New York, January 12, 2011 -- Moody's Investors Service has downgraded the ratings of 35 tranches,
and confirmed the rating of 1 tranche, from CSMC 2006-9 issued
by Credit Suisse First Boston. This transaction consists of two
collateral pools, designated as Pool 1 (containing Groups 1,
2, 3 and 4) and Pool 2 (containing Groups 5, 6, and
7). The collateral in Pool 1 primarily consists of first-lien,
fixed-rate Alt-A residential mortgage loans for properties
located in Puerto Rico. The collateral in Pool 2 primarily consists
of first-lien, fixed rate Alt-A residential mortgages
for properties located in various regions of the U.S.
RATINGS RATIONALE
The actions are primarily the result of the continued performance deterioration
in Alt-A pools in conjunction with home price and unemployment
conditions that remain under duress. The actions reflect Moody's
updated loss expectations on Alt-A pools issued from 2005 to 2007.
To assess the rating implications of the updated loss levels on Alt-A
RMBS, each individual pool was run through a variety of scenarios
in the Structured Finance Workstation® (SFW), the cash flow
model developed by Moody's Wall Street analytics. This individual
pool level analysis incorporates performance variances across the different
pools and the structural features of the transaction including priorities
of payment distribution among the different tranches, average life
of the tranches, current balances of the tranches and future cash
flows under expected and stressed scenarios. The scenarios include
ninety-six different combinations comprising of six loss levels,
four loss timing curves and four prepayment curves. The volatility
in losses experienced by a tranche due to small increments in losses on
the underlying mortgage pool is taken into consideration when assigning
ratings.
The principal methodology used in rating Pool 2 (Groups 5, 6 and
7) securities was "Alt-A RMBS Loss Projection Update: February
2010" rating methodology published in February 2010. 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.
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. Moody's notes an increasing
potential for a double-dip recession, which could cause a
further 20% decline in home prices (versus its baseline assumption
of roughly 5% further decline). Overall, Moody's assumes
a further 5% decline in home prices with stabilization in early
2011, accompanied by continued stress in national employment levels
through that timeframe.
Today's rating action also reflect a correction to the analysis
of collateral contained in Pool 1 (Groups 1, 2, 3, and
4). This pool was previously rated using the Alt-A methodology
without any adjustments to reflect the geographic characteristics of the
constituent loans. Pool 1 mortgage loans are secured by properties
in Puerto Rico. The updated rating incorporates certain adjustments
in the Alt-A methodology assumptions to account for the macro economic
factors pertaining to Puerto Rico, as outlined below.
Pool 1 is backed by fixed-rate residential mortgage loans for properties
located in Puerto Rico. Puerto Rico's economy has been in recession
for the past four years and the unemployment rate in the region has increased
to 16.0%. Due to the deteriorating economic environment,
delinquencies on the underlying pools have significantly increased over
the past year. For loans underlying CSMC 2006-9 Pool 1,
delinquencies greater than 60 days (as a percentage of original balance)
have risen to 10.25% from 6.11% over the prior
12 months as of September 2010. Historically, a large percentage
of delinquent borrowers in Puerto Rico were able to cure out of the delinquencies.
However, the prolonged recession has increased the risk of default.
Moody's also expects delinquencies (and future defaults) to continue to
rise as the unemployment rate in Puerto Rico increases through 2011.
In addition to the increased frequency of defaults, Moody's actions
are also based on concerns relating to expectations of severity of loss
given default. Historically, Puerto Rico has enjoyed modest
house price appreciation -- however, slowdown in the
mainland US and the severity of the recession in Puerto Rico, has
started to adversely impact house prices on the island, as a result
loss severities on the deals are expected to rise. Also,
the average foreclosure timeline in Puerto Rico is 24 months which can
further exacerbate severities through increased foreclosure costs.
The rating actions are the result of an analysis of credit enhancement
relative to updated collateral loss projections. Updated loss estimates
for the transactions were arrived at using a two-stage process.
First, the increase in the serious delinquencies in the past 12
month was obtained using historical performance to date. This trend
of increase in delinquencies was then converted to projected losses using
lifetime roll rates (probabilities of transition to default) of 70%,
80%, 90% and 100% for loans that were 60 day
delinquent, 90 or more days delinquent, in foreclosure,
and for properties held-for-sale (REO) respectively.
The loss upon default (loss severity) was assumed to be 40%.
The second step was to determine defaults and losses for the remaining
life of the deal following the projection period. To calculate
future defaults, Moody's applied a burnout factor to the default
rate calculated over the past 12-month period. The burnout
accounts for the likely improvement in performance subsequent to 2010
as the economy recovers. Future losses were obtained by applying
severity assumptions to future defaults.
A list of updated estimated pool losses, sensitivity analysis,
and tranche recovery details is being posted on an ongoing basis for the
duration of this review period and may be found at:
Excel: http://v3.moodys.com/page/viewresearchdoc.aspx?docid=PBS_SF198174
For more information please see www.moodys.com.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or financial
instruments related to the monitoring of this transaction in the past
six months.
Complete rating actions are as follows:
Issuer: CSMC Mortgage-Backed Trust Series 2006-9
Cl. 1-A-1, Downgraded to B2 (sf); previously
on Jan 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. 2-A-1, Downgraded to B2 (sf); previously
on Jan 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. 3-A-1, Downgraded to Caa1 (sf); previously
on Jan 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. 4-A-1, Downgraded to Caa1 (sf); previously
on Jan 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. 4-A-2, Downgraded to Caa1 (sf); previously
on Jan 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. 4-A-3, Downgraded to Caa1 (sf); previously
on Jan 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. 4-A-4, Downgraded to Caa1 (sf); previously
on Jan 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. 4-A-5, Downgraded to Caa1 (sf); previously
on Jan 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. 4-A-6, Downgraded to Caa1 (sf); previously
on Jan 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. 4-A-7, Downgraded to Caa1 (sf); previously
on Jan 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. 4-A-8, Downgraded to Caa1 (sf); previously
on Jan 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. 4-A-9, Downgraded to Caa1 (sf); previously
on Jan 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. 4-A-10, Downgraded to Caa1 (sf); previously
on Jan 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. 4-A-11, Downgraded to Caa1 (sf); previously
on Jan 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. 4-A-12, Downgraded to Caa1 (sf); previously
on Jan 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. 4-A-13, Downgraded to Caa1 (sf); previously
on Jan 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. 4-A-14, Downgraded to Caa1 (sf); previously
on Jan 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. 4-A-15, Downgraded to Caa1 (sf); previously
on Jan 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. 5-A-1, Downgraded to Caa2 (sf); previously
on Jan 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Cl. 6-A-1, Downgraded to Caa1 (sf); previously
on Jan 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade
Cl. 6-A-2, Downgraded to Caa1 (sf); previously
on Jan 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade
Cl. 6-A-3, Downgraded to Caa2 (sf); previously
on Jan 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Cl. 6-A-4, Downgraded to Caa2 (sf); previously
on Jan 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade
Cl. 6-A-6, Downgraded to Caa1 (sf); previously
on Jan 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade
Cl. 6-A-7, Downgraded to Caa2 (sf); previously
on Jan 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Cl. 6-A-8, Downgraded to Caa2 (sf); previously
on Jan 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Cl. 6-A-9, Downgraded to Caa2 (sf); previously
on Jan 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Cl. 6-A-10, Downgraded to Caa2 (sf); previously
on Jan 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Cl. 6-A-11, Downgraded to Caa1 (sf); previously
on Jan 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade
Cl. 6-A-14, Confirmed at Caa2 (sf); previously
on Jan 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade
Cl. 6-A-15, Downgraded to Caa2 (sf); previously
on Jan 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Cl. 7-A-1, Downgraded to Caa3 (sf); previously
on Jan 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Cl. 7-A-2, Downgraded to Caa3 (sf); previously
on Jan 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Cl. D-X, Downgraded to Caa1 (sf); previously
on Jan 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. A-X, Downgraded to Caa1 (sf); previously
on Jan 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade
Cl. D-P, Downgraded to B2 (sf); previously on
Jan 14, 2010 B1 (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_SF231042
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 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
Jipil Ha
Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Amita Shrivastava
Vice President - Senior Analyst
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 $536 million of Fixed Rate Alt-A RMBS issued by CSMC Mortgage-Backed Trust 2006-9
