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By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

 

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Rating Action:

Moody's assigns rating to swaps in CWALT, Inc. Mortgage Pass-Through Certificates, Series 2007-HY9, an RMBS transaction

11 Jan 2011

New York, January 11, 2011 -- Moody's Investors Service has assigned a A1 (sf) rating on the Certificate Swap and the Subordinate Swap to the CWALT, Inc. Mortgage Pass-Through Certificates, Series 2007-HY9 transaction. Moody's rating addresses the credit risk posed to the swap counterparty. This rating only addresses the risk attributable to the ability of the trust to continue to honor its obligations under the swaps. The rating does not address market risk that may be experienced by the party facing the trust under the swap contracts.

Issuer: CWALT, Inc. Mortgage Pass-Through Certificates, Series 2007-HY9

Swaps: Certificate Swap (Reference Number N659812N), Subordinate Swap (Reference Number N659814N)

Interest Rate Swap (Certificate Swap), Assigned A1 (sf)

Interest Rate Swap (Subordinated Certificate Swap), Assigned A1 (sf)

RATINGS RATIONALE

The ratings take into account the rating of the swap counterparty, the transaction's legal structure and the characteristics of the collateral mortgage pool of the respective trust. Because there is relatively limited historical performance data for the types of instruments, this credit rating may have a greater potential rating volatility than would ratings for transactions supported by more historical performance data.

Our rating approach for this counterparty instrument rating (CIR) rests on three propositions:

» The CIRs are based on an analysis of the payment promise made by the trust, the position of the instrument in the payment waterfall, the credit quality of the rated payment flows, the security arrangements governing the trust's relationship with the counterparty, the support mechanisms available to the counterparty, the termination date of the swap and other structural features of the transaction in question. In this regard, the rating process is similar to that for all other ratings assigned by Moody's.

» The credit quality and ratings assigned to counterparty instrument obligations of the trust may differ from those of its payment obligations to bondholders. As a result, ratings assigned to bonds issued by the trust may diverge from the CIR and therefore the bond ratings may offer only a limited guidance on the CIR.

» Although counterparty instrument ratings address payments to rather than from the counterparty, in certain circumstances the credit strength of the counterparty itself may have a bearing on the CIR. For example, where a counterparty's non-performance under a swap agreement leads to the trust having to make a termination payment to that counterparty, Moody's will take into account the likelihood of the counterparty's non-performance occurring and the position of termination payments in the cash flow waterfall . Specifically, in the event that the swap counterparty causes a termination event, any termination payment owed to the swap counterparty may be paid at the bottom of the cash flow waterfall. As a result, a default by the swap counterparty, which is currently rated Aa3, makes payment in full to the counterparty unlikely.

By way of background, the swap counterparty, Deutsche Bank AG, New York Branch in this case, receives a fixed rate from, and pays LIBOR to, the trust on notional amounts that are monthly amounts set forth in the schedules to the swap agreements. Per the terms of the deal documents, the swap counterparty receives payments from each swap prior to bondholders, and is thus in a senior position to all bonds issued by the trust. These payments are made pro-rata based on the relative size of each obligation which allows both swaps to have the same rating. The termination date for the Certificate Swap and for the Subordinate Swap is 25th July, 2012. To pay the swap counterparty, the trust also has access to principal payments, liquidation proceeds and interest collections. This provision strengthens the nature of senior payment right of the swap counterparty.

The primary risks driving the rating on the swaps is the risk that the collateral pool amortizes at a rate that exceeds the amortization rate of the swaps' notional balances and the risk of a termination event triggered by a default of the swap counterparty. As the notional amounts are fixed according to a monthly schedule, it is likely, especially in high default scenarios, that the collateral balance would amortize faster than the swaps' notional balances. The counterparty in the swap, Deutsche Bank AG, New York Branch, has a Aa3 long term rating and a P-1 short term rating by Moody's.

Our methodology for rating swaps on US RMBS transactions includes running collateral cashflows and considers the rating of the swap counterparty. We stress the cashflows by increasing defaults and prepayments to determine what level of collateral stress would cause a shortfall in proceeds owed to the swap counterparty. The cashflows are modeled to reflect the waterfall of the underlying transaction, which results in all swap payments other than termination payments caused by a counterparty default coming at the top of the waterfall. Termination payments owed to the swap counterparty resulting from a default of the swap counterparty are paid at the bottom of the waterfall. The swaps in this transaction passed scenarios consistent with the Aa1 collateral cashflow stresses. Sensitivity to a decline in the weighted average interest rate of the collateral pool was also analyzed. However, when considering the swap provider's long term rating, Aa3, the remaining life of the swap and additional qualitative considerations that were not modeled, such as interest rate reduction modifications or more conservative servicer advancing approaches, Moody's assigned the swaps a A1 (sf) rating.

Moody's projected remaining loss on the mortgage pool as a percentage of the current balance is 44%.

Other methodologies and factors that may have been considered in the process of rating this issuer can also be found on Moody's website.

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

Moody's Investors Service did not receive or take into account a third party due diligence report on the underlying assets or financial instruments in this transaction.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service information, and confidential and proprietary Moody's Analytics information.

Moody's Investors Service considers the quality of information available on the issuer of obligation satisfactory for the purposes of assigning a credit rating. However, the credit rating action was based on limited historical data.

Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

New York
Scott Adam Friedman
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Kruti Muni
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

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

Moody's assigns rating to swaps in CWALT, Inc. Mortgage Pass-Through Certificates, Series 2007-HY9, an RMBS transaction
No Related Data.
© 2021 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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