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Rating Action:

Moody's downgrades $37 million of second lien RMBS issued by Countrywide Home Loans , Inc.

23 Feb 2011

New York, February 23, 2011 -- Moody's Investors Service has taken action on 30 tranches from seven RMBS transactions issued by Countrywide Home Loans, Inc. The collateral backing these deals consists of closed end second lien mortgages.

RATINGS RATIONALE

The actions are a result of the continued performance deterioration in second lien pools in conjunction with home price and unemployment conditions that remain under duress. The actions reflect Moody's updated loss expectations on

second lien pools.

The principal methodology used in rating these notes was "Second Lien RMBS Loss Projection Methodology: April 2010" published in April 2010. The ratings also take into consideration loss mitigation provided by mortgage insurers, typically assuming a rescission rate of 20-40%, and corporate guarantees provided to each deal except CWABS, Inc. Asset-Backed Certificates, Series 2003-S1 (CWABS 2003-S1) by Countrywide Home Loans (CHL) (rated A2). Losses on mortgage loans that are rescinded by the mortgage insurers (stated for each deal below) which would otherwise be a loss to the junior most tranches are covered by the CHL guarantees, to the extent the guarantees are sufficient to cover pool losses. Hence, most ratings are floored at the A2 rating of CHL. Aside from CWABS 2003-S1, which has no CHL guarantee, the mezzanine tranches from CWABS 2004-S1 have ratings lower than A2, due to the remaining corporate guarantee being potentially low relative to Moody's expected pool losses.

For tranches we expect to be protected both by mortgage insurance and the CHL guarantees, ratings may be higher than Moody's assessment of the individual credit strength of either of the two. The higher rating is the result of the application of the joint probability-of-default analysis, described in detail in Moody's Special Comment, "The Incorporation of Joint-Default Analysis into Moody's Corporate, Financial and Government Rating Methodologies," February 2005. That analysis indicates that the rating on a jointly supported obligation may be higher than that of either support provider, because the likelihood of joint default is typically less than the probability of default of either support provider individually.

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

For securities insured by a financial guarantor, the rating on the securities is the higher of (i) the guarantor's financial strength rating and (ii) the current underlying rating (i.e., absent consideration of the guaranty) on the security. The principal methodology used in determining the underlying rating is the same methodology for rating securities that do not have a financial guaranty and is as described earlier. Class A-5 issued by CWABS, Inc., Asset-Backed Pass-Through Certificates, Series 2002-S3, Class A-4 issued by CWABS, Inc., Asset-Backed Pass-Through Certificates, Series 2002-S4 are wrapped by MBIA Insurance Corporation (rated B3).

For CWABS 2003-S1 and CWABS 2004-S1, if expected losses on the each of the collateral pools were to increase by 10%, model implied results indicate that most of the deals' ratings would remain stable, with the exception of Class M-2 from CWABS 2003-S1, for which model implied results would be one notch lower (Caa2 versus Caa1). For the other deals covered by today's actions, the ratings would be stable, due to benefit from mortgage insurance and the CHL corporate guarantees described above.

The primary source of assumption uncertainty is the current macroeconomic environment, in which unemployment remains at high levels, and weakness persists in the housing market. Overall, Moody's assumes a further 5% decline in home prices with stabilization later in 2011, accompanied by continued stress in national employment levels through that timeframe.

For more information please see www.moodys.com.

Moody's Investors Service received and took into account one or more third party due diligence reports on the underlying assets or financial instruments in this transaction and the due diligence reports had a neutral impact on the rating.

Complete rating actions are as follows:

Issuer: CWABS, Inc. Asset-Backed Certificates, Series 2002-S1

Expected Losses (as a % of Original Balance): 2%

Cl. A-4, Confirmed at Aaa (sf); previously on Mar 18, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. A-5, Downgraded to Aa3 (sf); previously on Mar 18, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. A-IO, Confirmed at Aaa (sf); previously on Mar 18, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. M-1, Downgraded to A1 (sf); previously on Mar 18, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. M-2, Downgraded to A2 (sf); previously on Mar 18, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade

Issuer: CWABS, Inc. Asset-Backed Certificates, Series 2002-S2

Expected Losses (as a % of Original Balance): 1%

Cl. A-5, Downgraded to Aa2 (sf); previously on Mar 18, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. A-IO, Downgraded to Aa2 (sf); previously on Mar 18, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. M-1, Downgraded to Aa3 (sf); previously on Mar 18, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. M-2, Downgraded to A2 (sf); previously on Mar 18, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade

Issuer: CWABS, Inc., Asset-Backed Pass-Through Certificates, Series 2002-S3

Expected Losses (as a % of Original Balance): 1%

Cl. A-5, Confirmed at Aaa (sf); previously on Mar 18, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Financial Guarantor: MBIA Insurance Corporation (Downgraded to B3, Outlook Negative on Jun 25, 2009)

Underlying Rating: Confirmed at Aaa (sf); previously on Mar 18, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. A-IO, Confirmed at Aaa (sf); previously on Mar 18, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. M-1, Downgraded to Aa3 (sf); previously on Mar 18, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. M-2, Downgraded to A2 (sf); previously on Mar 18, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade

Issuer: CWABS, Inc., Asset-Backed Pass-Through Certificates, Series 2002-S4

Expected Losses (as a % of Original Balance): 1%

Cl. A-5, Confirmed at Aaa (sf); previously on Mar 18, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. A-IO, Confirmed at Aaa (sf); previously on Mar 18, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. M-1, Downgraded to Aa1 (sf); previously on Mar 18, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. M-2, Downgraded to A1 (sf); previously on Mar 18, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. B, Downgraded to A2 (sf); previously on Mar 18, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade

Issuer: CWABS, Inc., Asset-Backed Certificates, Series 2002-SC1

Expected Losses (as a % of Original Balance): 6%

Cl. A-IO, Downgraded to A1 (sf); previously on Mar 18, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. M-2, Downgraded to A1 (sf); previously on Mar 18, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. B-1, Downgraded to A2 (sf); previously on Mar 18, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade

Issuer: CWABS, INC., Asset-Backed Certificates, Series 2003-S1

Expected Losses (as a % of Original Balance): 1%

Cl. A-5, Downgraded to A1 (sf); previously on Mar 18, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. A-IO, Downgraded to A1 (sf); previously on Mar 18, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. M-1, Downgraded to Baa2 (sf); previously on Mar 18, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. M-2, Downgraded to Caa1 (sf); previously on Mar 18, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade

Issuer: CWABS, Inc. Asset-Backed Certificates, Series 2004-S1

Expected Losses (as a % of Original Balance): 4%

Cl. A-3, Confirmed at Aa3 (sf); previously on Mar 18, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade

Cl. A-IO, Downgraded to Aa3 (sf); previously on Mar 18, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. M-1, Upgraded to A1 (sf); previously on Mar 18, 2010 Baa2 (sf) Placed Under Review for Possible Downgrade

Cl. M-2, Upgraded to A2 (sf); previously on Mar 18, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade

Cl. M-3, Upgraded to Baa1 (sf); previously on Mar 18, 2010 Ba3 (sf) Placed Under Review for Possible Downgrade

A list of these actions including CUSIP identifiers may be found at:

Excel: http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF237750

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, confidential and proprietary Moody's Analytics information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of maintaining a credit rating.

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
Aron Bergman
Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Amelia (Amy) Tobey
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 downgrades $37 million of second lien RMBS issued by Countrywide Home Loans , Inc.
No Related Data.
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