien (without any associated P&I) on the property. Therefore, this equity contribution by the third party is reflected in CLTV but is not reflected in LTV

13 loans (2.1% by loan balance) have bi-weekly payments instead of monthly payments. By making a mortgage payment every two weeks, the borrower is effectively making 13 monthly payments per year instead of 12 monthly payments. The actual interest paid over the life of the loan is also reduced because of faster amortization.

Aggregation quality

The aggregator of this pool is Citigroup Global Markets Realty Corp. The aggregator acquired the loans in the pool from various originators including Commerce Home Mortgage, LoanDepot, VNB and Goldwater Bank, and other aggregators such as Galton and MaxEx. Approximately 73.4%, 7.9%, 6.1%, 5.2%, 5.2% and 2.2% of the loans in the pool were acquired from GMRF Mortgage Acquisition Company, LLC (Galton), Commerce Home Mortgage, LLC, loanDepot.com, LLC (loanDepot), Valley National Bank (VNB), MaxEx, LLC, and Goldwater Bank NA, respectively. All the loans were underwritten to each respective seller's guidelines instead of Citigroup's own guidelines.

Based on the information provided related to Citigroup Global Markets Realty Corp.'s (CGMRC) valuation and risk management practices, the 100% due diligence, the transparent representation and warranty framework, and strong alignment of interests/risk retention, we did not make any adjustments to our losses based on our review of the aggregator.

Origination quality

We did not adjust our expected loss assumptions for loans underwritten to Galton's, loanDepot's, and VNB's programs in spite of certain weaknesses in underwriting guidelines such as lower FICO score requirement accompanied with allowance for higher LTV and DTI ratio loans. This is because quantitative factors such as lower FICO and higher LTV limits are already captured in our MILAN model. However, there are some smaller originators/sellers in this pool whose guidelines we did not review. We increased our loss assumptions for these originators/sellers in order to account for this uncertainty in origination quality.

Servicing arrangement

We consider the overall servicing arrangement for this pool as 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.

Fay and Shellpoint are the two named servicers. The servicing fee will be based on a step-up incentive fee structure with a minimum monthly base fee of $10 per loan and additional fees for delinquent or defaulted loans. In spite of the step-up incentive fee, the fee will not exceed the aggregate servicing fee of 25 bps for this transaction. In our cashflow model, we have assumed a servicing fee of 25 bps.

There is no master servicer in this transaction. U.S. Bank National Association will be the trust administrator and the trustee is U.S. Bank Trust National Association. Moreover, the servicers will not advance any scheduled principal or interest on delinquent mortgages. We did not apply any adjustment to our expected losses for the lack of master servicer due to the following: (1) There is no P&I advancing in this transaction which obviates the need for a master servicer to step in if the primary servicer is unable to do so, (2) Although limited in depth and scope, there is still third party oversight of Fay and Shellpoint from the GSEs, the CFPB, the accounting firms and state regulators, (3) the complexity of the loan product is low and the pool credit quality is generally good, reducing the complexity of servicing and reporting, and (4) U.S. Bank National Association, as the trust administrator, will be responsible for aggregating the reports from the servicers and reporting to investors, but also appoint a replacement servicer at the direction of the controlling holder. The fees paid to the successor servicer cannot exceed the aggregate servicing fee of 25 bps.

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. However, there is one loan where the servicer has noted that the borrower has been impacted by COVID-19 hardship. The servicer is currently evaluating the hardship request.

Generally, the borrower must initially contact the servicer and attest they have been impacted by a COVID-19 hardship and that they require payment assistance. The servicer will offer an initial forbearance period to the borrower, which can be extended if the borrower attests that they require additional payment assistance.

At the end of the forbearance period, if the borrower is unable to make the forborne payments on such mortgage loan as a lump sum payment or does not enter into a repayment plan, the servicer may defer the missed payments, which could be added as a noninterest-bearing payment due at the end of the loan term. If the borrower can no longer afford to make payments in line with the original loan terms, the servicer would typically work with the borrower to modify the loan (although the servicer may utilize any other loss mitigation option permitted under the pooling and servicing agreement with respect to such mortgage loan at such time or anytime thereafter).

Of note, per the transaction documents, any principal forbearance amount created in connection with any modification (whether as a result of a COVID-19 forbearance or otherwise) will be recognized as a realized loss only if it is written off or forgiven by the servicer.

Third-party review

The Sponsor engaged AMC Diligence, LLC (AMC), Clayton Services, LLC, and Edge Mortgage Advisory Company, LLC as independent third-party review firms. They conducted a review of credit, property valuations, regulatory compliance and data accuracy checks ("full review") for 100% (431) of the loans in the pool. Each mortgage loan was reviewed by only one of the TPR firms and each TPR firm produced one or more reports detailing its review procedures and the related results. These firms conducted detailed credit, valuation, regulatory compliance and data integrity reviews on 100% of the mortgage pool. The TPR results indicated compliance with the originators' underwriting guidelines for majority of loans, no material compliance issues, and no appraisal defects. Overall, the loans that had exceptions to the originators' underwriting guidelines had strong documented compensating factors such as low DTIs, low LTVs, high reserves, high FICOs, or clean payment histories. The TPR firms also identified minor compliance exceptions for reasons such as inadequate RESPA disclosures (which do not have assignee liability) and TILA/RESPA Integrated Disclosure (TRID) violations related to fees that were out of variance but then were cured and disclosed.

In this transaction, 63 of the non-conforming loans had a property valuation review only consisting of a Collateral Underwriter and no other third-party valuation product such as a CDA and field review. We consider the use of Collateral Underwriter for non-conforming loans to be credit negative due to (1) the lack of human intervention which increases the likelihood of missing emerging risk trends, (2) the limited track record of the software and limited transparency into the model and (3) GSE focus on non-jumbo loans which may lower reliability on jumbo loan appraisals. However, we have not applied an adjustment to the loss for such loans since the statistically significant sample size and valuation results of the loans that were reviewed using a third-party valuation product such as a CDA (which we consider to be a more accurate third-party valuation product) were sufficient and the original appraisal balances for such loans were not significantly higher than that of appraisal values for loans which had both a CU score and another valuation product.

R&W framework

We assessed CMLTI 2020-EXP1's R&W framework for this transaction as adequate, consistent with that of other prime jumbo transactions for which the breach review process is thorough, transparent and objective, and the costs and manner of review are clearly outlined at issuance. An effective R&W framework protects a transaction against the risk of loss from fraudulent or defective loans.

We assessed the R&W framework based on three factors: (a) the financial strength of the R&W provider, (b) the strength of the R&Ws (including qualifiers and sunsets), and (c) the effectiveness of the enforcement mechanisms.

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. The mechanisms for enforcing breaches of R&Ws are generally strong. The trust administrator is obligated to hire an independent breach reviewer to perform a review when a loan either becomes 120 days delinquent or it liquidates at a loss. Of note, loans in forbearance due to a pandemic or national emergency will not be reviewed while in forbearance.

Unlike some R&W frameworks that prescribe specific tests for the reviewer to perform, the scope of the review is open and not specifically defined. If a material R&W breach is discovered, the R&W provider will be obligated to cure the defect, repurchase the loan, or reimburse any realized loss. One exception is that there will be no obligation to remedy a breach of R&W if the defect that gave rise to the R&W breach was disclosed in the PPM.

We did not make any R&W adjustment for this deal.

Transaction structure

CMLTI 2020-EXP1 features a structure that allocates principal payments sequentially to the bonds, instead of the shifting-interest structure that is typical of prime and expanded prime transactions we rate, benefitting the senior bondholders. In addition, the excess spread in this transaction can be used to absorb losses before any excess is released to the sponsor, while in typical prime and expanded prime structures the excess spread is absorbed by the interest-only tranches.

The transaction also features an interest reserve account, which can be used to pay bondholders in the event delinquent loans and the lack of P&I advancing to cover their payments causes interest shortfalls. The combination of the reserve account and the excess spread substantially mitigate the risk of shortfalls. On the closing date, the sponsor is expected to fund the interest reserve account up to its target of three months of interest distributions.

Interest payments to the bonds will be made using the interest remittance amount; principal will be paid sequentially to all the bonds using the principal remittance amount. Any excess spread will be used to first replenish the interest reserve account to its target amount before being used to reimburse realized loss, Net WAC shortfall and unpaid expenses/fees. Any funds in the reserve account in excess of the required amount will be released to the sponsor.

Realized loss and certificate write-down will be allocated in reverse sequential order starting with Class B-3.

There is more than 2% excess spread (annualized) available in the deal. When excess spread is a form of credit enhancement, it can provide a significant amount of credit protection to investors. However, the amount of protection actually provided by excess spread will depend on: (1) WAC deterioration or yield compression resulting from (i) high-yielding mortgage loans prepaying or defaulting at a faster pace than other mortgage loans; or (ii) modifications of loan interest rates lowering the average rate (2) the speed with which mortgage loans prepay or default during the life of the securitization and (3) The amount of excess spread that "leaks out" of the transaction before it is needed to protect investors. The risk of leakage is typically highest in the early months of a transaction when losses are relatively low.

In our analysis, we accounted for WAC deterioration by applying a 25% haircut to the weighted average interest rate of the mortgage loans in the pool. We used this calculated lower interest rate in our cash flow modeling. Other factors were taken into account by applying a higher prepayment rate in our cash flow model. We applied a CPR of

approximately 30% which is higher than 20-25% CPR range in our methodology due to the fact that better credit quality pools tend to prepay faster. In addition, the higher prepayment rate was derived based on historical prepayment rates of loans with similar characteristics.

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 of the subordinate bonds 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 these ratings 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. Alternatively, 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 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_1234784.

The analysis includes an assessment of collateral characteristics and performance to determine the expected collateral loss or a range of expected collateral losses or cash flows to the rated instruments. As a second step, Moody's estimates expected collateral losses or cash flows using a quantitative tool that takes into account credit enhancement, loss allocation and other structural features, to derive the expected loss for each 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.

Chinmay Kulkarni
Asst Vice President - 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

No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

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Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody's Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody's investors Service also maintain policies and procedures to address the independence of Moody's Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody's Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. ("MJKK") is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody's SF Japan K.K. ("MSFJ") is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization ("NRSRO"). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

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