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Rating Action:

Moody's assigns provisional ratings to New Residential Mortgage Loan Trust 2015-1

17 Jun 2015

New York, June 17, 2015 -- Moody's Investors Service has assigned provisional ratings to ten classes of notes issued by New Residential Mortgage Loan Trust 2015-1 ("NRMLT 2015-1"). The NRMLT 2015-1 transaction is a securitization of approximately $333.5 million of first lien, seasoned prime mortgage loans with weighted average seasoning of 146 months, weighted average updated LTV of 41.0% and weighted average updated FICO score of 719. Specialized Loan Servicing (SLS) will act as the primary servicer and Nationstar Mortgage LLC is the Master Servicer.

The complete rating action is as follows:

Class A-1 notes, Assigned (P)Aaa (sf)

Class A-1-IO notes, Assigned (P)Aaa (sf)

Class A notes, Assigned (P)Aaa (sf)

Class B-1 notes, Assigned (P)Aa1 (sf)

Class B1-IO notes, Assigned (P)Aa1 (sf)

Class B-2 notes, Assigned (P)A1 (sf)

Class B2-IO notes, Assigned (P)A1 (sf)

Class B-3 notes, Assigned (P)Baa1 (sf)

Class B-4 notes, Assigned (P)Ba1 (sf)

Class B-5 notes, Assigned (P)B2 (sf)

RATINGS RATIONALE

Our expected losses on the collateral pool are 1.0% in a base case scenario and reach 6.50% at a stress level consistent with the Aaa ratings on the senior classes. We based our expected loss on this pool on our estimates of (1) the default rate on the remaining balance of the loans and (2) the principal recovery rate on the defaulted balances. The final expected losses for the pool reflect the TPR's findings and our assessment of the representations and warranties (R&Ws) framework.

For this pool, we used baseline delinquency rate of 1% for the 15yr loans and 2% for remaining collateral to calculate the delinquencies on the pool. We calculated future delinquencies using the default burnout and voluntary conditional prepayment rate (CPR) assumptions similar to those in our US RMBS surveillance methodology for prime loans originated before 2004. We then aggregated the delinquencies and converted them to losses by applying pool-specific lifetime default frequency and loss severity assumptions.

Using this approach, the weighted average expected loss on this pool is approximately 1%. We varied the voluntary prepayment rate and modification rates for the loans but assumed the same roll-rate and default burnout factor. We made further negative adjustment to our expected loss based on the third party review findings and the weakness of the R&W framework.

Collateral Description

New Residential Mortgage Loan Trust 2015-1 (NRMLT 2015-1) is a securitization of seasoned performing residential mortgage loans which the seller, NRZ Sponsor V LLC, will purchase on the closing date, in connection with the termination of various securitization trusts. The transaction consists primarily of 30-year and 15-year fixed-rate mortgages (43 mortgage loans have terms between 20 and 30 years; 29 mortgage loans are adjustable-rate). 6.78% of the loans are balloon mortgage loans. Approximately 89.6% of the loans in this pool by balance have never been modified and have been performing while the other 10.36% of the loans were previously modified. The weighted average seasoning on the collateral is 146 months.

Third-party Review and Reps & Warranties

American Mortgage Consultants (AMC), conducted a compliance and data integrity review on a random sample of 367 loans from the pool. The regulatory compliance review consisted of a review of compliance with Section 32/HOEPA, Federal Truth in Lending Act/Regulation Z (TILA), the Real Estate Settlement Protection Act/Regulation X (TILA), and federal, state and local anti-predatory regulations. AMC ordered HDI values on all loans in the securitization in addition to an updated broker price opinions (BPOs) on 336 properties, from Clear Capital.

AMC also conducted a review of data integrity, title and pay history on the selected sample to confirm that certain information in the mortgage loan files matched the data supplied by the related servicers. There were no issues reported in the data integrity review.

Upon the review of 367 loans, AMC found that 202 loans have exceptions. The majority of these exceptions were due to missing HUD and/or TIL documents, under disclosed finance charge, or missing right to cancel disclosures. 19 loans had missing original loan files. For the loans where the HUD documents, TIL documents and/or the original loan files are missing, AMC was unable to complete the testing. Although the TPR report indicated that the statute of limitations for many of these issues already passed, borrowers can still raise these legal claims in defense against foreclosure as a set off or recoupment and win damages that can reduce the amount of the foreclosure proceeds. In addition, some of these missing documents could prevent or materially delay activities such as foreclosure, loss mitigation and processing title claim under the related title insurance policy.

The seller, NRZ Sponsor V LLC, is providing a representation and warranty for mortgage files. In this R&W, and to the extent that the indenture trustee, the master servicer, the servicer, the depositor or the custodian has actual knowledge of a defective or missing mortgage loan document or a breach of a representation or warranty regarding the completeness of the mortgage file or the accuracy of the Mortgage Loan documents, and such missing document, defect or breach is preventing or materially delaying the (a) realization against the related mortgaged property through foreclosure or similar loss mitigation activity or (b) processing of any title claim under the related title insurance policy, the party with such actual knowledge will give written notice of such breach, defect or missing document, as applicable, to the seller, the indenture trustee, the depositor, the master servicer, the servicer and the custodian. Upon notification of a missing or defective mortgage loan file, the seller will have 120 days from the date it receives such notification to deliver such missing document or otherwise cure such defect or breach. If it is unable to do so, it will be obligated to replace or repurchase the mortgage loan. In our analysis we assumed that 10% of the projected default will have missing documents' breaches that will not be remedied and result in higher than expected loss severity.

Indenture Trustee & Master Servicer

The transaction indenture trustee is Wilmington Trust National Association. The custodian functions will be performed by Bank of New York. The paying agent and cash management functions will be performed by CitiBank, N.A. In addition, Nationstar Mortgage LLC., as Master Servicer, is responsible for servicer oversight, and termination of servicers and for the appointment of successor servicers.

Tail Risk & 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 subordination floor of 1.50% of the closing pool balance, which mitigates tail risk by protecting the senior bonds from eroding credit enhancement over time.

Factors that would lead to an upgrade or downgrade of the rating:

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 our 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. Other reasons for better-than-expected performance include changes to servicing practices that enhance collections or refinancing opportunities that result in prepayments.

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 our 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.

The methodologies used in this rating were "US RMBS Surveillance Methodology" published in November 2013 and "Moody's Approach to Rating US Prime RMBS" published in February 2015. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

For further details on the transaction, please check Moody's pre-sale report for this transaction.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

Further information on the representations and warranties and enforcement mechanisms available to investors are available on http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF409929.

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.

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 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.

The following information supplements Disclosure 10 ("Information Relating to Conflicts of Interest as required by Paragraph (a)(1)(ii)(J) of SEC Rule 17g-7") in the regulatory disclosures made at the ratings tab on the issuer/entity page on www.moodys.com for each credit rating:

Moody's also was paid for services other than determining a credit rating in the most recently ended fiscal year by the person that paid Moody's to determine this credit rating.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Ola Hannoun-Costa
Vice President - Senior 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

Yehudah Forster
VP - Senior Credit Officer
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 ratings to New Residential Mortgage Loan Trust 2015-1
No Related Data.
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